The Qianhai Shenzhen-Hong Kong Modern Service Industry Cooperation Zone ("Qianhai Cooperation Zone") has been developed since 2010. It is a major initiative demonstrating the strengthened cooperation and interaction between Hong Kong and Shenzhen. Qianhai Cooperation Zone has introduced various preferential policy measures for Hong Kong individuals and businesses. Data shows that the number of registered enterprises in the Qianhai Cooperation Zone has increased by 44.9 times in the past ten years, with a remarkable average annual growth rate of 89.2%.

On 6 September 2021, the Central Committee of the Communist Party of China and the State Council promulgated the Plan for Comprehensive Deepening Reform and Opening Up of the Qianhai Shenzhen-Hong Kong Modern Service Industry Cooperation Zone ("Qianhai Plan"), which has significantly increased the total area of the Qianhai Cooperation Zone from 14.92 km2 to 120.56 km2. The Qianhai Plan is designed to further open up the Qianhai Zone to the international business community.  

The "new" Qianhai includes the Convention and Exhibition New Town, Ocean New Town Area, Shenzhen Bao'an International Airport and surrounding area, Bao'an Centre and Da Chan Bay Area, Shekou and the two Big and small Nanshan sub-districts. It covers the Dananshan and Xiaonanshan mountain, having 68 km of coastline, 27 rivers, 4 mangrove wetlands, 6 urban parks, and 3 islands. The international airport, the cross-border highway, the 7 port terminals, 5 open ports, 2 railway stations, 4 expressways, 7 urban rail transit and the intercity railway provide convenient access to the zone. The planning of a railway link to the western New Territories will further facilitate its connection with Hong Kong, making the half-hour travel connection with Hong Kong and one-hour living zone within the Greater Bay Area (GBA) feasible. 

 Following is a question by the Hon Mrs Regina Ip and a written reply by the Secretary for Financial Services and the Treasury, Mr Christopher Hui, in the Legislative Council today (July 5):
 
Question:
 
     To explore a new source of government revenue, the Financial Secretary announced in the 2021-2022 Budget an adjustment to the rate of stamp duty on stock transfers payable by both buyers and sellers from 0.1 per cent to 0.13 per cent of the transaction amounts, and the new rate has been implemented since August 1, 2021. However, according to the statistics from the Hong Kong Exchanges and Clearing Limited, the total turnover in the securities market in the whole of 2022 was $30.7271 trillion, representing a 25.4 per cent decrease as compared with $41.1823 trillion in 2021. There are views that the shift to weak turnover is one of the causes for the decline in the market capitalisations of quite a number of listed companies, and the decline in market capitalisations has knock-on effects, including affecting enterprises' desire to list in Hong Kong and not favouring Hong Kong's positioning as an international financial centre. Regarding the rate of stamp duty on stock transfers, will the Government inform this Council whether it will, in the light of the external environmental factors, the geopolitical situation and the high interest rate environment, consider adjusting the rate in the near future, such as restoring the rate to 0.1 per cent, or even lowering it to 0 per cent; if so, of the details; if not, the relevant considerations and reasons?
 
Reply:
 
President,
 
     Over the past few years, the combined effects of the COVID-19 pandemic and economic downturn, as well as the Government's launch of counter-cyclical measures to support the public and businesses, had posed substantial pressure on public finance. There is therefore a need to adopt measures to contain government expenditure and increase government revenue. Thoroughly taking account of the potential impact on the securities market and our global competitiveness, the 2021-22 Budget proposed that the rate of Stamp Duty on Stock Transfers (Stamp Duty) be adjusted upward from 0.1 per cent to the current level of 0.13 per cent of the consideration or value of each transaction payable by buyers and sellers respectively. The relevant Amendment Bill upon passage by the Legislative Council came into effect in August 2021.
 
