News & Analysis

Hong Kong signs DTA with Guernsey

The special administrative region follows Singapore in signing a DTA with Guernsey, signaling its desire to become a more attractive fund domicile for private equity firms.

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Popular European fund domicile Guernsey has inked its second full double tax agreement in Asia with Hong Kong, just months after signing a similar agreement with Singapore, according to a company statement. The agreement gives comfort to funds with interests in both locations that they will not be taxed twice on their assets.

Chief minister of Guernsey Peter Harwood, said in a statement, “The signing of this DTA, combined with the visit of the Chinese ambassador to the UK to Guernsey this week, recognizes the importance attached to Guernsey’s business relationship with the Far East.”

Industry professionals have in the past shown frustration with the special administrative region’s lack of tax exemptions or benefits for the asset class, something the Hong Kong Private Equity and Venture Capital Association (HKVCA) has tried to change. 

In contrast, Singapore, which signed its own DTA with Guernsey in February, has taken significant steps to make it attractive to asset managers, in particular creating legislation and incentives for private equity firms. One example is offering complete tax exemptions to GPs based in the country. One industry source recently commented that it was “hard to say that Hong Kong has the same focus”. 

However, this appears to be changing. The latest move is yet another by Hong Kong that shows its commitment to become a more attractive fund domicile for private equity vehicles. 

In February, the Hong Kong government announced that it would extend an exemption on profits tax to include private equity firms that are incorporated or registered outside Hong Kong and do not have any Hong Kong properties or carry out business in the SAR. 

“I think it is very significant and it is clearing up what has been a grey area, which has put a number of GPs off setting up [funds] in Hong Kong over the years,” chief executive of Hong Kong-based GP Headland Capital Partners Marcus Thompson said at the time.