Zetland Fiduciary Group

ニュースレター April 2015

News Letter Title:Government Surplus and Tax Handouts Zetland Newsletter  April, 2015 | www.zetland.biz/ Dear Friend of Zetland, This year marks the 25th anniversary of Hong Kong’s Basic Law. It all started with the Sino-British Joint Declaration from 19 December 1984 which set out, among other things, the basic policies and principle of ‘one country, two systems’. The socialist system and policies shall not be practiced in the Hong Kong Special Administrative Region and Hong Kong’s previous capitalist system and life-style shall remain unchanged for 50 years and that these basic policies will be stipulated in a Basic Law. The Basic Law of Hong Kong was finally adopted on 4 April 1990 and put into effect on 1 July 1997 as Hong Kong’s constitutional document. We are joining the congratulatory celebrations of this truly unique achievement. Other topics of this newsletter include Hong Kong’s and Singapore’s 2015/16 budget summaries of tax incentives hand-outs after a higher than expected surplus. Facing the challenges of an aging society and declining birth rates, Hong Kong will ease its immigration regulations to attract more foreign talent following the suspension of the CIES earlier this year. We are also examining China’s new economic ‘silk road’ pilot program targeting closer economic cooperation with neighboring countries to strengthen growth after GDP expectations for this year have been corrected down to 7%. Lastly, our tax team explains the proposed narrow-scope amendments to international accounting standards on share-based payment transactions. Yours sincerely, James Lee Group Managing Director Zetland Fiduciary Group

Enhancement Measures to Hong Kong’s Employment Policies

To meet the population challenges of an ageing population and declining workforce, the Immigration Department has announced enhancement measures to its immigration policy to be implemented in the second quarter of 2015. The measures are geared towards building up human capital by complementing our local workforce with non-local talent, professionals and entrepreneurs. The measures include:

1. The implementation of a pilot scheme to attract the second generation of Chinese Hong Kong permanent residents who have emigrated overseas to return to Hong Kong.
2. A relaxation of the stay arrangements for entrants under the General Employment Policy (GEP) and the Admission Scheme for Mainland Talents and Professionals to facilitate the entry and stay of professionals and entrepreneurs.
3. A relaxation of the stay arrangements for entrants under the Quality Migrant Admission Scheme (QMAS) and adjustment of the QMAS scoring scheme to attract quality migrants with an outstanding education background or international work experience.
4. Clarification of the factors to be considered under the GEP investment stream

For Employment

Under the enhancement measures, the initial duration of stay upon entry and subsequent extensions of stay will be relaxed. The initial stay of successful applicants under the GEP or ASMTP will be relaxed from 1 year to 2 years on employment condition, or in accordance with the duration of the employment contract, whichever is shorter. Extension of stay pattern will also be relaxed from 2-2-3 years to 3-3 years, or in accordance with the duration of the employment contract, whichever is shorter. In addition, GEP and ASMTP entrants, who have been permitted to take up employment as a professional in Hong Kong under the GEP or ASMTP for not less than 2 years and have an assessable income for salaries tax of not less than HK$2 million in the previous year of assessment (top-tier stream), may be granted a 6-year extension of stay on time limitation only without other conditions of stay. Visa holders under the top-tier stream are therefore, no longer required to seek approval from the Director of Immigration should they change their employer and a notification to the Immigration Department will suffice. The new extension policy and top-tier stream will automatically apply to existing GEP and ASMTP visa holders as well.

For Investment

For business investors, the above pattern for entry (2 years) and extension (3-3 years) will apply as well. In addition, the Immigration Department has widened the entry requirements considering also investment applicants of start-up companies whose funding is supported by a government-backed programme such as:

• StartmeupHK Venture Programme administered by the InvestHK
• Incu-App, Incu-Bio and Incu-Tech programmes administered by the Hong Kong Science and Technology Parks Corporation
• Cyberport Incubation Programme
• Small Entrepreneur Research Assistance Programme administered by the Innovation and Technology Commission (this programme is expected to be replaced by the new Enterprise Support Scheme in early 2015)
• Design Incubation Programme administered by the Hong Kong Design Centre

Quality Migrant Admission Scheme

The Quality Migrant Admission Scheme (QMAS) seeks to attract highly skilled or talented persons to take up residency in Hong Kong without the need to secure employment before their entry into Hong Kong. The scheme is a points-based test with a maximum of 150 awardable points. An applicant is required to have at least 80 points to qualify. The enhancement measures under the QMAS include:

