January 11 2021. Eligible carried interest recipients.
Introduction Of Carried Interest Tax Concessions For Hong Kong Private Equity Funds
The preferential tax rate is especially important for a private equity fund and its managers.
. 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. For tax concessions to apply carried interest must arise from eligible transactions in private companies and be distributed by a fund certified by the Hong Kong Monetary Authority or the Innovation and Technology Venture Fund Corporation set up by the Government the spokesperson added. The Regime operates to provide tax concession at both the salaries tax and profits tax levels.
A qualifying payer is any of the following. The tax concession regime for carried interest distributed by eligible private equity funds operating in Hong Kong alongside the enhancements to the profits tax exemption that was initially introduced in April 2019 offer additional strong incentive and an attractive tax framework for fund operators to establish and operate private equity funds in Hong Kong while. Following the governments consultation paper issued in August 2020 and the industry consultation on the initial proposals the Legislative Council LegCo Panel on Financial Affairs released a discussion paper on 4 January 2021 on the.
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. The proposal states that the tax concession only applies to carried interest distributed by PE transactions only. 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.
Carried interest tax concession - conditions Must be paid by a qualifying payer The carried interest must be paid by a certified investment fund ie. Eligible Carried Interest will be taxed at 0 profits tax rate. Under the Carried Interest Tax Concession Regime eligible carried interest will be taxed at 0 profits tax rate and all of the eligible carried interest would also be excluded from the employment income for the calculation of the investment professionals salaries tax.
Specifically the carried interest must arise from a tax-exempted qualifying transaction in the shares stocks. The proposed carried interest tax concession for Hong Kong private equity fund sponsors is expected to be introduced as legislation as soon as possible taking into account feedback received. 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.
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. 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. 1 If passed in the current form the concessionary tax.
After six months of consultation the Inland Revenue Amendment Tax Concessions for Carried Interest Bill 2021 Bill providing for a tax concession for a 0 profits tax rate on eligible carried interest Tax Concession was introduced to the Legislative Council on 3 February 2021. On 7 May 2021 the Inland Revenue Amendment Tax Concessions for Carried Interest Ordinance came into operation introducing the much-anticipated Carried Interest Tax Concession Regime the Regime. The Government has spared no efforts in developing Hong Kong as a premier PE fund hub.
On 7 May 2021 the Inland Revenue Amendment Tax Concessions for Carried Interest Ordinance 2021 the Amendment Ordinance was enacted into law. The New Law applies to eligible carried interest received or accrued on or after 1 April 2020. A private equity fund typically uses carried interest to pass through a share of its net capital gains to its general partner which in turn passes the gains on to the investment managers figure 1.
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. The managers pay a federal personal income tax on these gains at a rate of 238 percent 20. To be eligible for the Tax Concession the carried interest must be distributed by a fund which falls within the meaning of fund under section 20AM of.
As a prerequisite to the concessionary tax regime the eligible carried interest must arise from profits on the in-scope transactions 2 of private equity PE funds which are exempt from profits tax under the Unified Fund Exemption Regime UFR. At the meeting of the Executive Council on 26 January 2021 the Council ADVISEDand the Chief Executive ORDEREDthat the Inland Revenue Amendment Tax Concessions for Carried Interest Bill 2021 the Bill at Annex A should be introduced into the Legislative Council LegCo to. A tax concession is proposed for carried interest issued by private entity PE funds operating in Hong Kong.
11 rows As part of a longstanding Government policy to attract private equity PE and investment fund. 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 Carried Interest Tax Concession Regime coupled with the introduction.
Inland Revenue Amendment Tax Concessions for Carried Interest Bill 2021. The proposal provides that the legislation will be retroactive to April 2020. Carried interest tax concession - conditions Must be paid by a qualifying payer The carried interest must be paid by a certified investment fund ie.
Received a preferred return at an annual rate of 6 compound interest that would also be considered carried interest. 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. 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 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. 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.
Pwc Cn Publication New Year Good News Carried Interest Tax Concession
Asset Management Tax Update Kpmg China
Asset Management Update Kpmg China
Ey Avcj Asia Cfo Coo Forum
Pwc Cn Publication New Year Good News Carried Interest Tax Concession
Part 3 Hong Kong Limited Partnership Fund Updates On Tax Concessions For Carried Interest Vistra
Assessing Opportunities In Asia S Evolving Funds Landscape
Introduction Of Carried Interest Tax Concessions For Hong Kong Private Equity Funds
Carried Interest Tax Concession Regime For Private Equity Funds Lexology
Proposal On Hong Kong S Carried Interest Tax Concession Regime Lexology
New Tax Breaks A Magnet For Private Equity Funds The Standard
Dentons Hong Kong Carried Interest Tax Concessions For Private Equity Fund Operators In Hong Kong Enacted As Law Retrospective Effect From April 2020
2
Part 3 Hong Kong Limited Partnership Fund Updates On Tax Concessions For Carried Interest Vistra
Introduction Of Carried Interest Tax Concessions For Hong Kong Private Equity Funds
Pwc Cn Publication More Good News Carried Interest Tax Concession
Pdf Venture Capital Taxation In Australia And New Zealand
A New Era For Carried Interest In Hong Kong Kpmg China
Hong Kong S Carried Interest Tax Concession Zero Tax Insights Proskauer Rose Llp
