The tax treatment of carried interest in Hong Kong (“HK”) has been a controversial issue and key area of debate. To enhance the competitiveness of HK’s asset management industry and to attract more private equity (“PE”) funds to operate in HK, the HK Government has issued a proposal on 4 January 2021 to provide clarifications on the tax concession arrangement on carried interest distributed by eligible PE funds. The Inland Revenue (Amendment) (Tax Concessions for Carried Interest) Bill 2021 (“the Amendment Bill”) providing for the carried interest tax concession regime was gazetted on 29 January 2021 and passed by the Legislative Council on 28 April 2021. The Hong Kong Monetary Authority (“HKMA”) and Inland Revenue Department (“IRD”) will announce relevant details in relation to the implementation of the Amendment Bill in due course.
In this article, Yvette Chan, Managing Director and Asia M&A Tax Practice Leader, provides a detailed overview of the carried tax concession and key conditions set out by the Amendment Bill. Yvette also details uncertainties of the carried interest tax concession and what this means for PE funds.
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