Deloitte on Tuesday called for improvements to Hong Kong’s tax policy, which include attracting single family offices and funds, to uphold the city’s position as an international financial center and an asset management hub.

Executives of Deloitte, one of the world’s “Big Four” accounting firms, said it is essential that the Hong Kong Special Administrative Region government conduct a thorough examination of the city’s tax system and existing concessionary measures, to maintain and enhance Hong Kong’s competitive edge.

“We suggest introducing new tax concessions by offering a concessionary tax rate, for example, 8.25 percent, being half of the standard tax rate for international commodity traders,” said Polly Wan, tax partner of Deloitte China.

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“It is expected to facilitate the development of a comprehensive commodity trading ecosystem in Hong Kong, and attract qualified international commodity traders to establish headquarters here.” Wan added.

The firm also proposed enhancing the existing preferential tax regime for ship leasing, relaxing tax deductions for intellectual property and research and development, and improving the competitiveness of the tax system.

Attracting family offices and funds to Hong Kong are another focal point in Deloitte’s proposals.

On May 10, 2023, Hong Kong’s Legislative Council passed a bill for the concessionary tax regime for single family offices in the SAR. According to the new regime, their qualifying assets and incidental income are exempt from profits tax.

The SAR government should review the tax incentives for single family offices and funds, and “expand the list of ‘qualifying assets’ to include digital assets, art pieces, overseas properties or even Hong Kong properties with a value exceeding HK$50 million ($6.43 million),” said Roy Phan, tax partner of Deloitte China.

He said the reason is that “investors now are interested in many alternative assets”.

Currently, the qualifying assets include securities, futures contracts, foreign exchange contracts and foreign currencies, deposits, exchange-traded commodities and Over The Counter derivative products, and investments in underlying investee private companies.

He also proposed to remove the 5-percent threshold for incidental income, including interest from bonds and dividend income.

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Deloitte estimated that the deficit of the SAR government for the fiscal year 2024-25 will exceed HK$100 billion and that the city’s estimated fiscal reserves as of March 2025, will fall to approximately HK$600 billion.

“We expect that the land premium, one source of governmental revenue, in this year will be better than that of last year, only three pieces of land were sold as the government temporarily suspended the land sales in the last quarter of fiscal year 2023-24. For the same period of this fiscal year, three pieces of land were sold up to the present and there are 11 pieces pending to sell,”said Polly Wan.

According to the Hong Kong Land Registry, this year’s sales of property has exceeded that of 2023. “That could bring more stamp duty and improve government revenue as well,” Wan added.

Contact the writer at thor_wu@chinadailyhk.com