|
|
|
Ayesha Lau |
Darren Bowdern |
Legislation was introduced into the Legislative Council in January 2014 to provide a profits tax concession to captive insurance companies in respect of their profits from the business of insurance of offshore risks. Such profits are to be chargeable to profits tax at half the normal rate, that is 8.25%. The Inland Revenue (Amendment) (No. 3) Bill 2013 was gazetted on December 27 2013. The Bill seeks to give effect to the proposal in the 2013-14 Budget that the profits tax on the offshore insurance business of captive insurance companies would be reduced in line with the tax concession applicable to reinsurance companies. The financial secretary considered that attracting a cluster of large-scale captive insurers in Hong Kong would promote the development of other related businesses, including reinsurance, making Hong Kong's risk management services more diversified.
The objective of the Bill is to reduce by half the profits tax on profits derived from the offshore risks insurance business of captive insurers (which are typically set up to underwrite the risks of companies within the same group to which the captive insurers belong).
Subject to the Bill being passed by the Legislative Council, the tax concession will have effect for years of assessment 2013-14 and subsequent.
Hong Kong, with its sound regulatory regime and well developed financial infrastructure, is well positioned to establish itself as a centre for captive insurance in Asia and this should in turn reinforce Hong Kong's status as a regional insurance hub.
However, while this latest development is encouraging, it needs to be viewed against Hong Kong only having two captive insurers. Whether the proposed reduction in the profits tax rate will be sufficient to attract companies to locate in Hong Kong, rather than jurisdictions such as Singapore (which has the largest captive insurance market in Asia) remains to be seen.
That said, Hong Kong with its close proximity to China should be an attractive location for Chinese companies with significant captive insurance needs to establish their headquarters.
The Inland Revenue Department announced in December 2013 that the comprehensive double taxation agreement (CDTA) between Qatar and Hong Kong, signed on May 13 2013, came into effect on December 5 2013 and will have effect in Hong Kong as from April 1 2014. At the moment, only the CDTAs with Italy and Guernsey have yet to enter into force.
Ayesha Lau (ayesha.lau@kpmg.com) and Darren Bowdern (darren.bowdern@kpmg.com)
KPMG
Tel: +852 2826 8028 & +852 2826 7166
Website: www.kpmg.com
