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Hong Kong’s Legislative Council has passed an Inland Revenue Amendment that will provide a 50 percent tax concession on the profits of captive insurers.
The change will provide significant impetus to the development of the Island’s nascent captive insurance sector.
The concession will take effect from the 2013/2014 tax year and will cover the profits of offshore risks insured by Hong Kong captives.
Commenting on the measure, Secretary for Financial Services and the Treasury, Professor K C Chan, says. "The tax concession would provide further impetus for groups or enterprises to consider setting up captive insurers in Hong Kong to underwrite their own risks.”
Chan says that the Island’s “fundamental strengths” are a simplified tax regime, its ready supply of local talent, free flow of information and capital, and a highly competitive market environment.
He adds that Hong Kong is “well positioned to establish itself as a domicile of captive insurance.”
Chan says that the development of its captive sector will enable Hong Kong to continue to build its presence as an insurance hub for the region, leading to the development of associated professional services in reinsurance, accounting, actuarial and legal services.
The Chinese government is evidently behind efforts to develop the captive sector in Hong Kong, having indicated in June 2012 that mainland enterprises should consider captives as a means to enhance their risk management capabilities.
As Chinese firms develop increasingly international footprints, captives will help to drive down insurance costs and strengthen risk management.
Hong Kong, captive insurance, tax