NEW TAX CONCESSION LAW TO BOOST HONG KONG’S SHIP LEASING MARKET

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-Hong Kong is hopeful to see an enlargement of its global share of ship leasing activities following the recent ship leasing tax concession.

-The tax rate on the qualifying profits of ship lessors carrying out lease activities to be 0%.

-Furthermore, the Hong Kong Government plans to capture about 12% of the world’s market in the future.

-New Tax scheme to open up opportunities in Mainland Chinese companies to access more talented people in Hong Kong.

-Terms of qualifying for the concession states that all the management activities must be conducted within the border while the vessel involved must be trading outside it’s waters.

Based on the report published by Seatrade Maritime News,

On 19 June 2020, the Inland Revenue (Ship Leasing Tax Concessions) Ordinance 2020, which introduces concessionary tax regimes for qualifying ship lessors and ship leasing managers, came into effect.

Terms of the Ordinance

The tax rate on the qualifying profits of ship lessors carrying out operating lease and finance lease activities, including subleasing and sale and leaseback arrangement, will be 0%.

On the other hand, the tax rate on the qualifying profits carrying out ship leasing management activities for ship lessors will be 0% and 8.25% for associated companies and non-associated companies, respectively.

“For ship leasing, the (Hong Kong) government is actually planning or forecasting that in 10 years’ time we should be able to capture about 12% of the world’s market – something we are quite confident about”

Said Benjamin Wong, head of maritime cluster of Invest Hong Kong, Government of the Hong Kong Special Administrative Region (HKSAR).

Opening up of Opportunities

Bill Guo, executive director of shipping at ICBC Leasing, believed that Hong Kong is now set to become an even more “ideal place” for many China leasing companies to conduct their activities.

He also states that,

“With the new tax scheme, we can and could do more in Hong Kong, including setting up subsidiary companies. It is a good opportunity for mainland Chinese companies to access more talented people in Hong Kong, as the majority of Chinese leasing companies are now based in Beijing, Shanghai and Shenzhen,”

Terms of Qualifying for the Concession

Rosita Lau, partner at Ince & Co explained some of the key requirements of the legislation in terms of qualifying for the concession.

“Only those ‘qualifying ship lessors’, ”qualifying shipping lease management” are qualified to enjoy the benefits. And all the management activities must be conducted within Hong Kong while the vessel involved must be trading outside Hong Kong waters.”

“Ordinary or traditional ship financiers or ship-managers are not, as a starting point, to be qualified to be benefited but they can always restructure their business so as to enjoy them.”

Furthermore, she added that those who are interested in getting the benefits should pay special attention to all those legal requirements set out in the legislation in particular under:

The Definition section

Section 14 P and 14 T

Schedule 8 C and 17 FA

Source: Seatrade Maritime News