Introduction

The Asia-Pacific Journal of Taxation (APJT) is a joint effort between the Taxation Institute of Hong Kong and the School of Accounting and Finance of The Hong Kong Polytechnic University.

It publishes research papers, commentary notes, book reviews and articles that address significant issues in the field of taxation relevant to Hong Kong, China and the Asian Pacific region.

The APJT aims to provide quality service to the readership by making its content ore informative and thorough, and by striking a proper balance between professionalism and intellectual stimulation.

The APJT normally publishes two issues every year.

Feature Articles

PRC & International Technical Column(s)
Volume 23, Number 2
The Impact of Tax-Related Incentives on Innovation: Evidence from China
HK Technical Column(s)
Volume 23, Number 2
A Review of Recent Board of Review Cases

Editorial

Joint Editors

Jody Wong
The Hong Kong Polytechnic University
Percy Wong
The Hong Kong Polytechnic University
Philip Hung
The Taxation Institute of Hong Kong
Jeremy Choi
The Taxation Institute of Hong Kong
Anita Tsang
The Taxation Institute of Hong Kong
 

Editorial Consultants

Agnes Cheng
The Hong Kong Polytechnic University
Nigel Eastaway
MHA MacIntyre Hudson
Michael Olesnicky
Baker & McKenzie, HK
Charles Swenson
University of Southern California, USA
Daniel Thornton
Queen's University, Canada
Jefferson VanderWolk
Squire Patton Boggs, USA
Marcellus Wong
AMTD Group
 

Editorial Board Members

Brian Andrew
University of Wollongong
Wilson Cheng
Ernst & Young Tax Services Limited
Cheng Chi
KPMG, China
Sarah Chin
Deloitte Touche Tohmatsu, HK
Jeremy Choi
PricewaterhouseCoopers, HK
Spencer Chong
PricewaterhouseCoopers, HK
Wilson Chow
The University of Hong Kong
Daniel Ho
Hong Kong Baptist University
Patrick Ho
FTMS Training System Limited
Betty Kwok
The Hang Seng University of Hong Kong
Simon James
University of Exeter
Jeyapalan Kasipillai
Monash University Malaysia
Patrick Kwong
Ernst & Young Tax Services Limited
Stephen Lee
Sinotax Services Limited
Thomas Lee
Thomas Lee & Partners
Tak Yan Leung
Open University of Hong Kong
Aldous Mak
Hong Kong Institute of Vocational Education (Haking Wong)
Kelvin Mak
Hong Kong University of Science and Technology
Poh Eng Hin
Nanyang Technology University
Richard Simmons
Lingnan University, HK
Anthony Tam
Mazars
Fergus Wong
PricewaterhouseCoopers, HK
Chris Xing
KPMG, China
Kalloe Vinod
KPMG, Netherlands
 

Letters From The Editors

Following a record number of tax laws enacted in 2018 and the first half of 2019, the HKSAR Government’s legislating activities in the area of taxation have slightly slowed down in the second half of 2019. Since July this year, one tax bill has been enacted and two tax bills have been gazetted.
 
The Inland Revenue (Amendment) (Tax Concessions) Ordinance 2019 was enacted on 15 November 2019 to provide for a 100 per cent reduction of salaries tax, profits tax, and tax under personal assessment for the year of assessment 2018/19 subject to a ceiling of HK$20,000 per case. Following the enactment of the Ordinance, it is expected that the Inland Revenue Department (IRD) will start issuing the 2018/19 assessment notices to taxpayers. The Rating (Amendment) Bill 2019 was gazetted on 13 September 2019 to implement the so-called “vacancy tax” for unoccupied private first-hand residential units that was announced by the Chief Executive back in June this year. In addition, the Inland Revenue (Amendment) (Profits Tax Concessions for Insurance-related Businesses) Bill 2019 was gazetted on 6 December 2019 to provide a further tax incentive for the insurance industry. The Bill proposes an 8.25 per cent concessionary profits tax rate for the general reinsurance business of direct insurers, certain classes of the general insurance business of direct insurers, and certain types of insurance brokerage business.
 
Looking forward, a few pieces of draft tax legislation are in the pipeline. These include bills on the limited partnership regime for funds and a concessionary profits tax regime for ship leasing and ship leasing management businesses. In addition, the Financial Secretary will deliver the 2020/21 Hong Kong Budget on 26 February 2020. The Institute is preparing its budget submission to the government with recommendations covering areas such as diversifying Hong Kong’s economic structure, enhancing the competitiveness of the Hong Kong tax system, and improving people’s livelihood.
 
On the international front, a number of work-in-progress initiatives have continued to reshape the international tax landscape. These initiatives include the BEPS 2.0 project led by the G20 and the Organisation for Economic Cooperation and Development, the review of foreign source income exemption regimes by the European Union, and the implementation of the economic substance requirements in various no or low tax jurisdictions, such as the British Virgin Islands, Bermuda, and the Cayman Islands. All of these international tax developments would potentially affect the tax system and businesses in Hong Kong. Both taxpayers and the tax administration in Hong Kong will need to closely monitor future developments in these evolving areas.
 
This issue of the Journal contains a variety of articles contributed by authors from Hong Kong and overseas. In the Hong Kong Technical column, in addition to the usual review of recent Board of Review cases, there are four articles examining the taxation of carried interest in Hong Kong, the enhanced profits tax exemption regime for investment funds, the revised Departmental Interpretation and Practice Notes No. 28 on deduction of foreign taxes, and the potential impacts of BEPS 2.0 on the taxation of intra-group financing activities in Hong Kong, respectively. In the PRC & International column, there is an article examining the impacts of tax-related incentives on the innovation performance of Chinese firms and another article discussing the taxation of foreign profits in Taiwan in general and the recent tax incentives to encourage the repatriation of offshore funds for investing in Taiwan. The article in the Belt and Road column provides an overview of the tax rules in Uzbekistan. In the Article of Interest column, the author talks about how data blending can optimise the risk identification and management process of tax administrations. We have also received two letters to the editors, one commenting on the newly introduced transfer pricing documentation requirements in Hong Kong and the other commenting on the recent approach adopted by IRD officers in questioning offshore claims made by taxpayers.
 
We would like to express our heartfelt thanks to the authors for contributing these insightful articles. Our special thanks go to the reviewers for their valuable comments. Last but not least, we wish to thank our readers for their continued support. We hope you will enjoy reading the Journal. We welcome any comments and suggestions to improve its content and quality. If you wish to voice your views and suggestions on any tax matters, be they policy issues or practical matters, you are welcome to submit a letter to the editors.
 
Finally, the Institute wishes to advise that with the launch of the electronic version of the Journal in May this year, and in order to promote environment-friendly practices, the Institute plans to offer readers the option of receiving an electronic copy of the Journal instead of a hard copy starting from 2020. More details about this arrangement will be communicated to readers in the first quarter of 2020.
 

The Joint Editors
December 2019