• evising the point-scoring scheme under the General Points Test (GPT) such that an additional 30 points will be awarded to graduates of renowned institutions recognized internationally and an additional 15 points to applicants with not less than 2 years of graduate or specialist level international work experience.
• Relaxing the initial duration of stay upon entry and subsequent extensions of stay such that entrants under the GPT may be granted a stay pattern of 2-3-3 years instead of the current 1-2-2-3 years and that entrants under the Achievement-based Points Test may be granted a stay of 8 years upon entry; top-tier GPT entrants may be granted a stay pattern of 2-6 years.

The eligibility criteria for the top-tier stream are:

• The applicant has been residing in Hong Kong under the QMAS for not less than 2 years.
• The applicant has an assessable income for salaries tax of not less than HK$2 million in the previous year of assessment.

Admission Scheme for the Second Generation of Chinese Hong Kong Permanent Residents

The Admission Scheme for the Second Generation of Chinese Hong Kong Permanent Residents (ASSG) aims at attracting the second generation of Chinese Hong Kong permanent residents who have emigrated overseas to return to Hong Kong. Applicants will have to meet, apart from normal immigration requirements, the following criteria:

• Aged between 18 and 40
• Born overseas (i.e. not in the Mainland, the HKSAR, the Macao SAR or Taiwan)
• At least one parent who is the holder of a valid Hong Kong Permanent Identity Card at the time of application and was a Chinese national who had settled overseas at the time of the applicant’s birth
• A good education background, normally a first degree, but in special circumstances, good technical qualifications, proven professional abilities and/or relevant experience and achievements supported by documentary evidence may also be accepted
• Proficient in written and spoken Chinese (Putonghua or Cantonese) or English
• Sufficient financial means and ability to meet the living expenses for his/her (including his/her dependants, if any) maintenance and accommodation in Hong Kong without recourse to public funds.

An applicant is not required to have secured an offer of employment in Hong Kong upon application under the ASSG and will normally be granted an initial stay of 12 months on time limitation only without other conditions of stay. Upon applying for extension of stay, the applicant is required to have secured an offer of employment which is at a level commonly taken up by degree holders and the remuneration package is at market level. For an applicant who has established or joined in business in Hong Kong, he/she is required to produce proof of his/her business. If the applicant fails to prove that he/she will continue to work in Hong Kong or has established or joined in any business, his/her application may be refused. Zetland has assisted many of our clients to apply for a Hong Kong visa, set up a company and assist with company secretarial matters. For more information please contact Dominik Stuiber at dominiks@zetland.biz.

Hong Kong’s 2015/16 Budget

Hong Kong’s 2015/16 Budget HK BudgetDespite last year’s deficit warnings due to increasing needs of government spending, the Financial Secretary reports a surplus of HK$36.8billion. This comes hardly as a surprise considering that for the past ten consecutive years the SAR has reported surpluses albeit slow economic growth and increased spending. The surplus is, for the largest part, owed to greater income from the double stamp duty and higher than anticipated government income from profits tax. While Europe is further tightening austerity measures, Hong Kong companies and residents can enjoy the sweets of the budget surplus:

• Tax under Profits Tax, Salaries Tax and personal assessment for 2015/16 to be reduced by 75% capped at HKD20,000;
• Rates exemption for the first two quarters of 2015/16 capped at HKD 1,500 per quarter;
• Amendments to the IRO to include tax concessions for corporate treasury centres;
• Extended tax deductions for Intellectual Property Rights purchases.

Hong Kong is an attractive jurisdiction and base for regional and global operations and an international finance and trading centre. For more information, please contact Dominik Stuiber at dominiks@zetland.biz.

