Guideline on Certification of Funds for Deferred Interest Tax Concession



Following our article “FSTB Proposal on the Tax Concession for Interest Carried”, the Hong Kong Monetary Authority (“HKMA“) on July 16, 2021 issued a directive on the certification of funds for the tax concession on deferred interest under Schedule 16D of the Inland Revenue Ordinance (Cap. 112) (“IRO“).

The guideline sets out two requirements for the certification of funds in order to benefit from the tax advantage of deferred interest:

  1. The fund has invested in certain asset classes during the applicable period (such as stocks, funds, bonds issued by a private company); and
  2. The qualified person has met the minimum business requirements (have at least two qualified full-time employees who perform investment management services and with total operating expenses of more than HK $ 2 million for each year evaluation) throughout the applicable period.

The applicable period means the period beginning on the day on which the Eligible Person begins to provide investment management services for a Fund and ending on the day on which the Eligible Deferred Interest is received by or accrued by such Eligible Person.

An application can be made to the HKMA for each assessment year in which the eligible person wishes to benefit from the deferred interest tax benefit. To apply for certification, a fund must submit to HKMA a completed “Certification Request Form” and the required supporting documents, including an audit report. The certification scheme is open to applications for funds with immediate effect.

In addition, the HKMA also clarified that an eligible person will not automatically be entitled to tax breaks even if the thresholds are met. To be eligible for tax breaks, an eligible person must demonstrate that the “suitability test” under Article 5 (3) of Annex 16D of the IRO has been satisfied when claiming tax relief. income tax for eligible deferred interest in a given year. devaluation.


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