20 March, 2018
On 28 February 2018, the Financial Secretary announced a series of measures to further develop Hong Kong’s bond market in the 2018-19 Budget (the "2018 Budget"). The government have said that they will set aside a dedicated provision of HK$500 million to develop the financial services industry in the next five years. Below is a summary of the proposed measures which include the launch of a pilot bond grant scheme (the "Bond Grant Scheme") to promote corporate bond issuances in Hong Kong and a green bond grant scheme (the "Green Bond Grant Scheme") to promote green bond issuances in Hong Kong. These initiatives are part of the government’s plans to enhance their competitiveness in the bond market and are still subject to implementation. It is expected that further announcements on timing and other eligibility criteria will be made in due course.
Bond Grant Scheme
The main aim of the Bond Grant Scheme is to attract companies (whether incorporated in Hong Kong or otherwise) to issue bonds in Hong Kong. The Bond Grant Scheme will apply for a three-year period.
It aims to co-fund up to half of eligible expenses on a bond issue, capped at HK$2.5 million. Each company can apply for the Bond Grant Scheme for up to two bond issuances. The Hong Kong Monetary Authority (the “HKMA”) will announce further eligibility criteria in due course.
Green Bond Initiatives
The main aim of the Green Bond Grant Scheme is to encourage more companies to issue green bonds. The Green Bond Grant Scheme will offer subsidies to qualified green bond issuers. To benefit from the Green Bond Grant Scheme, green bond issuers must be certified under the green finance certification scheme developed by the Hong Kong Quality Assurance Agency.
In addition, the government have said that they will set up a HK$100 billion green bond issuance programme (the “Green Bond Programme”). The Green Bond Programme will be used to provide funding for green public works projects. It is expected that the inaugural sovereign green bonds will be issued in 2018-19.
Other measures
Tax incentives on, among others, interest income and trading profits from debt instruments – the qualifying debt instrument scheme will be expanded and Hong Kong investors will enjoy further tax concession for interest income and trading profits derived from a more diverse range of debt instruments. For example, in addition to instruments lodged and cleared by the HKMA’s Central Moneymarkets Unit, debt securities listed in Hong Kong will also become eligible instruments. The scope of tax exemption for interest income and trading profits will also be extended to include short term debt instruments of any duration (currently an original maturity of at least seven years is required).
Other tax incentives will also be introduced to attract more companies to establish corporate treasury centres in Hong Kong and to encourage China to continue to issue sovereign bonds in Renminbi and other currencies in Hong Kong.
Retail bonds – the government will continue to issue retail bonds in 2018 and 2019, targeting Hong Kong residents aged 65 or above.
For further information, please contact:
William Liu , Partner, Linklaters
william.liu@linklaters.com
