In March 2017, Hong Kong's new chief executive-elect, Carrie Lam, described her philosophy on taxation to domestic and international investors at the Credit Suisse Asian Investment Conference (CSAIC). "My new tax philosophy is not exactly 'the more, the merrier'. Sometimes collecting less is highly desirable," she told journalists. Lam wants Hong Kong to be competitive and she sees lower taxation as a means for helping the country economically.
Lam proposed tax reforms that would ease the tax burden on SMEs and start-up enterprises in Hong Kong. She intends to lower the corporate income tax rate on the businesses' first HK$2 million ($256,000) of annual profit from 16.5% to 10%. She has also outlined tax deductions to increase research and development activities. In addition, there will be more avoidance of double taxation treaties with other jurisdictions.
It is easy to see how such tax proposals will appeal to businesses and audiences like those at the CSAIC. Lower taxes mean more profits for SMEs, which will enable them to reinvest in their businesses. It would make Hong Kong still more competitive to startups in a world where many countries, including the US, may lower corporate tax rates in the near future.
However, lower taxes may also lead to less revenue for the Hong Kong. This potentially means less money to finance infrastructure programmes. Some critics have suggested that Hong Kong needs to expand its tax base to ensure its citizens are treated fairly under the tax system.
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|Corporate Income Tax||16.5%|
|Capital Gains Tax||0%|
|Net Operating Losses (years)|
|Royalties paid to corporations||4.95%||16.5%||A|
|Royalties paid to individuals||4.5%||15%||A|
|Branch Remittance Tax||0%|
A) This is a final tax applicable to persons not carrying on business in Hong Kong. The general withholding tax rate is 4.95% for payments to corporations. For payments to individuals (including unincorporated businesses), the general withholding tax rate is 4.5%. However, if a recipient of payments is an associate of the payer and if the intellectual property rights were previously owned by a Hong Kong taxpayer, a withholding tax rate of 16.5% applies to payments to corporations and, for payments to individuals (including unincorporated businesses), a 15% rate applies.
Steven Sieker is the head of the tax department at Baker McKenzie. The department comprises four partners, one special counsel and seven other fee earners. Wenwen Chai joined the practice in September 2016. The practice's tax lawyers have worked in private practice, in-house, at major accounting firms and in banks. They have also held industry positions, and served on government committees. They are also experienced in all aspects of taxation law regarding Hong Kong. This includes tax controversy, tax planning for multinational companies, personal tax and trust services, establishment of new business presences, and financing arrangements. The lawyers in the department are full-time tax professionals.
The tax team's services include dealing with tax disputes, tax litigation, tax planning, global structuring, M&A, private banking and wealth management, employment-related taxes and stamp duty. Baker McKenzie's Hong Kong office also serves as a base for their China customs and indirect practice. As the Hong Kong office is part of the Baker McKenzie network, it can provide seamless tax advice in 47 countries across the globe. In 2015, it launched the Baker McKenzie FenXun (FTZ) Joint Operation Office in the China (Shanghai) Free Trade Zone, which was approved by the Shanghai Bureau of Justice.
Clifford Chance established itself in the Asia-Pacific region by opening the Hong Kong office in 1980. The tax services that the firm provides include banking and finance, restructuring, corporate, M&A and joint ventures, real estate, private equity and funds. The Clifford Chance tax disputes team advises clients on tax disputes, tax compliance and tax controversies. The team's areas of expertise are tax litigation, corporate tax and VAT disputes, cross-border disclosure requests from tax authorities and management of tax risk. Brian Gilchrist is a partner at the firm. He practices general and civil litigation with skills in a range of areas including tax.
Stefano Mariani is a tax associate and the head of the tax practice at Deacons. The practice advises clients on the tax regimes of Hong Kong and other jurisdictions. The tax team comprises experienced lawyers with contacts at the tax authority. This enables the firm to advise its clients on regulatory developments. The practice's tax services include business and corporate tax planning, tax investigations, audits, disputes and stamp duties.
Mariani has advisory and contentious tax experience including corporate taxation and group reconstructions, personal taxation, and trusts and estate planning and management. He advises clients on Hong Kong and international tax law, including tax-efficient structuring and restructuring and tax appeals. His experience also includes cross-border tax planning and double taxation treaty-driven tax structuring. Minning Wei is an associate and her expertise includes tax investigations, audits, disputes and business and corporate tax planning.
Sara Chin is the head of the tax department at Deloitte. The practice provides tax and business advisory services in the areas of global business tax, global employer services, indirect tax, tax disputes and cross-border tax including international tax, M&A and business model optimisation. Chin is also the national indirect tax and customs leader. In this role, she leads the tax team in providing integrated solutions to the most complicated VAT and customs issues.
