Issue Feb 2020

BMS Corporate Services Limited is a licensed Trust & Company Service Provider (“TCSP”) in Hong Kong. With over 30 years of professional experience, we provide a full range of corporate services, including company secretarial, accounting and payroll outsourcing services, to our clients. Corporate and business rules change rapidly, and our e-News serves to provide you with updates on the relevant topics.

Proposed tax regime for ship leasing in Hong Kong

The Inland Revenue (Amendment) (Ship Leasing Concessions) Bill 2020, which was gazetted on 17 January 2020, introduces a concessionary tax regime for certain ship leasing activities. The regime is designed around a Hong Kong based manager using separate Hong Kong incorporated special purpose companies to own and lease ships for use outside Hong Kong waters.

Main features:
  • Tax rate on qualifying profits of “qualifying ship lessors” will be 0%.
  • Qualifying profilt from operating leases will be 20% of gross rentals less deductible expenses (excluding tax depreciation).
  • Qualifying profilt from finance leases will be gross finance income (interest) less deductible expenses.
  • A ship is to be treated as a capital asset if it is used by the qualifying ship lessor for carrying out a qualifying ship leasing activity for not less than 3 consecutive years immediately before disposal of the ship.
  • Tax rate on the profits of “qualifying ship leasing managers” will be 0% for services provided to an associate, and 8.25% for services provided to a non-associate.
  • “Qualifying ship leasing management activities” comprise a wide range of financing and management activities related to ship leasing, including provision of intra-group financing.
  • For the ship leasing activity to be considered to be carried out or arranged by the qualifying ship lessor in Hong Kong, there must be adequate employees and operating expenditure.
“Qualifying ship lessors” and “qualifying ship leasing managers” must be corporations which conduct only qualifying activities, with some non-qualifying activity allowed for leasing managers. Both the lessors and managers are required to be centrally managed and controlled in Hong Kong, with all profit generating activities conducted in Hong Kong and not attributable to any permanent establishment outside Hong Kong.

There is a safe harbour allowing qualifying ship leasing managers to carry on certain non-qualifying activities – at least 75% of profits must arise from qualifying activities and at least 75% of total assets must be used to carry out qualifying activities.

There are also several anti-avoidance measures built into the regime.

Hong Kong Budget 2020/21

Hong Kong Financial Secretary delivered the 2020/21 budget speech on 26 February 2020. The government forecasts a deficit of HK$37.8 billion for 2019/20 and expects fiscal reserves to reach HK$1,133.1 billion by 31 March 2020.

Major proposals for business and individuals:
  • Reduce salaries tax and tax under personal assessment for 2019/20 by 100%, subject to a ceiling of HK$20,000.
  • Reduce profits tax for 2019/20 by 100%, subject to a ceiling of HK$20,000.
  • Waive stamp duty on stock transfers paid by the Exchange Traded Fund (ETF) market makers when creating and redeeming ETF units in Hong Kong.
  • Establish a limited partnership regime and provide tax concession for carried interest issued by private equity funds to attract them to domicile and operate in Hong Kong.
  • Continue to provide 300% tax deduction for the first HK$2 million and a 200% deduction for the remaining amount for qualifying research and development (“R&D”) expenditure incurred by enterprises and subsidizing local R&D work.
  • Offer a profits tax exemption to qualifying ship lessors and a half-rate profits tax concession to qualifying ship leasing managers, and half-rate tax concession for eligible insurance businesses.
  • Issue green bonds totalling HK$66 billion in next five years, and inflation-linked retail bonds and Silver Bonds totalling not less than HK$13 billion.
  • Waive rates in respect of residential properties for 2020/21, subject to a ceiling of HK$1,500 per quarter.
  • Provide an extra month’s Comprehensive Social Security Assistance payment, Old Age Allowance, Old Age Living Allowance and Disability Allowance.
  • Pay one month’s rent for lower income tenants living in public rental units.
  • Pay examination fees for school candidates sitting for the 2021 Hong Kong Diploma of Secondary Education Examination.
  • HK$10,000 cash payout to Hong Kong permanent residents aged 18 or above.
  • Introduce a concessionary low-interest loan with 100% Government guarantee for enterprises, the application period of which will last for 6 months.
    • Maximum loan of HK$2 million with repayment period up to 3 years.
    • Moratorium on principal repayment for first 6 months.
  • Waive rates for non-domestic properties for 2020/21, subject to a ceiling of HK$5,000 per quarter in first two quarters; and HK$1,500 per quarter for remaining two quarters.
  • Waive business registration fees for 2020/21.
  • Waive registration fees for company annual returns for 2 years.
  • Subsidize 75% of electricity charges for non-residential account for 4 extra months, subject to a monthly cap of HK$5,000.
  • Waive 75% of water and sewage charges of non-domestic households for 4 extra months, subject to monthly caps of HK$20,000 and HK$12,500 respectively.
  • Provide rental subsidy of HK$100 million for local recycling enterprises for 6 months..
  • Reduce 50% rental for government properties / properties covered by short-term and temporary waivers for 6 months.

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  Position Contact Email

James Lai Director (852) 3151 1211 James.Lai@bmshk.com.hk
Zoe Pak Associate Director
(Company Secretarial
(852) 3151 1210 Zoe.Pak@bmshk.com.hk
Gloria Ng Manager
(Trade Services)
(852) 3151 1212 GNg@bmshk.com.hk
Gladys Cheung Manager
(Company Secretarial
(852) 3151 1218 Gladys.Cheung@bmshk.com.hk

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This information is of a general nature only and is not intended to be relied upon, nor to be a substitute for, specific professional advice. No responsibility for loss arising from acting on or refraining from action as a result of any of this information can be accepted. No reader should act on the basis of this information without obtaining independent professional advice with regard to their particular circumstances.