In a move designed to bolster Hong Kong’s status as a major international financial centre, the government has proposed exempting offshore f...

In a move designed to bolster Hong Kong’s status as a major international financial centre, the government has proposed exempting offshore funds from paying profits tax. The move is designed to exempt non-Hong Kong residents from paying profits tax on income derived from the trading of local securities by offshore funds. It follows criticism that Hong Kong’s tax policy on offshore funds’ investments in local securities lacked clarity. Some reports have suggested that several international fund managers said they were considering focusing on making offshore funds available to institutional clients and private banking clients in Singapore, where they would be exempt from profits tax. Many offshore-fund managers had operated in Hong Kong believing they were exempt from paying any taxes. However, under Hong Kong's Internal Revenue Ordinance, offshore funds are required to pay taxes on profits gained from any local exposure to stocks and bonds. Assessable profits are taxed at a rate of 17.5 percent in Hong Kong, according to PricewaterhouseCoopers.