News that the Government’s bill to provide tax incentives for ship lessors has been passed by the Legislative Council is set to provide another boost to Hong Kong’s maritime centre credentials.
The amendment to the Inland Revenue Ordinance will allow for zero profits rate tax for shipping lessors and see profits tax slashed by 50% for ship leasing management, according to a circular sent out from the Hong Kong Shipowners Association.
That the initiative has been fulfilled at this juncture shows the Government was as good as its word. Back in November 2019, at the time of the Hong Kong Maritime Week, secretary for transport and housing, Frank Chan, maintained that the bill would be passed by mid-2020.
“We’ve heard the industry call for further tax incentives to attract more presence of maritime commercial principals, and we are working on that,” he said.
The tax breaks apply to operating lease – except for sublease without a specific contract term – or a funding lease whose term exceeds one year, the circular revealed.
The new regime is also independent of the policies under the IRO Section 23B, which entitles traditional shipowners and operators to tax concessions for income generated. By their chartered-out vessels.
“Lessors have risen as the new principals in today’s shipping markets, so we want to attract them to base their business in Hong Kong by offering them similar tax benefits enjoyed by owners an HKSOA official told Lloyd’s List.
The news comes barely a week after the Government introduced new measures to keep global trade moving by introducing special arrangements for vital crew changes. When the new arrangements were introduced, Mr Chan said:
“As an international maritime centre, Hong Kong is always mindful of the need to ensure sustainable operation of international shipping in support of the global and local shipping community.
“Amid the unprecedented challenge of COVID-19, we fully appreciate the difficulties encountered by shipping companies, ship operators and seafarers. Right from the start upon the introduction of compulsory quarantine arrangements in Hong Kong, we have exempted crew members of vessels with cargo operation in Hong Kong from the requirement. Our recent extension of the exemption to all cargo vessels entering Hong Kong will give further facilitation to the shipping sector by enabling timely crew change of more vessels and will be a relief for the seafarers who have stayed onboard for an excessively long time, positively responding to the call of the International Maritime Organisation, International Chamber of Shipping, International Transport Workers’ Federation and local shipping community.
“The Hong Kong Special Administrative Region Government will remain vigilant in monitoring and responding to the development of the epidemic situation.”
Many seafarers have completed their contracts but remain confined to their vessels sometimes for two months or more.
Last Wednesday, the International Maritime Organization and the United Nations Conference on Trade and Development stated in a joint letter: Crew changeovers are essential for the continuity of shipping in a safe and sustainable manner. It’s estimated that starting from mid-June as many as 300,000 seafarers a month will require international flights to enable ships’ crew changeover. About half will travel home by aircraft for repatriation while the other half will join ships. And approximately 70,000 cruise ship staff are waiting for their repatriation.”
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