carried interest tax concession
For qualifying carried interest recipients subject to profits tax ie the fund management entities under Part V of the Securities and Futures Ordinance carried interest payments would first need be netted off against outgoings and expenses and depreciation to arrive at the net carried interest eligible for the concession. Under this new concession eligible carried interest received or accrued on or after from 1 April 2020 will be subject to zero percent profits tax.
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To qualify for the tax concession the fund must be validated by the HKMA.
. The Government has spared no efforts in developing Hong Kong as a premier PE fund hub. The key features of the proposed tax concession regime are as follows. Furthermore the Proposal clarifies that 100 of eligible carried interest would also be excluded from the employment income for the calculation of the investment professionals salaries tax.
Tax concession rate The Proposal provides that eligible carried interest would be charged at a 0 profits tax rate such rate was kept silent under the Consultation Paper. Only carried interest distributed out of tax-exempted qualifying transactions in private equity investments ie shares stocks debentures loan stocks funds bonds or notes of or issued by a private company under Schedule 16C of the Inland Revenue Ordinance would be eligible for the tax concession. The Inland Revenue Amendment Tax Concessions for Carried Interest Ordinance 2021 Ordinance was enacted into law on 7 May 2021 by way of amendment to the Inland Revenue Ordinance IRO.
That is where an entity that is recipient of the carried interest return pays part of the return to its employees that payment will be concessionally taxed. Subject to the passage of the Bill by the Legislative Council the. Eligible carried interest recipients.
Hong Kong enacted the Inland Revenue Amendment Tax Concessions for Carried Interest Bill 2021 the New Law on 7 May 20211 The New Law provides a tax regime offering tax incentives for eligible carried interest of qualifying persons and qualifying employees. The Regime operates to provide tax concession at both the salaries tax and profits tax levels. January 11 2021.
Qualifying carried interest broadly includes carried interest received from gains from investments in private. Under this new concession eligible carried interest received or accrued on or after from 1 April 2020 will be subject to zero percent profits tax. Asset Management Tax Update of 29 January 2021 provided an overview of the Carried Interest Tax Concession Bill.
After years of lobbying with the government of the Hong Kong Special Administration Region Hong Kong SAR government and the Hong Kong Inland Revenue Department IRD the tax concessions for carried interest are now effective retrospectively from April 1 2020. The New Law applies to eligible carried interest received or accrued on or after 1 April 2020. Following its proposal to introduce a concessionary tax rate for carried interest earned from Hong Kong private equity funds on January 4 2021 the Hong Kong Government announced that eligible carried interest will be charged at a profits tax rate of 0 and that 100 of eligible carried interest will be excluded.
We set out in the table below a summary of the key aspects of the Regime. Eligible Carried Interest will be taxed at 0 profits tax rate and all of the Eligible Carried Interest would also be excluded from computation in the calculation of salaries tax. On 29 January 2021 the Inland Revenue Amendment Tax Concessions for Carried Interest Bill 2021 the Bill was gazetted to amend the Inland Revenue Ordinance and introduce a concessionary tax treatment on eligible carried interest received by or accrued to qualifying recipients on or after 1 April 2020.
The Hong Kong Government introduced the Inland Revenue Amendment Tax Concessions for Carried Interest Bill 2021 the Bill on 28 January 2021. The concessional tax treatment for carried interest is now effective from 1 April 2020 and will provide for a 0 tax rate for qualifying carried interest. The Inland Revenue Amendment Tax Concessions for Carried Interest Ordinance 2021 Ordinance was enacted into law on 7 May 2021 by way of amendment to the Inland Revenue Ordinance IRO.
The Bill proposes a tax regime offering tax incentives for eligible carried interest of qualifying persons and qualifying employees. They provide for a 0 tax rate for qualifying carried interest further to the. Applying retrospectively to tax years commencing on or after 1 April 2020 the Amendment Ordinance has essentially transformed Hong Kong into one of the most tax efficient jurisdictions for fund.
As part of a longstanding Government policy to attract private equity PE and investment fund. The proposal states that the tax concession only applies to carried interest distributed by PE transactions only. Qualifying carried interest would be taxed at a highly competitive rate However the consultation paper does not clarify whether this rate would be a tax exemption ie a 0 rate or some other reduced tax rate.
Received a preferred return at an annual rate of 6 compound interest that would also be considered carried interest. On 7 May 2021 the Inland Revenue Amendment Tax Concessions for Carried Interest Ordinance 2021 the Amendment Ordinance was enacted into law. Specifically the carried interest must arise from a tax-exempted qualifying transaction in the shares stocks.
Proposed tax concession regime. Given tax treatment is one of the key factors influencing the choice of jurisdiction for fund domiciliation and operations it is announced in the 2020- 21 Budget Speech that the Government plans to provide tax concession for carried interest distributed by PE funds operating in Hong Kong. The legislative council brief accompanying the Bill specifies that carried interest derived from a hedging transaction may only be eligible for the Tax Concession if the hedging transaction forms part and parcel of the private equity transaction and the profits on the hedging transaction are embedded in the profits or loss on such transaction for the calculation of.
The tax concession for a carried interest also looks through to the employees.
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