Singapore Budget 2015 – Key Highlights

Building our future, strengthening our social security is the theme for Singapore’s budget 2015. Singapore’s Deputy Prime Minister and Minister of Finance, Mr Tharman Shanmugaratnam delivered the Budget 2015 in Parliament on 23 February 2015, for the financial year 1 April 2015 to 31 March 2016. As Singapore celebrates its 50th year of independence, the “Jubilee Budget” concentrates on the future: building Singapore and helping Singaporeans to prepare for the changes by supporting families with children, middle-income families and providing greater assurance in retirement. There are 4 major areas the budget focuses on building Singapore’s future; (1) investing in skills for the future, (2) restructuring our economy by promoting innovation and internationalization, (3) investing in economic and social infrastructure, strengthening employee’s assurance in retirement; and (4) enhancing support for middle-income families. To achieve the above objectives and finance the future expenditure needs, it was critical to preserve a fair and sustainable fiscal system, not just for today but for the next generation. Some of the budget highlights for companies:

• Extending the Corporate Income Tax (“CIT”) rebate to Years of Assessment (“YAs”) 2016 to 2017 at the same rate of 30% payable, but up to a lower cap of $20,000 per YA.
• Allow the Productivity Innovative Bonus scheme to expire in YA2015, as it was intended as a transitional measure.
• Enhancing the Double Tax Deduction (“DTD”) for internationalization scheme – businesses may claim a 200% tax deduction on qualifying expenditure incurred on qualifying market expansion and investment development activities, subject to conditions.
• Introducing the International Growth Scheme – to suppose high potential companies in their growth oversea by providing a concessionary tax rate of 10% for a period not exceeding 5 years on their incremental income from qualifying activities.
• Extending and enhancing the Mergers & Acquistion (M&A) scheme by providing a cap on the value of S$20m of qualifying acquisitions per YA.
• Extending and enhancing the Angel Investors Tax Deduction (AITD) scheme by enjoying a tax deduction of 50% of the cost of qualifying investor.
• Extending and enhancing the Maritime Sector incentive to further develop Singapore as an International Maritime Centre.
• Extending the income tax and GST concessions for five years for REITs.

On the personal income tax and to strengthen the social support, some of the highlights are:

• Enhancing the progressive personal income tax rate structure, by increasing the highest income tax rate applicable for chargeable income in excess of S$320,000 from 20% to 22%. This new personal income tax structure will take effect from YA2017.
• A personal income tax rebate of 50%, capped at S$1000 per taxpayer, will be granted to all tax resident individuals for YA2015.
• Allowing individual taxpayers to claim specified amount of expenses against his passive rental income derived from residential properties in Singapore.
• Extending and enhancing tax deduction for donations from 250% to 300% in 2015.
• Increasing the CPF salary ceiling from $5000 to $6000
• Raise capital contribution cap within the Supplementary Retirement Scheme with effect from 1 January 2016.
• Raise CPF contribution rates for older workers aged between 50 and 65 with effect from 1 January 2016.

For more information on any specific tax incentive, please contact Su Lee, General Manager of Zetland Singapore at suleec@zetland.biz or +65 65572071

