Hong Kong Financial News

Recently, a business reception was held in Berlin in order o mark the inauguration of the Hong Kong Economic and Trade Office (HKETO) operation in Germany.

According to the new  office's director, Stephen Wong, the Hong Kong Economic and Trade Office in Berlin will strengthen the bilateral economic and trade relationships between Hong Kong and Germany, Austria, Switzerland, the Czech Republic, the Slovak Republic, Hungary, Slovenia, and Poland.

When speaking at an inauguration reception, Wong explained that Hong Kong is uniquely positioned as Asia's World City and the gateway to mainland China. He said that in 2003 a Closer Economic Partnership Arrangement, or CEPA, was signed with Mainland China and 6 supplementary agreements were concluded since then.

Also, Wong said that Hong Kong is ready to revise its laws with a view to update the standards for the exchange of tax information on an international scale, which has already been positively acknowledged by the Organization for Economic Co-operation & Development (OECD).

According to the estimations announced by Hong Kong's Financial Secretary John Tsang, about 500 000 tax payers will receive rebate cheques in September 2009, while 800 000 will not have to pay tax for year 2009.

Mr  Tsang is sure that the recently-announced relief measures will help people during the period of the economic downturn. Financial Secretary said that evaluation will be finished in September and by that time around 500 000 tax payers will receive their rebate, while 800 000 will not be obliged to pay tax for the financial year.

It is worth noting that, as Tsang emphasized, no relief measures can cover everybody directly but such measures as assisting small- and medium-sized enterprises getting loans from banks will help 140 000 people indirectly – they will hel people keep their jobs. Financial Secretary promised to monitor the development od the Hong Kong's economy and concluded, “We expect the deterioration will slow down in the second half of the year. But if things worsen we will consider carrying out more relief measures. With the ones we have already announced, I am confident we will be able to help everyone get through the year".

Departmental Interpretation and Practice Notes No 45 (DIPN 45) have been issued by the Hong Kong Inland Revenue Department regarding double taxation relief due to transfer pricing or profit reallocation adjustments.

DIPN 45 is used to explain how relief from double taxation due to transfer pricing and profit reallocation adjustments is to be provided. This document addresses issues that are connected with economic double taxation (taxation on 2 associated enterpises) and juridical double taxation(taxation on 1 enterprise in 2 states) as well as covers situations when the Hong Kong SAR has no double taxation agreement (DTA) with the overseas tax jurisdiction.

A “Mutual Agreement Procedures Article” is included into the document and based on Article 25 of the OECD model.

Hong Kong's Financial Services and the Treasury Bureau have welcomed an article published in the middle of May by the Organization for Economic Co-operation and Development (OECD).

The article by the OECD commended transparent tax system in Hong Kong as well as its efforts to comply with international standards on tax information exchange. It was written by Jeffrey Owens, who is the director of the organization's Centre for Tax Policy & Administration in Paris.

In his article, Mr Owens wrote, "Hong Kong has built its position as an international financial centre on the basis of free markets, low tax rates and a transparent tax system. Under the OECD criteria, Hong Kong is not considered a tax haven". He also noted that Hong Kong was the 1st major financial centre in the region that managed to make such a move and that since that time other Asian countries have followed Hong Kong's lead.

New Zealand's Trade Minister Tim Groser has expressed his pleasure that trade talks between Hong Kong and New Zealand have resumed

According to Groser, "Resumption of negotiations towards a Closer Economic Partnership (CEP) with Hong Kong enables us to look at taking relations to a new level and will provide a valuable platform to stimulate growth in our trading relationship". He also said that  New Zealand's Prime Minister John Key's recently met with Hong Kong Chief Executive Donald Tsang at the Boao Forum and highlighted the strength of the relationship between the jurisdictions. Prime Minister Key expressed his commitment to raise the profile of New Zealand business in Hong Kong.

Initially, New Zealand and Hong Kong commenced CEP negotiations in 2001. However, after 5 rounds of talks, these negotiations were suspended in 2002. But it was possible to resume the negotiations with the conclusion of the Free Trade Agreement between New Zealand and China.

Groser said that "Hong Kong is a very important partner for New Zealand - both commercially and strategically as a key services and investment hub for the North Asia region. Hong Kong is the world's 12th largest trading economy. It is also the second largest source of Foreign Direct Investment (FDI) in Asia".

In order to encourage online filing of tax returns, Hong Kong's Inland Revenue Department has made an announcement that an automatic one-month extension will be granted to all e-filers.

On May 5, Alice Lau, Commissioner of Inland Revenue, said that 2.08 million individual tax returns are being sent out by the department and reminded that taxpayers must file their returns on time. She said that the deadline falls on June 4, however eTAX users filing their returns online will get a deadline extension – they will have an opportunity to file the returns until July 4.

The deduction ceiling for approved charitable donations has been raised to 35% of the taxpayer's income, therefore the Inland Revenue department will enhance audits on donation claims with a view to detect abuse.

It is worth noting that during 2008-2009, USD 24 billion in revenue was collected, which is an increase of USD 1.1 billion on the previous financial year.

On April 30, 2009, Hong Kong's Inland Revenue (Amendment) Bill 2009 was officially gazetted.

On May 13, this bill was introduced into the Legislative Council. After that, the tax reduction will be reflected in the taxpayer's final tax payable for 2008-2009.

The Inland Revenue (Amendment) Bill will allow a one-off reduction of 50% on salaries tax and tax under personal assessment for 2008-2009, subject to a ceiling of USD 774.

This measure had been announced by the HK Financial Secretary in the 2009-2010 Budget.

According to the estimations, the proposal will cost the Hong Kong's government about USD 529 million in 2009-2010.

Hong Kong's 5th comprehensive agreement for double taxation avoidance was gazetted on April 30, 2009. This was a tax treaty with Vietnam.

Any Hong Kong income tax paid by Vietnam residents or companies will be allowed as a credit against any tax payable in respect of the same incomes in Vietnam, under this tax agreement.

The withholding tax on royalties derived in Vietnam will be capped at 7% where payments are made for patent, design, model, plan, secret formula or process.

As to the withholding tax on interest derived in Vietnam, it will be reduced from the current 10% to 0% if the recipient is the Hong Kong Government, the HKMA or other mutually agreed recognized institutions.

After both sides have completed their ratification procedures, the agreement will come into force.

Hong Kong's Airport Authority has launched a USD 58 million relief package in order to assist airlines and other operators at Hong Kong International Airport whose business has been affected by the global economic downturn.

The relief package consists of USD 32 million interest-free payments and USD 25 million worth of reductions in charges.

Until the end of 2009, airlines that operate at the airport are offered a 10% reduction in landing and parking charges. Also, 50% of rental payments for airline lounges, offices, counters and storage can be deferred for up to 1 year and repaid by interest-free installments from April 2010 and on.

Sotheby's, the auction house for paintings, sculpture, other fine art, antiques, books, jewellery, etc., hammered off a total of USD 88.6 million worth of artwork in its spring Asian sales in Hong Kong.

This is 11% higher than its pre-sale estimate in a showing for the fragile Chinese art market. Asia sales in Hong Kong are held twice a year, and they are often perceived as a weather vane for the Chinese art market.

Kevin Ching, CEO for Sotheby's Asia, expressed his delight with the results that have been achieved as these results send a very positive and encouraging signal to the market.