Hong Kong: Tax exemption for private equity funds, clarifying guidance

Hong Kong guidance for private equity funds

Hong Kong’s Inland Revenue Department (IRD) released guidance addressing its interpretation of measures enacted last year that sought to extend the tax exemption for offshore funds to private equity firms. The guidance has implications for funds operating in Hong Kong, as well as the tax treatment of carried interest distributions and the ability of a Hong Kong entity (e.g., SPV) to obtain a tax residency certificate.

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Department Interpretation and Practice Note 51 (31 May 2016) outlines how the IRD intends to interpret the provisions to extend the existing profits tax exemption for offshore funds to offshore private equity funds.

KPMG observation

The private equity industry in Hong Kong has been waiting for guidance from the IRD, given that the law enacted last year contained a number of areas of uncertainty for offshore private equity funds. This in turn gave rise to concerns that the uncertainties might prevent funds from being able to rely upon the extended exemption provided in the law.

 

Read a June 2016 report [PDF 179 KB] prepared by the KPMG member firm in Hong Kong:   IRD Issues Guidance on Extension of Offshore Funds Exemption to PE Funds

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