Stefano Mariani and James Tong recently contributed an article to MNE Tax on the proposal of a group tax loss transfer regime in Hong Kong.
The Financial Services Development Council (FSDC), a high-level government advisory panel, on September 11 published a report which proposes that Hong Kong adopt a group tax loss relief regime with a view to encouraging corporate groups to undertake investment activities in the region. The regime would allow the transfer of current year unrelieved tax losses from one wholly-owned group company to another.
The proposal could have significant implications on corporate groups, particularly those in the financial services industry which often operate through multiple legal entities, without compromising the simple fiscal policy of Hong Kong. It would likely encourage more entrepreneurial risk-taking by wholly-owned groups.
The FSDC proposed regime is an important contribution to the very pressing discussion of tax reform in Hong Kong. For instance, both the UK and Singapore have group loss relief and loss carry-back provisions. With an increasingly competitive global economic environment, Hong Kong should modernise its tax code and adapt accordingly.
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