Hong Kong 2018-19 Budget Insights

Further strengthening Hong Kong’s asset management industry

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When presenting the budget, the Financial Secretary noted the initiatives the government has already introduced with a view to strengthening the ability of the Hong Kong fund industry to compete in the market and to diversify the management platform.

These initiatives include a legislative bill granting profits tax exemption to resident privately offered open-ended fund companies (OFCs) incorporated in Hong Kong. To ensure that the proposed tax exemption regime for OFCs complies with the international standards, it is understood that the government is considering making certain technical amendments to the bill to remove the potential ring-fencing features of the proposed regime.

Furthermore, to facilitate Hong Kong's development into a full-fledged fund service center, the Financial Secretary also announced that the government will examine the feasibility of introducing a limited partnership regime in Hong Kong for private equity funds and the related tax arrangements.

We welcome the above initiatives. In addition, the Financial Secretary may also consider the desirability of extending the proposed tax exemption for resident OFCs to cover all types of resident funds in Hong Kong, including resident trust funds and other resident fund companies not incorporated in Hong Kong, and resident partnership funds not established under the proposed limited partnership regime.