carried interest tax concession

Only carried interest distributed out of tax-exempted qualifying transactions in private equity investments ie shares stocks debentures loan stocks funds bonds or notes of or issued by a private company under Schedule 16C of the Inland Revenue Ordinance would be eligible for the tax concession. Tax concession rate The Proposal provides that eligible carried interest would be charged at a 0 profits tax rate such rate was kept silent under the Consultation Paper.

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Qualifying carried interest broadly includes carried interest received from gains from investments in private.

. To qualify for the tax concession the fund must be validated by the HKMA. January 11 2021. The Inland Revenue Amendment Tax Concessions for Carried Interest Ordinance 2021 Ordinance was enacted into law on 7 May 2021 by way of amendment to the Inland Revenue Ordinance IRO.

After six months of consultation the Inland Revenue Amendment Tax Concessions for Carried Interest Bill 2021 Bill providing for. That is where an entity that is recipient of the carried interest return pays part of the return to its employees that payment will be concessionally taxed. At the meeting of the Executive Council on 26 January 2021 the Council ADVISEDand the Chief Executive ORDEREDthat the Inland Revenue Amendment Tax Concessions for Carried Interest Bill 2021 the Bill at Annex A should be introduced into the Legislative Council LegCo to.

On 7 May 2021 the Inland Revenue Amendment Tax Concessions for Carried Interest Ordinance 2021 the Amendment Ordinance was enacted into law. The Inland Revenue Amendment Tax Concessions for Carried Interest Ordinance 2021 Ordinance was enacted into law on 7 May 2021 by way of amendment to the Inland Revenue Ordinance IRO. The Government has spared no efforts in developing Hong Kong as a premier PE fund hub.

Regardless whether the qualifying employees apply for the salaries tax concession in respect of eligible carried interest you must state the exact amount of sums paid or payable to them in section 26 and exact number of qualifying employees who. Following its proposal to introduce a concessionary tax rate for carried interest earned from Hong Kong private equity funds on January 4 2021 the Hong Kong Government announced that eligible carried interest will be charged at a profits tax rate of 0 and that 100 of eligible carried interest will be excluded. On 7 May 2021 the Inland Revenue Amendment Tax Concessions for Carried Interest Ordinance came into operation introducing the much-anticipated Carried Interest Tax Concession Regime the Regime.

Eligible carried interest recipients. As a prerequisite to the concessionary tax regime the eligible carried interest must arise from profits on the in-scope transactions 2 of private equity PE funds which are exempt from profits tax under the Unified Fund Exemption Regime UFR. Received a preferred return at an annual rate of 6 compound interest that would also be considered carried interest.

For carried interest to qualify for the concession the underlying investments from which the carried interest is distributed must also comply with the same conditions governing exemption from tax. Asset Management Tax Update of 29 January 2021 provided an overview of the Carried Interest Tax Concession Bill. Specifically the carried interest must arise from a tax-exempted qualifying transaction in the shares stocks.

The Regime operates to provide tax concession at both the salaries tax and profits tax levels. For qualifying carried interest recipients subject to profits tax ie the fund management entities under Part V of the Securities and Futures Ordinance carried interest payments would first need be netted off against outgoings and expenses and depreciation to arrive at the net carried interest eligible for the concession. These include being a qualified recipient the need to comply with headcount and operating expenditure substance requirements as well as the need for the fund be certified by the Hong Kong Monetary Authority and the Inland Revenue.

The tax concession involves a number of conditions that must be satisfied for a carried interest to qualify for the concession. The tax concession regime for carried interest distributed by eligible private equity funds operating in Hong Kong alongside the enhancements to the profits tax exemption that was initially introduced in April 2019 offer additional strong incentive and an attractive tax framework for fund operators to establish and operate private equity funds in Hong Kong while. They provide for a 0 tax rate for qualifying carried interest further to the.

Furthermore the Proposal clarifies that 100 of eligible carried interest would also be excluded from the employment income for the calculation of the investment professionals salaries tax. Applying retrospectively to tax years commencing on or after 1 April 2020 the Amendment Ordinance has essentially transformed Hong Kong into one of the most tax efficient jurisdictions for fund. Eligible Carried Interest will be taxed at 0 profits tax rate.

Under this new concession eligible carried interest received or accrued on or after from 1 April 2020 will be subject to zero percent profits tax. 11 rows As part of a longstanding Government policy to attract private equity PE and investment fund. Inland Revenue Amendment Tax Concessions for Carried Interest Bill 2021.

The tax concession for a carried interest also looks through to the employees. The concessional tax treatment for carried interest is now effective from 1 April 2020 and will provide for a 0 tax rate for qualifying carried interest. A qualifying payer is any of the following.

For tax concessions to apply carried interest must arise from eligible transactions in private companies and be distributed by a fund certified by the Hong Kong Monetary Authority or the Innovation and Technology Venture Fund Corporation set up by the Government the spokesperson added. Under this new concession eligible carried interest received or accrued on or after from 1 April 2020 will be subject to zero percent profits tax. Given tax treatment is one of the key factors influencing the choice of jurisdiction for fund domiciliation and operations it is announced in the 2020- 21 Budget Speech that the Government plans to provide tax concession for carried interest distributed by PE funds operating in Hong Kong.

The proposal states that the tax concession only applies to carried interest distributed by PE transactions only. A fter years of lobbying with the government of the Hong Kong Special Administration Region Hong Kong SAR government and the Hong Kong Inland Revenue Department IRD the tax concessions for carried interest are now effective retrospectively from April 1 2020.

Pwc Cn Publication New Year Good News Carried Interest Tax Concession