December 7, 2023 Hong Kong introduces bill to enhance aircraft leasing preferential tax regime
Legislation aimed at enhancing the preferential tax regime to make Hong Kong a preferred location for aircraft leasing in the region was gazetted on 17 November 2023. Hong Kong had announced in the 2023/24 Budget1 that it will enhance the preferential tax regime to make Hong Kong a preferred location for aircraft leasing in the region. The gazette legislation is now subject to legislative amendments proposed in the Legislative Council. Detailed discussion Currently, Hong Kong's aircraft leasing preferential tax regime allows qualifying profits of qualifying aircraft lessors and qualifying aircraft leasing managers to be taxed at the concessionary tax rate of 8.25% and also provides for a 20% tax base concession in lieu of tax depreciation allowance. The legislation gazetted on 17 November includes the following key proposals:
The enhanced measures will be effective for financial years ending on or after 1 April 2023 and thus will have retroactive effect for some taxpayers upon passage of the bill. Meanwhile, the Departmental Interpretation and Practice Notes clarify that bare trust leasing model will also qualify for the entire aircraft leasing tax incentive regime, including the proposed amendments when the bill is passed. ——————————————— For additional information with respect to this Alert, please contact the following: Ernst & Young Tax Services Limited, Hong Kong
Ernst & Young LLP (United States), Hong Kong Tax Desk, New York
Ernst & Young LLP (United States), Asia Pacific Business Group, New York
Ernst & Young LLP (United States), Asia Pacific Business Group, Chicago
Published by NTD’s Tax Technical Knowledge Services group; Carolyn Wright, legal editor ——————————————— ENDNOTES 1 See EY Global Tax Alert, Hong Kong announces 2023/24 Budget, dated 23 February 2023. 2 In a dry lease, the lessor provides the aircraft but no crew; the lessee is responsible for providing the flight crew and accepts operational control. 3 In a wet lease, the lessor provides the aircraft and at least one crewmember. | ||||