     In the first few months after the implementation of the new rate of Stamp Duty (i.e. from August to December 2021), the average daily turnover in the Hong Kong market still recorded an increase of some 2 per cent as compared to that of the same period in 2020. In tandem with the rebound of the Hong Kong stock market in December 2022, the average daily turnover also rose by 15 per cent compared to the same month in 2021. In 2022, the average daily turnover was about $125 billion, and that in the first quarter of this year was $128 billion. These figures, though below the peak in 2021, are comparable to the average daily turnover of $129.5 billion in 2020, i.e. the year before the implementation of the new rate of Stamp Duty. Separately, as one of the indicators of stock trading and liquidity, the overall share turnover ratio (Note) (also known as "turnover rate") measuring the rate of shares changing hands in the market during a particular period increased from 0.22 per cent in 2020 to 0.27 per cent in 2022, suggesting that trading activities not having been adversely affected by the upward adjustment of the rate of Stamp Duty. Therefore, we consider that the overall stock market turnover is more prone to the drop in stock prices, and relevant price movements are mainly driven by external factors.
 
     According to past experiences, a cut in the rate of Stamp Duty may not necessarily stimulate market turnover. For example, the Government reduced the rate of Stamp Duty three times between 1998 and 2001, but the average daily turnover dropped from $14.3 billion in 1997 to $6 billion in 2002. On the other hand, with an estimation based on the actual revenue of Stamp Duty in 2022-23, a downward adjustment of the Stamp Duty rate to 0.1 per cent or 0 per cent would reduce government revenue by $12.3 billion and $53.1 billion respectively, accounting for about 2 per cent or 9 per cent of the overall revenue in that year.
 
     To bolster the turnover and competitiveness of the stock market, the Government in co-ordination with the financial regulators and the Hong Kong Exchanges and Clearing Limited (HKEX) have kept up efforts in promoting market innovation and development. Measures implemented include allowing new economy companies with a weighted voting rights structure as well as pre-revenue or pre-profit biotechology companies to list in Hong Kong; facilitating secondary listing and dual-primary listing of Greater China and overseas companies in Hong Kong; making legislative amendments to exempt the Stamp Duty on trading of exchange-traded funds and transactions conducted by dual-counter market makers; and expanding the mutual market access in the stock market, etc. With concerted efforts of parties concerned, 28 companies were already newly listed in the first five months of this year, an increase of 33 per cent as compared to the same period in 2022. In March this year, the HKEX launched the listing regime for specialist technology companies to further expand the listing channel for issuers. It is also working to reform GEM to provide a more effective fundraising platform for companies concerned.
 
     The Government will, as in the past, continue to examine government revenue individually and holistically, and take relevant factors into full consideration when deciding whether there is a need for revision, while launching targeted policy measures to promote market diversification and development in an orderly manner, thereby consolidating Hong Kong's status as an international financial centre.
 
Note: Calculating the average value of Hang Seng Composite Large Cap, Mid Cap and Small Cap Indexes constituent stocks.

The Inland Revenue Department today (April 3) issued about 220 000 profits tax returns, 120 000 property tax returns and 310 000 employer's returns for the year of assessment 2022-23. About 2.4 million of tax returns for individuals will be issued on May 2. Taxpayers and employers are generally required to file their returns within one month from the date of issue of the relevant returns. For cases with tax representatives appointed, the deadlines for filing returns are set out in the Block Extension Letter posted on the department's website.

     Members of the public can visit the department's website (www.ird.gov.hk) for common questions and answers on how to complete tax returns. The department has gradually enhanced the functions of electronic tax filing to promote tax digitalisation and to enhance the efficiency, reliability and accuracy of return filing. Taxpayers are encouraged to file their tax returns through eTAX electronic services, details of which can be found on the webpage (www.gov.hk/en/residents/taxes/etax/services/index.htm) (Note). Guidance on electronic filing of employer's returns is also available on the department's website (www.ird.gov.hk/eng/tax/err.htm). The eTAX services permit individuals to use the Government's "iAM Smart" digital services to log in and sign the tax returns (signing is only applicable to holders of "iAM Smart" accounts with digital signing function). For information about the "iAM Smart" services, please visit the website at (www.iamsmart.gov.hk).

     Starting from this year, all corporations and businesses, regardless of the amount of their gross income and the mode of return filing, must submit their profits tax returns together with all supporting documents (including financial statements and profits tax computations). Further, all relevant supplementary forms and other forms required to be furnished with the returns must be e-filed under eTAX. If a taxpayer does not choose to e-file the return, the taxpayer has to print and sign a paper Control List for the supplementary forms and/or other forms e-filed and then furnish the signed Control List together with the return and supporting documents in paper form.

