Hong Kong lures ship leasing firms to set up shop with offer of removing profit tax
HONG Kong is to remove income tax for ship leasing firms that are willing to locate their business to the Asian maritime hub in a move to boost the local shipping sector
HONG Kong is to remove income tax for ship leasing firms that are willing to locate their business to the Asian maritime hub in a move to boost the local shipping sector.
Addressing the Capital Link Hong Kong Maritime Forum, as part of the Hong Kong Maritime Week, the Secretary for Transport and Housing, Frank Chan, said qualified shipping lessors registered in Hong Kong will 'enjoy a zero per cent profit tax rate'. They include those engaging in operating as well as financial leases, including subleasing and sale and leaseback activities.
'We've heard the industry call for further tax incentives to attract more presence on maritime commercial principles, and we are working on that,' he said.
While little detail about the tax exemption was provided, Mr Chan told Lloyd's List, UK, on the sidelines of the conference that this new tax regime was 'at law drafting stage' and expected to take effect by mid-2020.
Local shipowners and lawyers have indicated that the legislation may include entitlement of ship lessors to the tax break policies under the so-called section 23B of the Inland Revenue Ordinance, which currently just applies to shipowners.
The charter out of a Hong Kong registered ship engaged in international trade is exempt from profits tax on its charterhire income under section 23B.
The move comes as leasing houses, especially the major ones from China, are playing an increasingly important role in the global ship finance market, and in some cases, even acting as traditional shipowners via rising uptakes of operating leases.
Hong Kong, a former British colony and now a Chinese Special Administrative Region, should use that momentum to benefit its maritime community, the city's Financial Services Development Council noted in its Maritime Leasing Paper published in May last year.
'Many Mainland China vessel leasing companies with all or part of their fleet based or registered outside Mainland China in low tax jurisdictions are looking into housing their offshore ownership operations in respectable jurisdictions with a stable tax and legal environment, along with other considerations,' it wrote. 'All these activities present a real opportunity for Hong Kong.'
The paper added that Hong Kong's long-standing competitor Singapore offered concessionary tax rates 'to shipping-related support services and on qualifying management income of leasing businesses'.
Mr Chan told delegates that the tax exemption for ship lessors would be coupled with another move to halve the profit tax rate to 8.25 per cent for qualified ship leasing management companies.