The New Silk Road Economy in China

Chinese leaders sketched out priorities for the "Belt and Road" initiatives, highlighting transport infrastructure building, investment and trade facilitation, financial cooperation and cultural exchange. China's "Belt and Road" initiatives will create more opportunities to boost connectivity in Asia and beyond. The Belt and Road Initiatives were put forward by Chinese President Xi Jinping during his overseas visits in 2013, which includes the Silk Road Economic Belt -- from China via Central Asia and Russia to Europe, and the 21st Century Maritime Silk Road -- through the Strait of Malacca to India, the Middle East and East Africa. Both projects remind people of the ancient Silk Road that set a paradigm of interaction among nations. The initiatives will not be a competitive replacement of other economic or political associations in the region, like the Eurasian Economic Union (EEU) and the Shanghai Cooperation Organization (SCO). They will, on the contrary, help to strengthen multilateral relations. Analysts see this as in response to recent political tensions in the South China Sea, as well as instability in the Malacca Strait, through which an estimated 85 percent of imports to China and 80 percent of energy imports are transported. Together it is hoped the two Silk Road initiatives will ensure China’s ability to import a necessary volume of raw materials and energy to feed its continued economic growth. This upsurge in infrastructure and trade agreements has direct significance for foreign investors looking at China and/or its neighbors in Central and Southeast Asia. As these projects mature and impediments to trade are gradually reduced, this will facilitate the movement of goods between markets and the ease with which foreign business can establish a transnational presence in Asia. And as new energy markets open along the new Silk Road, costs are likely to come down for businesses operating in China. In addition, China will provide more foreign aid and encourage private capital to participate in the construction of "One Belt and One Road". More than 50 countries along the ancient Silk Road have voiced willingness to participate in the initiatives to foster common development between China, Europe and Asia. China has fulfilled its commitments with tangible efforts, including a USD40 billion Silk Road Fund to directly support the projects and the establishment of the Asian Infrastructure Investment Bank to help supply the capital for infrastructure construction along the routes. As China promotes the Belt and Road initiative abroad, it is also driving change back home. In an economic work conference held in December 2014, it was listed as one of the priority tasks for 2015. And in recent days, the initiative has been lauded by people's congress sessions across the country. A total of 20 provincial regions have made their development blueprints based on the belt and road initiative. Observers believe that the initiative can further integrate China, allowing more parts of the country to enjoy the benefits of its opening-up policy. But the significance of the Belt and Road initiative lies in its potential to integrate domestic and regional development, bringing a more pragmatic approach to China's foreign policy. Along the belt and road are many developing countries, with a combined population of 4.4 billion and an annual economic output of USD2.2 trillion. “One Belt and One Road" connects economies in Asia Pacific and Europe. China and the countries along the belt and road will share the benefits of the project such as bolstering the economy, improving people's livelihood and tackling crisis. China has strengthened cooperation with neighboring countries in the fields of energy, transportation and trade. China's import of products and services improves the economy of its neighbors and bolsters its own sluggish economy. The initiative will become a major part of its foreign policies, resulting in a more favorable and mutually-beneficial regional environment. A bilateral cooperation mechanism between China and countries such as Mongolia, Iran and Turkey will be created this year, said Yu Xiaodong, spokesperson of the China Council for the Promotion of International Trade (CCPIT), China's largest trade organization. Such cooperation mechanisms not only promote international trade, but complement governmental cooperation. CCPIT will promote the establishing of a Silk Road Business Council and Zhenghe Economic and Cultural Friendship Association, two institutions that will prop up economic cooperation between China and "belt and road" countries. CCPIT also encourages domestic enterprises and local governments to hold exhibitions in "belt and road" countries. Around nine exhibitions are in the pipeline, including automobile, high-speed railway, consumer electronics and textile industry. The initiatives will not only bring economic benefits to countries involved, but also bolster social and cultural interactions among all the partners in the region through other channels, like educational projects and cultural programs. For further information please contact Phoebe Luo at phoebe@zetland.biz.

Forming a Firm Foundation - Belize International Foundation

The concept of civil law is fundamentally different from the common law, as it does not know a distinction between legal and equitable rights. Civil law in contrast to common law is not judge made law but its legal norms are enshrined in codes. Civil judges do not create law but implement and interpret the legal provisions contained in the codes. The structure of the Belize International Foundations is very similar to that contemplated for trusts and their administration. The crucial difference lies in the fact that a foundation in contrast to a trust enjoys legal personality and may be set up by unilateral declaration of the founder and the assets of the foundations only need to be endowed rather than be transferred physically. For clients in civil law countries this is of importance as the concept of a trust is not validly recognized and courts may not recognize transfer of assets such as real estate into a trust but they may recognize transfers into foundations. In accordance to the International Foundations Act, 2010 it provides additional protection where it concerns the subject of bankruptcy. It is established notwithstanding any foreign law, rule or regulation, the foundation shall not be void or voidable due to the fact that it is voluntary and without valuable consideration being given for a disposition to a foundation or to it being established for the benefit of the founder, or the founder’s spouse or children. The Act further states that the foundation endowment shall not be subject to transfer, encumbrance or other restraint solely because of the founder’s bankruptcy, liquidation or insolvency in any action or proceeding at suit of a bankruptcy trustee, receiver or creditor of the founder’s bankruptcy estate. A Belize Foundation is established upon proper execution of a foundation charter or equivalent document, by a founder and the members of a foundation council, by which a founder makes a disposition of rights, title or interest in property to the foundation for a specific purpose. Some potential uses of foundations are for succession planning and wealth management, discrete structures, discretionary benefits, and charitable or non-charitable purposes. Belize Foundations are exempt from business tax and offer a no tax haven for offshore investors. Not to mention the high level of anonymity offered by the jurisdiction and its geographical location is well placed in terms of access and international relations to other jurisdictions worldwide. Feel free to contact us at Zetland to assist with the formation of foundations in Belize, whether it is for protection of personal wealth from financial and political instability of your local jurisdiction, tax planning for inheritance assets or estate management. For further information, please feel free to contact Anju Gidwani, Director of the Belize Office (anju@zetland.biz)

Tax Filing Deadlines Notes

Hong Kong The Inland Revenue Department of Hong Kong has sent out the Profit Tax Returns and Employer’s Returns earlier this month. The returns should generally be filed within one month from the date of issue. An extension of the filing due date may be available through your tax representative. Should you require more time or assistance with your tax return filing, please contact us at tax@zetland.biz.