Deloitte's Hong Kong tax practice includes the Deloitte Asia-Pacific international core of excellence (Deloitte AP ICE). Leonard Khaw and Lili Zheng co-lead this initiative. It provides local insight into key foreign tax jurisdictions in the context of clients' constraints and objectives. The firm has integrated foreign nationals into the practice, and they are available to provide tax support in a wide variety of situations. These include new business development, one-off issues, day-to-day questions, M&A and corporate life events. The firm can utilise the resources of its global network for support.
In the past year, the practice advised a US-listed company on the establishment of a centralised global procurement company for the Asia-Pacific region from designing and planning to implementation and review.
David Chan is the head of the tax department at EY. The practice comprises 38 partners and 323 other fee earners. In the past year, the following professionals have joined the practice: Liza Drew, Rohit Narula, Nick Pond, Kelly Ho, Jeroen van Mourik, and Linda Rowe.
The firm offers advice regarding assurance, tax, transaction and advisory services. The services include business tax, indirect tax, international tax, transaction tax, and tax-related issues associated with human capital, compliance and reporting. The tax department is active in facilitating training courses for the IRD. The department's professionals participate as committee or advisory board members on accounting, and tax professional bodies.
EY can rely on its global network, which includes professionals in 85 countries, to help clients understand tax policy changes, and resolve tax disputes around the globe. Many of these professionals are former government officials. The global network enables the department to create compliance and reporting foundations, and effective risk management protocols.
The global network also enables the firm to assist businesses in preventing, managing, and resolving tax controversy issues. Services that EY provide with regard to tax controversy include pre-filing controversy management and tracking, dispute resolution, return filing and preparing relevant back-up documentation.
The tax practice at Grant Thornton advises clients on tax compliance, tax advisory and other financial advisory matters. Its services include help with tax compliance, planning and advisory, indirect tax, and tax risk management and transaction support. The firm's clients include MNEs, SMEs, listed companies, individuals and expatriates.
The tax practice has experience and knowledge of tax regimes in China and abroad. The firm is an integrated part of Grant Thornton China. It is also part of a global network of member firms across 130 countries. William Chan is a partner of the firm's tax services.
KPMG has nine partners who specialise in corporate tax, and six partners who specialise in tax controversy. Curtis Ng became the head of the tax department at KPMG's Hong Kong office in May 2017. Ng has experience representing clients in investigations conducted by the tax authorities. He advises clients who operate in property development and construction and international conglomerates in the manufacturing sector.
His predecessor was Ayesha Macpherson Lau. Lau has adopted the new role as managing partner of the Hong Kong office in May 2017. She has experience in settling tax disputes on behalf of clients with the tax authorities. Wade Wagatsuma leads the country's US corporate tax practice. He specialises in US federal income taxation with emphasis on transactional tax planning for both domestic and cross-border transactions. Daniel Hui advises MNCs on investments, M&A, corporate restructuring, IPO and pre-acquisition due diligence assistance in China in connection with direct tax, indirect tax, customs, foreign exchange and business regulations. In 2016, Ng helped an international client resolve issues raised by the Inland Revenue Department (IRD). Advice concerned the client's application to enjoy the reduced dividend withholding tax rate under the double tax agreement between China and Hong Kong.
The tax practice at Lorenz & Partners employs lawyers and tax experts that have experience in national and international taxation. It advises clients on the tax structuring of projects, agreements and investments. The practice advises clients on domestic tax law including corporate income tax, personal income tax, VAT, withholding tax and stamp duty. The firm specialises in tax optimisation, planning and application for fiscal incentives and tax reductions and promotions. The practice is also experienced in German tax law and advises German-speaking clients about foreign investment in Hong Kong and China.
Michael Lorenz is a German attorney-at-law and a partner at the firm. Lorenz has a registered foreign lawyer (RFL) in Hong Kong since 2006. Stefan Schmierer is also a German attorney-at-law. He became an RFL in Hong Kong in 2010 and he is a senior legal adviser at the firm.
PwC's tax services include international tax, M&A, tax controversy, tax reporting and strategy.
Peter Ng is the China and Hong leader of the practice. Ng has more than 28 years of experience in international tax structuring, M&A, corporate reorganisations and tax audit advisory.
Charles Lee is the China South and Hong Kong leader at the firm. Prior to joining the firm, he worked for the IRD. His experience includes due diligence review and tax restructuring.
Susan Kwong is a tax associate director at the firm. She has more than 20 years of tax experience. She advises clients concerning corporate tax, M&A and tax structuring.
KK So is the Asia-Pacific real estate tax leader at PwC. His experience includes advising on property and infrastructure projects. These projects include structuring real estate funds and joint ventures, funding structures and structured finance products, due diligence reviews, reviewing financial models, assistance in tax audits and tax depreciation reviews.
Emily Chak is a tax director and she has more than 10 years of experience advising domestic clients and MNEs. Her experience includes M&A, regional tax advisory work and resolution of tax disputes.