Hong Kong legislators’ approve tax concession for captive insurers

Hong Kong’s legislators have passed an amendment to the territory’s taxation law to allow captive insurers to enjoy a 50-percent reduction in the profits tax on their insurance business related to offshore risks.The concession takes effect from the current fiscal year ending 31 March 2014.”The tax concession would provide further impetus for groups or enterprises to consider setting up captive insurers in Hong Kong to underwrite their own risks,” the Secretary for Financial Services and the Treasury, Professor K C Chan, said.“Our fundamental strengths as an international financial centre includes a simple tax regime, rule of law, ready supply of talent, free flow of information and capital, and a highly open and competitive operating environment. Hong Kong is well positioned to establish itself as a domicile of captive insurance,” he added.He pointed out that the development of captive insurance would reinforce Hong Kong’s status as a regional insurance hub, while making the territory’s risk management services more diversified and promoting the development of other related professional services including reinsurance, accounting, actuarial and legal services.This potential is reinforced by a policy promulgated by the central government in Beijing in June 2012 encouraging mainland Chinese enterprises to form captive insurers in Hong Kong to enhance their risk management.Hong Kong is a special administrative region of China.