Accounting Date	Extended Due Date
For N Code Returns(Accounting Date between 1 April to 30 November)	No extension(Due date 4 May 2015)
For D Code Returns(Accounting Date between 1 to 31 December)	17 August 2015
For M Code Returns(Accounting Date between 1 January to 31 March)	16 November 2015
For M Code Returns and Current Year Loss Cases	1 February 2016

USA The filing deadline of the federal tax return was on 15 April, US tax payers living abroad can get an automatic 2-months extension, pushing the filing due date to 15 June. Should you require assistance with your tax filing, contact our experts at tax@zetland.biz for assistance.

Share-based Payment Accounting update: proposed narrow-scope amendments to IFRS 2

On 25 November 2014, the IASB published an exposure draft regarding Classification and measurement of share-based payment transactions (“the ED”), mainly to tackle the topic of ambiguity of accounting treatment for Share-based Payment under IFRS 2. The ED aims to clarify the classification and/or measurement of such payment in terms of timing and amount of expense recognition for new and outstanding share awards. If adopted, potentially three types of arrangement would be affected as summarized below:- 1.Cash-settled share-based payment transactions that include performance conditions Currently no guidance is available in IFRS 2 for measuring the fair market value of cash-settled share-based payments with vesting or non-vesting conditions. As a result, in practise differences occur between measuring the liability using same approach as for equity-settled awards and using full fair value. The ED proposes a same approach to measure cash-settled share-based payment and equity-settled share-based payment (i.e. the modified grant date method). As such, when measuring the liability a) market and non-vesting conditions would be taken into account in measuring the liability; and b) the number of rights to receive cash would be adjusted to reflect the best estimate of those expected to vest as a result of fulfilling service and any non-market performance conditions. The proposed amendment would have no impact, however, on the cumulative amount of expense ultimately recognised, as the total consideration for cash-settled share-based payment equals the cash paid on settlement. 2.Share-based payment settled net of tax withholdings Some jurisdictions require the company to collect or withhold tax related to a share-based payment and as a result some share-based payment arrangements permit / require the company to withhold a portion of the shares that would otherwise be issued to the employee, and to pay the tax authorities on the employee’s behalf. It is unresolved whether the portion of the withheld share-based payment should be accounted for as equity-settled or cash-settled. For classification purpose, the ED clarifies that a share-based payment transaction with employees should be accounted for as equity-based if a) the arrangement permit / require the company to settle the transaction net by withholding a specified portion of the equity instruments to meet the statutory requirement (net settlement feature); and b) the entire share-based payment transaction would otherwise be classified as equity-settled if there were no net settlement feature. 3.Modifications to a share-based payment transaction that changes the classification from cash-settled to equity settled IFRS 2 provides no specific guidance on the topic of cash-settled share-based payments that are modified. Thus diversity occurs in practise when accounting for such transactions. The ED proposes the following approach to account for modification to a cash-settled share-based payment that causes change of classification to equity-settled:-

• At the modification date, liability for original cash-settled share-based payment would be derecognised, and equity-settled share-based payment would be measured at fair value as at the modification date, recognising to the extent that services have been rendered up to the date; and
• Profit or loss should be recognised immediately for the difference between the carrying amount of the liability as at the modification date and the amount recognised in equity as at that date.

The proposed amendments would apply from the effective date prospectively, and companies with required information are permitted for retrospective application. Early application would also be permitted. Comments are due to the IASB by 25 March 2015. Companies should consider whether the proposal could result in a change to the accounting for share-based transactions. If you are interested to know more about the current share-based payment arrangement or are interested to implement a system for employee motivation & reward, please call us at +852 3553 9084 or email us at tax@zetland.biz. Forward to a friend!© 2015 Zetland Fiduciary Group Limited, All rights reserved.