12 January 2021
The Legislative Council Panel on Financial Affairs released a discussion paper earlier this month on the proposed tax concession regime for carried interest. The discussion paper proposed a zero concessionary tax rate for qualifying carried interest. This follows consultation with the industry after the issue of the consultation paper outlining the parameters and eligibility criteria of the concessionary tax treatment back in August 2020.
Apart from the proposal to set the concessionary tax rate at 0%, the proposed parameters and eligibility criteria outlined in the discussion paper are largely similar to what was proposed previously in the August 2020 consultation paper. However, the latest discussion paper has relaxed the substantial activity requirements to include having an average operating expenditure of HKD 2 million per million incurred in Hong Kong. Previously, a requirement of an annual minimum spending of HKD 3 million was suggested in the August 2020 consultation paper. The discussion paper also extended the tax concession regime to the Innovation and Technology Venture Fund Corporation set up under the Innovation and Technology Venture Fund Scheme.
Please refer to our earlier Client Alert for details of the proposed parameters and eligibility criteria in the August 2020 consultation paper alert).
The amendment bill is expected to be released in late January 2021. Subject to the passage of the amendment bill, the concessionary tax treatment will take retrospective effect to eligible carried interest recipients on or after 1 April 2020.
For further information, please contact:
Jason Ng, Partner, Baker McKenzie
jason.ng@bakermckenzie.com
