15 June 2016
China is taking forward the Belt and Road initiative, the national strategy for long term development. It is certain that the emerging markets along the routes are likely to become the new catalyst for the future development of Hong Kong.
Financial services will be in growing demand in emerging markets. Hong Kong is well-equipped to serve as a platform for financing and fund management for these markets. Hong Kong endeavours to facilitate the financing of infrastructure projects and provide a platform for pooling the efforts of investors, banks and the financial sector to offer comprehensive financial services for various infrastructure projects.
Driven by the Belt and Road initiative, China enterprises will expand their overseas business, and there will be a greater demand for business services to lower corporate financial costs and enhance treasury risk management. Hong Kong is an ideal location to set up corporate treasury centres (CTC). To further attract multinational and China enterprises to establish CTCs in Hong Kong, the Hong Kong Government is proposing, under specified conditions, interest deductions under profits tax for CTCs, and profits tax reduction by half (i.e. from the prevailing standard tax rate 16.5% reduced to 8.25%) for specified treasury activities. For this purpose, a bill will be read by the Legislative Council of Hong Kong later this year.
Hong Kong government also strives to set up a platform conducive to the development of Islamic finance. Efforts include enhancing the related market infrastructure, providing manpower training, and promoting the development of Islamic financial products and co-operation with other Islamic financial markets.
The Asian Infrastructure Investment Bank (AIIB) was officially launched earlier this year. Hong Kong shall continue its active discussion with AIIB and the China Government on Hong Kong's participation in AIIB as a non-sovereign territory. Hong Kong shall also continue to support the work of AIIB, and seek to leverage its expertise to serve AIIB in capital markets financing, asset management and dispute resolution.
The success of the two Sukuk issuances by Hong Kong Government in the 2014 and 2015 has demonstrated the ability of Hong Kong's financial market to support the launch of Islamic financial products and meet their financing needs. Hong Kong's Financial Secretary, Mr. John Tsang, said in his 2016/17 Budget speech in March 2016 that, Hong Kong shall seize the opportunity to issue the third sukuk in a timely manner.
For any questions on the setting up of CTC as well as Islamic finance matters in Hong Kong, please feel free to contact us.
Ms. Catherine LE BOURGEOIS (Main Partner)
Mr. Wilson YEUNG (International Tax Director)