Hong Kong pushes tax break for fund managers as Singapore intensifies competition

Hong Kong's financial sector is urging legislators to fast-track a tax exemption bill for fund managers after Singapore introduced a competing scheme, intensifying the battle between Asia's two financial hubs to attract asset management firms.

The proposed legislation, tabled in the Legislative Council in June with a vote expected before year-end, would exempt carried interest—the performance fees collected by hedge fund and private equity managers—from taxation. Industry figures warn that any delay risks driving traders to rival markets that already offer similar incentives.

Singapore move raises pressure

Singapore's recent unveiling of its own tax-exemption framework has sharpened concerns among Hong Kong bankers and financial professionals about the city's competitive position. "Hong Kong needs to proceed quickly with the proposed law change to continue strengthening our established reputable position as the No 1 global wealth management centre," said Jasmine Lee Shun-yi, vice-president of Hong Kong Institute of Certified Public Accountants, who described Singapore's action as an attempt "to try to match our bill".

Lee argued the tax break would prove "vital for Hong Kong to further increase its competitiveness to attract global fund managers to establish the entirety of their businesses in Hong Kong" and would also draw "relevant diverse talent to consider moving to Hong Kong".

Bill draws mixed reaction

The legislation has divided the financial industry since its introduction. Some market participants contend the exemption is too narrowly defined, while others have raised questions about equity, pointing to the proposal's benefit to ultra-wealthy fund managers.

The debate underscores the tension between Hong Kong's efforts to cement its status as a wealth management hub and concerns about tax fairness at a time when the two Asian financial centres compete aggressively for high-value firms and professionals.

Source: South China Morning Post