Hong Kong Adjusted the Requirements for Profits Tax Benefits

Hong Kong Adjusted the Requirements for Profits Tax Benefits

The Hong Kong Monetary Authority (HKMA) has announced the new credit rating requirements to be applied to debt instruments for the purpose of profits tax benefits.

According to the profits tax concession scheme, interest income and trading profits derived from debt securities are taxed at concessionary tax rates. For concessionary tax rates application a debt instrument should, among other criteria, have a credit rating defined by the HKMA as minimum required.

For a long-term debt instrument the following minimum rating required are fixed:

-          BBB- from ‘Fitch Ratings’,

-          Baa3 from ‘Moody’s’,

-          BBB- from ‘Rating and Investment Information’, and

-          BBB- from ‘Standard and Poor’s’.

For a short-term debt instrument the following rating is required:

-          F3 from ‘Fitch Ratings’,

-          P3 from ‘Moody’s’,

-          a-3 from ‘Rating and Investment Information’, and

-          A-3 from ‘Standard and Poor’s’.

The HKMA reserves the right to make further adjustments to the list of rating agencies and minimum credit ratings required for application of profit tax concession scheme.

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