The Hong Kong government said on Wednesday that tax benefits for fund managers and family offices proposed in a bill being considered by the legislative council of the Asian financial hub will exclude proprietary trading businesses.
The clarification means that proprietary trading giants such as Jane Street, Citadel Securities and Jump Trading could be shut out from the potentially lucrative tax benefits.
Hong Kong, aiming to strengthen competitiveness as a global asset management hub, is in the process of passing a bill to widen a tax-free carried interest measure to broader types of fund houses and individual fund managers.
Carried interest is essentially a performance-linked bonus tied to fund returns.
But businesses that trade or hold assets with their own capital to generate returns for themselves, commonly known as "proprietary trading businesses", do not meet the definition of a "fund", the Financial Services and Treasury Bureau said.
"Consequently, remuneration distributed by such operations will not qualify for tax exemptions," it added in a statement.
The proposed tax reform is seen as a key lever for Hong Kong to attract top investment talent amid intense talent competition with Singapore and Dubai.
Market gains last year saw a number of Asian fund managers pocket more than US$1 million in performance-linked bonuses, industry sources said, with top performers earning sums upwards of US$50 million, which would make a tax break highly lucrative.
The FSTB said the government of the Chinese-ruled city aimed to resume a second reading of the bill in the Legislative Council later this year.
Reuters
