MR CHAN CHUN-YING (in Cantonese):
Deputy President, as an international financial centre, Hong Kong must actively develop its asset management business besides such traditional sectors as banking, securities and insurance. The SAR Government embarked on setting up the legal framework for the open-ended fund company (“OFC”) structure in mid-2016. The OFC regime is expected to be put in place this year, with a view to building up Hong Kong’s own fund manufacturing capabilities. However, under the current tax arrangements, only offshore open-ended fund companies are eligible for profits tax exemption, which will inevitably hinder the development of Hong Kong’s fund industry. The Inland Revenue (Amendment) (No. 4) Bill 2017 (“the Bill”) seeks to prescribe certain specific conditions under which onshore OFCs are eligible for profits tax exemption. These conditions include: the OFC must be a Hong Kong resident person; it must be “non-closely held” (“NCH”); it must invest mainly in permissible asset classes specified by the Securities and Futures Commission, but with a degree of flexibility, i.e. the 10% de minimis limit; and the transactions concerned must be carried out or arranged by a qualified person. I believe that the Bills Committee Chairman has already explained in detail the benefits of the Bill. Hence, I am not going to repeat his points. As a member of the Bills Committee, I support the passage of the Bill, and I am very pleased to see that the Government has proposed the necessary amendments in light of the views of members of the Bills Committee, such as providing a clearer definition of “qualified investor”. During the scrutiny of the Bill, I have put forward two points of view: First, I hope that the Government can review the ownership requirement under the NCH condition at regular intervals in future, with a view to attracting more funds of a reasonably large scale to domicile in Hong Kong. The objective is to position Hong Kong as a premium location for fund domiciliation and create more high-end employment opportunities, which will become another new bright spot in Hong Kong’s financial development. Of course, as an international city, Hong Kong has to keep up to date with the changes in the international community at all times by amending its financial and economic laws and regulations. Meanwhile, the Legislative Council has often been scrutinizing amendments to relevant laws as well. Hong Kong was successful in the past because of its willingness to take the initiative, be proactive and keep up with the times. Other major fund jurisdictions, such as the United Kingdom and Singapore, have been vigorously promoting the development of their onshore fund industry. For this reason, I wish to once again remind the SAR Government to proactively set a timetable and review the ownership requirement, and refrain from being a follower who simply waits until other jurisdictions have finished amending their legislation before introducing bills into the Legislative Council. This will only undermine our competitive edge. Secondly, at the meeting of the Bills Committee, I have asked the Government to consider issuing certificates of resident status to such companies, with a view to facilitating them in seeking tax benefits in other tax jurisdictions which have signed Comprehensive Double Taxation Agreements with Hong Kong. Back then, the Government responded by noting that the Organisation for Economic Co-operation and Development (“OECD”) was formulating its position regarding tax treaty entitlements of investment vehicles relating to the initiative to combat Base Erosion and Profit Shifting. The Government will monitor relevant international practice to ensure that the issue of certificates of residence status to OFCs conforms to international standards. I hope that the Government will follow up on this matter expeditiously once OCED has made its position clear, with a view to attracting more multi-national fund companies to choose to domicile in Hong Kong, from where they will expand their fund business.
I so submit.