PRESS RELEASE

Local staff of International Finance Corporation exempted from salaries tax

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The Exemption from Salaries Tax (International Finance Corporation) Order was published in the Gazette today (June 1).

The Order, made by the Chief Executive in Council, seeks to exempt any Chinese national or Hong Kong permanent resident who is employed by or holding an office in the International Finance Corporation (IFC) from payment of salaries tax chargeable under section 8 of the Inland Revenue Ordinance (Cap.112).

IFC was set up in 1956 to promote sustainable private sector development in developing countries by promoting development of capital markets and productive enterprises. It is one of the member institutions of the World Bank Group.

Since the opening of its Hong Kong office in September 2000, IFC has been requesting salaries tax exemption for local staff working in the office. At present, local staff of almost all IFC's offices in other jurisdictions are granted tax exemption. IFC's non-local staff in Hong Kong also enjoy salaries tax exemption in accordance with the relevant international convention and IFC's Articles of Agreement.

IFC earlier indicated that it was considering combining the regional functions of its Asian offices and locating the combined Asia hub in Hong Kong or other cities in Asia. It further indicated that the granting of salaries tax exemption for its local staff would be of critical importance to its continued presence in Hong Kong.

The Administration has taken into account relevant factors in considering IFC's request for salaries tax exemption. Firstly, IFC's continued presence and expansion would bring benefits to Hong Kong. IFC's mission is to promote private sector investment in developing countries. It has also been playing a catalytic role in promoting bond market development in the region. Its presence here will be a vote of confidence in Hong Kong's political and economic stability and an endorsement of its status as an international financial centre.

Secondly, the granting of salaries tax exemption to IFC's local staff in Hong Kong is generally in line with international practice. IFC currently has offices in 62 countries and almost all hosting jurisdictions have granted tax exemption to IFC's local staff.

Thirdly, the granting of salaries tax exemption would facilitate IFC's recruitment of both Mainland Chinese and Hong Kong permanent residents to work in the Hong Kong office. This would encourage more Chinese nationals and Hong Kong permanent residents to take up the professional and senior management positions at the Hong Kong office and gain greater prominence in the World Bank Group.

The accession to IFC's request would help induce IFC to retain and expand its office in Hong Kong. Given the importance of IFC in the international arena, its presence would help uphold the image of Hong Kong as an international financial centre and also bring about increased financial activities to the benefit of the Hong Kong economy.

Ends/Friday, June 1, 2007
Issued at HKT 16:01

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