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Minimum credit rating to qualify for tax concession

The Hong Kong Monetary Authority (HKMA) today (Friday) announced that the minimum credit rating requirements for debt securities issued in Hong Kong to be eligible for the profits tax concession scheme are for the time being as follows:

Recognised rating agency

IBCA

JBRI

Moody's S&P's

Minimum rating required

BBB-

BBB+

Baa3

BBB-

"These standards will enable debt securities with an investment grade rating to qualify for the tax concession," a spokesman of HKMA said.

Under the profits tax concession scheme, the interest income and trading profits derived from eligible debt securities will enjoy a concessionary tax rate equal to 50 per cent of the profits tax rate.

The scheme applies to new debt issues, regardless of their currency denomination.

To be eligible, a debt issue should have at all times a credit rating assigned by a recognised rating agency which is not lower than the minimum standards specified by HKMA. The HKMA reserves the right to make adjustment to these standards from time to time.

In addition to the rating requirement, a debt issue has to meet the following eligibility criteria:

the entire issue is lodged with and cleared by the Central Moneymarkets Unit operated by HKMA;

(i)

(ii)

original maturity of not less than 5 years;