     Enhanced e-filing services for profits tax returns were launched with the following new features and filing requirements:
 
* All corporations and businesses can e-file profits tax returns under eTAX for the year of assessment 2022-23. They only need to fill in simplified e-returns online, upload completed required forms and the supporting documents prepared in inline eXtensible Business Reporting Language ("iXBRL") format, e-sign and submit the returns through eTAX.

* Semi-electronic filing mode is also available under eTAX. A taxpayer can upload the completed required forms and the supporting documents prepared in iXBRL format through eTAX, print a simplified tax return generated by eTAX for signature and submission in paper form.

* For full electronic filing or semi-electronic filing of profits tax returns, the taxpayer is required to submit the supporting documents (i.e. financial statements and profits tax computations) in iXBRL format. To facilitate corporations and businesses in preparing the required iXBRL data files, IRD iXBRL Data Preparation Tools are available for download on the department's website (www.ird.gov.hk/ixbrl) free of charge.

     The department reminds taxpayers and employers to pay sufficient postage for returns to be posted to the department to ensure timely delivery. Underpaid mail items will not be accepted by the department. Please note that Hongkong Post has adjusted the postage rates with effect from September 26, 2022. The postage for local letters weighing 30 grams or less has been adjusted from $2 to $2.2. Postage rates can be found on Hongkong Post's website at www.hongkongpost.hk.

Note: All eTAX online services will be suspended from 9pm on April 6 to 9pm on April 9 for migration of the Inland Revenue Department's systems to a cloud platform.

Family offices sit at the top of the wealth management industry. These privately held wealth management firms allow ultra-high-net-worth individuals (UHNWI) to benefit from the professionalism of an institution that is customized to the family’s specific needs and requirements.

Hong Kong is already one of Asia’s main asset and wealth management hubs, with asset under management at the end of 2021 worth USD 4.6 trillion¹. Family offices will play an increasingly important role in the further development of Hong Kong’s wealth management industry, with an official target to attract 200 family offices to the city by 2025.

At the 2023 Asia Futurists Leadership Summit, an expert panel “The Future Demand for Services by Family Offices” moderated by the Financial Services Development Council (FSDC) discussed the ways that Hong Kong can make itself an even more attractive destination for UHNWIs.

Enhancing regulations

The most significant supportive measure for Hong Kong’s family offices is the proposed family office tax concession regime that is currently under review by the Legislative Council. Under the new rules, profits from eligible transactions will not be subject to profits tax, as long as the entity is managed and controlled in Hong Kong.

“The benefits of this long-awaited tax regime will be to give tax certainty to Hong Kong and overseas UHNWIs managing their assets in Hong Kong via a family office. This kind of certainty is especially important due to the everchanging tax environment across the world,” said Rex Ho, Asia Pacific Financial Services Tax Leader, Mainland China and HKSAR Financial Services Tax Leader, PWC.

He highlighted how the new rules will be administratively user-friendly, with relatively low requirements to qualify for the exemption – minimum assets under management of HKD 240 million.

The other requirements do not set a high bar for family offices. These include having at least two financial professionals in the family office, a nominal spending requirement, and no requirements for the transaction to involve local assets. Furthermore, it will be a self-assessment regime.

Mr. Ho expects the tax regime bill to be passed in the first half of 2023.

Investing for good

Family offices play an important role in ensuring that an UHNWI is able to make a lasting impact among its family members and broader society.

“A family office is more than just about investing,” said Ronald Chan, Chief Investment Officer of Chartwell Capital Limited. “It’s also about passing on and enriching a family legacy, which includes educating the next generation on topics such as family governance, entrepreneurship, and philanthropy.”

Philanthropy, in particular, is a growing focus for Asia’s UHNWIs, as they allocate more of their wealth to good causes. Hong Kong has the potential to stand out in Asia as a philanthropy hub due to its high concentration of donors. The Centre for Asian Philanthropy and Society (CAPS) ranks Hong Kong as “doing well” in its Doing Good Index.

“Hong Kong has a high level of corporate and individual philanthropy and a vibrant financial services ecosystem, which are strengths,” said Kithmina Hewage, Senior Advisor at CAPS. “But we need to create a regulatory framework that better facilitates cross-border giving and leverages the potential that comes from Hong Kong’s proximity with Mainland China.”