Summary: The 2018 policy address on 10 October 2018 by Chief Executive Carrie Lam Cheng Yuet-ngor has created excitement and paved the way for further developments in Hong Kong’s maritime sector which has seen its global competitiveness decline over the past years.
The policy address sets out certain measures to enhance the development of Hong Kong’s maritime industry and related supporting services. We highlight some of the key initiatives which have been announced:
- implementation of tax concessions to foster Hong Kong’s ship leasing business to enhancing Hong Kong’s position as a ship leasing centre;
- provision of tax relief to promote marine insurance and the underwriting of specialty risks;
- streamlining regulations to facilitate the operation of protection and indemnity club for shipowners in Hong Kong; and
- further expansion of Hong Kong’s double tax agreement network to attract more international marine and maritime service providers to set up offices in Hong Kong.
The above measures also serve to further implement the “Belt and Road” initiative and to reiterate Hong Kong’s integral role as an international maritime centre. The measures have reflected some of the recommendations made under the Maritime Leasing Paper published by the HK Financial Services Development Council in May 2018 (FSDC Paper No. 34, the “Maritime Leasing Paper”) to promote Hong Kong’s maritime financing and leasing industry.
It is interesting to note that the Hong Kong government intends to use tax initiatives and concessions to develop Hong Kong’s ship leasing business. This is reminiscent of the beginnings of the bold push by the government in promoting the growth of a strong aircraft leasing industry in Hong Kong where bespoke tax legislation was implemented to develop the Hong Kong aircraft leasing industry. Qualifying Hong Kong aircraft lessors and lease managers now enjoy significant tax concessions including a 50% reduction to their applicable corporate tax rate (the corporate tax rate being effectively reduced from 16.5% to 8.25%). As part of these changes, a number of international aircraft leasing companies have now opted to set up leasing platforms to lease and manage aircraft from Hong Kong. The Maritime Leasing Paper has also recommended similar tax concessions to reduce the corporate income tax rate applicable for (i) maritime and ship leasing management companies; and (ii) maritime and ship related support services. Any tax concession or exemptions that Hong Kong can offer to the maritime sector in addition to its current favourable tax regime would certainly promote Hong Kong as a premier global ship leasing hub. There is no reason that the framework for improving the competitiveness of Hong Kong in aviation leasing should not be replicated for Hong Kong’s ship leasing industry.
Over the past years, Chinese financial leasing companies have become significant players in the international ship finance arena and as evidenced by the Hong Kong Government’s policy address, the Hong Kong government is determined to capture this ship leasing growth using its geographical advantage and positions as an international finance center with a stable legal system.
Overall, the policy address provides direction and clear support by the Hong Kong Government to expand and grow Hong Kong’s maritime sector but what actual measures will be rolled out over the coming months remains to be seen. Initial indications suggest that the proposed initiatives would be a welcomed change to pave the way for more business and economic activities that would benefit Hong Kong’s economy and position in the Greater Bay Area.