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Hong Kong passes new legislation to grant tax incentives to carried interest
Today, the Inland Revenue (Amendment) (Tax Concessions for Carried Interest) Bill 2021 (the Bill) passed its third reading in the Legislative Council. The Bill, as passed, is expected to be gazetted and formally become law (the new law) of Hong Kong next Friday.
The new law is essentially the same as the Bill in its original form. Clients may refer to our Hong Kong Tax alert – 28 January 2021 (2021 Issue No. 1) for a detailed discussion of the Bill in its original form.
The new law provides that eligible carried interest received by, or accrued to, a qualifying person on or after 1 April 2020 from the provision of investment management services in Hong Kong to a qualifying payer, where the eligible carried interest arises from profits earned from in-scope transactions of the qualifying payer and provided that the substantial activities requirements are met, the amount of eligible carried interest would be eligible for a 0% profits tax rate. In the case of qualifying employees, 100% of employment income paid out of the eligible carried interest of the qualifying person to which profits tax exemption under the new law applies can be excluded for ascertaining the salaries tax liabilities of the qualifying employees.
This Hong Kong Tax alert discusses the observations EY has on the new law.
Download this Hong Kong Tax Alert（繁體中文）
Download this Hong Kong Tax Alert（简体中文）