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Hong Kong Urged To Increase Tax Incentives

by Mary Swire, Lowtax.net, Hong Kong
16 January, 2017

Professional services firm PwC has recommended that Hong Kong should use available fiscal space to adopt financial and tax incentives.

PwC expects Hong Kong to record a HKD70.1bn (USD9bn) consolidated budget surplus in the FY2016/17, much higher than the HKD11.4bn surplus previously forecast by the Government. It expects Hong Kong's fiscal reserves to reach HKD913bn by end-March 2017 – equivalent to 23 months of total Government expenditure.

It said the increased surplus is partly attributable to higher-than-expected revenues from land sales, profits tax, and stamp duty.

PwC proposed that the Government should use part of its increased surplus to provide capped investment credits for eligible technology startups for investment in advanced and new technologies, IT systems, infrastructure, and equipment.

PwC suggested also expanding the scope of tax deductions for capital expenditure incurred for the purchase of intellectual property rights, as well as the adoption of appropriate tax incentives to encourage multinational enterprises to establish their regional headquarters in Hong Kong.

The firm also called for measures to develop Hong Kong into a center for aerospace financing, in line with a commitment from the local government, by relaxing the restriction imposed on tax depreciation allowances, to facilitate genuine leasing operations in Hong Kong, by providing a more favorable tax rate for aircraft lessors.

In addition, to strengthen Hong Kong's position as an international financial hub, PwC recommended that existing tax exemptions should be extended to onshore funds, and the tax incentives for insurers should be further expanded.

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