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Carried Interest Tax Concession Regime Introduced

The Inland Revenue (Amendment) (Tax Concessions for Carried Interest) Bill 2021 (“the Bill”) was passed by the Legislative Council on 28 April 2021. Once gazetted, the Bill will apply a concessionary tax rate of 0% to eligible carried interest payments distributed by eligible private equity funds operating in Hong Kong on or after 1 April 2020. This is another tax concession in the asset management fight for dominance between Hong Kong and Singapore.

In a Government press release, the Secretary for Financial Services and the Treasury, Mr Christopher Hui, said, "The tax concession regime for carried interest would attract more private equity funds to operate and be managed in Hong Kong, thus boosting more investment management and related activities, which will bring business opportunities to various professional services and economic benefits to Hong Kong."

To qualify for the concession, several conditions must be satisfied. These include the need to comply with headcount and operating expenditure requirements in Hong Kong, as well as the need for the fund to be certified by the Hong Kong Monetary Authority (“HKMA”) and the Hong Kong Inland Revenue Department (“IRD”).

The HKMA and IRD are still to announce detailed implementation procedures.

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