AVIATION | Staff Reporter, Hong Kong

Government reiterates promise to transform HK into aviation leasing hub

Good news for the involved industry.

In this year’s Policy Address, the Chief Executive of the Hong Kong Special Administrative Region of China, CY Leung, provided an update on the Government’s progress and reiterated its commitment to turning Hong Kong into an aviation leasing hub.

According to a release from PwC, this should be welcome news for the aircraft leasing industry, which has been looking for an Asian hub due to the growth in the airline industry in the region. It is widely accepted that tax is fundamental to the leasing industry. If a more competitive taxation regime is approved, Hong Kong could become a viable base for aircraft leasing serving China and other markets worldwide.

“The main obstacle for a Hong Kong-based company leasing out an aircraft is that it is taxed on gross rental income rather than profits,” says Clarence Leung, Asset Finance & Leasing Director, PwC Hong Kong.

Here's more from PwC:

“If Hong Kong is serious about this new industry, it is important for the Government to understand the advantageous tax regimes for the industry in the traditional hubs of Ireland and Singapore so as to ensure that any proposed tax changes are competitive. For example, lessors in those jurisdictions can not only claim for tax depreciation, but are also taxed at a more favourable rate.”

“The recent announcement by the SAR Government that it is formulating measures to develop Hong Kong into a centre for aerospace financing is welcome news for the industry,” says Catherine Tsang, Tax Partner, PwC Hong Kong. “It is projected that Asia Pacific will require more than 14,000 new aircraft over the next 20 years, worth about US$2,200bn. Leasing has become an important financing tool for the airline industry. The Hong Kong Government should act fast and bring in the necessary changes to develop this industry as soon as possible.”

We have seen more and more activities in aviation leasing in the last 12 months. In particular, there have been a number of new entrants to what is potentially a very lucrative industry. The aircraft leasing industry is changing and it is important for the lessors and airlines to understand how these changes may impact their businesses. With the right regime in place, it will bring growth to Hong Kong’s economy and will create more high skilled jobs in the SAR.  

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