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Publications and Press Releases :
Press Release
: News Archives
LegCo passes the Revenue (Abolition of Estate
Duty) Bill 2005
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The Legislative Council today
(November 2) passed the Revenue (Abolition of Estate Duty) Bill
2005 which seeks to amend the Estate Duty Ordinance to implement
the proposal announced in the 2005-06 Budget to abolish estate duty.
The Secretary for Financial Services
and the Treasury, Mr Frederick Ma, when moving the resumption of
the Second Reading of the ordinance, said that apart from removing
the unfairness and obstacles arising from the collection of estate
duty, another key objective of the proposed abolition was to facilitate
the further development of Hong Kong as an important asset management
centre.
The Government consulted the public
last year on whether to abolish estate duty. By and large, the majority
view tended to support abolition.
Mr Ma said: "By abolishing estate
duty, we believe Hong Kong can attract more local and overseas investors
to hold assets here. The abolition can further promote the development
of Hong Kong as an important asset management centre. More companies
and professionals will come here, and this will facilitate the further
development of our asset management services, create more employment
opportunities, and in turn make Hong Kong more competitive as an
international financial centre. Moreover, the abolition will reduce
the time taken for obtaining the grant of probate or letters of
administration, thereby helping to ease cash-flow problems that
heirs to an estate currently face, particularly for the general
public as well as operators of small and medium enterprises.
"The abolition of estate
duty is not only a tax concession but also a long term strategic
investment in Hong Kong's financial services industry and the overall
development of the economy," he stressed.
It is estimated that the proposal
to abolish estate duty will cost the government annual revenue of
around $1.5 billion. However, the Government estimated that the
abolition would help promote trading in Hong Kong's financial and
property markets, and contribute additional revenue from stamp duty
and other taxes.
Mr Ma said: "As asset management
services can foster growth in other financial activities and a series
of high value-added professional services, other industries will
also benefit indirectly. The community, and hence members of the
public, will enjoy the subsequent economic benefits."
The Ordinance will commence operation
three months from its publication in the gazette, i.e. February
11, 2006. Estates of persons who pass away on or after the commencement
date of the Ordinance will not be subject to estate duty. However,
it is proposed that, upon the commencement of the Ordinance, the
estate duty chargeable in respect of deaths occurring on or after
July 15, 2005 but before the commencement date (the interim period)
would be reduced with retrospective effect to a nominal duty of
$100 for estates of assessed value exceeding $7.5 million. Any estate
duty overpaid will be refunded. The nominal duty is necessary to
ensure that all existing legislative provisions and legal documents
making reference to actual charging or payment of estate duty would
not be put in doubt during the interim period.
Mr Ma said: "In the past, the
assessment of estate duty and the application for grant of representation
have been closely linked. These arrangements have indirectly safeguarded
the interest of beneficiaries in the estate concerned. The Revenue
(Abolition of Estate Duty) Ordinance enacted by the legislature
today has incorporated comments and views from Legislative Council
Members and organizations such as the Law Society of Hong Kong and
the Hong Kong Association of Banks in order to provide a legal framework
and associated measures that continue to safeguard the beneficiaries
in the absence of estate duty assessment procedures."
There are five elements in the new
scheme to safeguard the beneficiaries:
* to deter intermeddling with the
estate without lawful authority or reasonable excuse, provisions
for criminal offence have been included;
* in order not to reduce the existing
safeguards for beneficiaries, the new Ordinance requires the personal
representative to prepare an inventory of the estate;
* to ensure that the family or dependents
of the deceased in straits can meet funeral expenses or their own
living expenses, the new Ordinance amends the Probate and Administration
Ordinance. New provisions are added to empower the Secretary for
Home Affairs to authorize on application release of money from the
deceased's bank account to meet funeral expenses or the maintenance
of any person who was dependent on the deceased before his death
and has an interest in the estate;
* to provide under the new Ordinance
a set of measures to facilitate inspection of the safe deposit box
of the deceased by the personal representative and beneficiaries
before issue of the grant; and
* to include under the new Ordinance a mechanism to exempt persons
dealing with small estates from the intermeddling provisions. This
represents a balance between safeguarding the interest of the beneficiaries
and obviating an unnecessary burden for the personal representative.
To ensure that the family or dependents
of the deceased will not be affected by the changes in procedures
arising from the abolition of estate duty, the law enacted today
empowers the Secretary for Home Affairs to perform certain functions.
These are to assist members of the public when dealing with estates
of persons who passed away on or after February 11, 2006. They include
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(a) issue of a certificate for release
of money to meet funeral expenses and the maintenance of dependents
of the deceased who have an interest in the estate;
(b) issue of a certificate for inspection
to inspect the safe deposit box of the deceased. Public officials
will witness the inspection process and will assist in the preparation
of the inventory of the box where necessary;
(c) issue of authorization for removal
to enable the holder to remove a specified document or article from
the safe deposit box; and
(d) issue of a confirmation notice
to confirm the receipt of an affidavit from the personal representative
declaring that the estate in question is wholly made up of money
not exceeding $50,000 in value.
At present the Commissioner of Inland
Revenue performs her functions and carries out the related administrative
arrangements under the Estate Duty Ordinance through the Estate
Duty Office. Many of these are similar to the new powers of the
Secretary for Home Affairs. To ensure a smooth transition and to
assist members of the public, the Secretary for Home Affairs will
delegate his new powers to the Commissioner of Inland Revenue on
commencement of the new Ordinance under section 43 of the Interpretation
and General Clauses Ordinance. The transitional arrangement is expected
to last a year. The Secretary for Home Affairs is in the process
of setting up a new Estate Duty Unit to take over the relevant functions
from the Inland Revenue Department. Part of the staff now servicing
the Estate Duty Office of the Inland Revenue Department will be
transferred to the Estate Duty Unit of Home Affairs Bureau on its
set up.
In order that the above changes will
not affect the personal representative and other relevant parties
as far as possible, the Home Affairs Bureau will further explain
to the public the various new arrangements related to the application
for grant before the commencement of the new Ordinance.
Ends/Wednesday, November 2, 2005
Issued at HKT 19:17
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