Private Equity Tax News Flash

Jan 2015

Proposals to extend the Hong Kong offshore fund exemption regime

In his 2013/14 Budget, the Hong Kong Financial Secretary committed “to extend the profits tax exemption for offshore funds to include transactions in private companies which are incorporated or registered outside Hong Kong and do not hold any Hong Kong properties nor carry out any business in Hong Kong” in order to allow private equity (PE) funds to enjoy the same tax exemption as other offshore funds. The Financial Services and the Treasury Bureau tabled a briefing paper on the proposals before the Legislative Council Panel on Financial Affairs on 5 January 2015. The briefing paper reveals three key proposals, namely (a) extending the current tax exemption to offshore PE funds, (b) relaxing the criteria for specified transactions arranged by or carried out through persons who are not licensed under the Securities and Future Ordinance (SFO), and (c) an exemption for Special Purpose Vehicles (SPV) commonly used in PE funds.