Therefore, KPMG believes that a tax incentive for funds and RHQ should be introduced.
Hong Kong loses to close regional rival Singapore as the top Asian location for multinational corporations to set up regional headquarters as Hong Kong accounts for 37% whilst the Lion City accounts for 46%, according to KPMG Budget 2018/19 report.
In terms of technology MNCs, the disparity is more evident as Singapore blows Hong Kong out of the running after accounting for more than half (59%) of tech MNCs whilst Hong Kong accounts for barely a fifth of the pie at 18%.
The Philippines and China both account for 4% whilst Taiwan and Malaysia each house 2% of the tech MNCs.
Hong Kong must therefore work overtime to improve on its tax policies to attract MNCs and increase its competitiveness in the international economic arena.
“To encourage foreign investment, we suggest that the government introduce tax incentives for regional headquarters, extend tax exemption to onshore funds, and shorten the statutory period in which tax affairs are finalised,” said KPMG.
The profits tax rate for certain income from qualifying Hong Kong RHQs should also be halved to enhance Hong Kong’s attractiveness as a fund and regional headquarters location and supplement tax incentive for corporate treasury centres.
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