On 17 July 2015, the Hong Kong Government gazetted the Inland Revenue (Amendment) (No.2) Ordinance 2015 (“the Ordinance”), which extended the profits tax exemption for offshore funds to private equity (“PE”) funds. The Ordinance takes retrospective effect, applicable to tax chargeable for any year of assessment commencing on or after 1 April 2015. By virtue of this newly enacted tax legislation, transactions conducted by offshore private equity funds in respect of securities of eligible overseas portfolio companies will be able to enjoy profits tax exemption.
The Hong Kong Government aimed at providing clear tax exemption to specified transactions conducted by offshore PE funds or their special purpose vehicles (“SPV”), hoping to attract more PE fund managers to expand their business in Hong Kong and hire local asset management, investment and advisory services, which will be conducive to the further development of Hong Kong’s asset management industry.
Islamic finance is one of the fastest growing sectors in the international financial market. Given the strategic importance and influence of the Middle East investors, Islamic finance is increasingly in demand by investors wanting investment and financing products compliant with Islamic law (known as “Shariah”).
During recent years, a number of Asian countries such as Japan, Malaysia and Singapore have captured a large portion of Islamic finance activity in the region and have changed their tax law to cater for this. In order to maintain competitive edge as an international financial centre and to enhance investment flows between Mainland China and the Middle East, the Hong Kong government have already enforced some amended tax and stamp duty legislations to facilitate the Islamic bond (known as “Sukuk”) market development in Hong Kong.
Sukuk are a form of Shariah-compliant financial product, which essentially replicate the financial profile of a bond, but without the receipt or payment of interest (known as “Riba”), which is forbidden under Shariah.