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Revenue (No. 3) Bill 2003

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The Revenue (No.3) Bill 2003, which seeks to implement certain tax concession measures announced in the 2003-04 Budget, has been gazetted today (June 27).

Under the Bill, the Inland Revenue Ordinance (Cap. 112) and the Stamp Duty Ordinance (Cap. 117) will be amended to effect two tax concession proposals which aim to enhance Hong Kong's status as an international financial centre. These proposals relate to increased tax concessions for qualifying debt instruments (QDIs) and exemption from fixed stamp duty for unit trusts.

The first proposal is to extend the current 50% profits tax concession for trading profits and interest income derived from QDIs with an original maturity period of not less than five years, to QDIs with a maturity period of not less than three years, and to increase the profits tax concession from 50% to 100% for profits and interest income derived from QDIs with a maturity period of not less than seven years.

"The proposal relating to QDIs will encourage the supply of and trading activities in medium-term and long-term debt instruments and help promote the development of the debt market as a whole. A deep and well-functioning debt market will lead to significant efficiency gains in the economy, support growth in the financial services industry, and broaden the channels of financial intermediation in Hong Kong commensurate with its status as an international financial centre," a Government spokesman said.

The second proposal is to exempt subscriptions to and redemptions of units in unit trust funds in Hong Kong from the $5 fixed stamp duty. This exemption will reduce the compliance cost of the industry without compromising the capability of the Inland Revenue Department to collect stamp duty. It will also make local funds more competitive, as their offshore counterparts already enjoy this exemption.

The cost to government revenue of the tax concession for QDIs is estimated to be around $17 million a year, while the financial implications of the exemption for unit trusts will be minimal.

The Bill will be introduced into the Legislative Council on July 9, 2003. It is proposed in the Bill that the concession on profits and interest income from QDIs should apply to all issues made on or after Budget Day on March 5, 2003, whereas the concession on fixed stamp duty should apply to all subscriptions and redemptions of unit trusts in Hong Kong which take place after enactment.

End/Friday, June 27, 2003

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