Hong Kong Insurers Look For Offshore Marine Tax Exemption
The Hong Kong Federation of Insurers (HKFI) has presented a report on how to enhance the competitiveness and attractiveness of Hong Kong as an international maritime center (IMC) in the Asia-Pacific region to the Hong Kong maritime industry, which includes suggested tax exemptions and incentives.
"With our excellent port infrastructure, strategic location, sound legal system, and quality maritime services, Hong Kong has been an international port since 1970's," said Agnes Choi, Chairman of the HKFI. "To maintain this leading edge, and in face of keen competition from other markets, we hope to find ways to strengthen Hong Kong's role as an IMC."
The report points out that, from previously being the world’s busiest port, Hong Kong now ranks third, after Shanghai and Singapore. To compete, it is believed that "Hong Kong's Government needs to create a business environment conducive to maritime services. The advantages of Hong Kong's simple low tax regime are quickly being eclipsed by the tax incentives offered by competing IMCs."
Firstly, the insurance industry hopes that the Government will negotiate with the Mainland Government to designate Hong Kong a "Tier 2" reinsurance region and introduce double tax deduction to encourage Hong Kong shippers/exporters to change sales terms from the habitual FOB to CIF, thereby encouraging the local placement of insurance.
In addition, however, it is noted that Hong Kong has been a laggard in signing double taxation agreements (DTAs) with only about half of its top 20 trade partners. The HKFI states that pales in comparison with the 50 DTAs that Singapore and Mainland China have each secured. The report comments that additional DTAs with major trading partners would most likely foster bilateral economic and trading activities and encourage companies from more countries to set up regional offices in Hong Kong.
The international nature of marine insurance means that maritime risks anywhere in the world could be underwritten in Hong Kong. To solidify Hong Kong's IMC status, the report proposes that the Government should provide tax exemptions, as Singapore currently does, to provide further encouragement for offshore marine insurers to set up regional head offices in Hong Kong.
Singapore provides a raft of tax exemptions and financial support schemes to attract marine business (such as 10-year tax exemptions on qualified shipping income and 5-year tax concessions on ship or container leasing companies), many of which have been recently revised and are expected to continue for a long time.
Tax exemption schemes are also available in Singapore for captive insurers, specialized insurers and marine hull and liability insurers, and the Hong Kong Government is asked in the report to formulate effective counter-measures by providing tax incentives or exemption schemes in critical sectors so as to retain business.