Hong Kong’s Inland Revenue Department (IRD) has released a new Departmental Interpretation and Practice Note (DIPN) in which it outlines its interpretation of the ordinance enacted last year that sought to extend the tax exemption for offshore funds to private equity firms. In addition, the IRD has updated DIPN 43 to reflect the changes contained in last year’s legislation.

This tax alert aims to provide an overview of the implications of the new DIPN for funds operating in Hong Kong as well as commentary on the different areas touched upon in the DIPN such as the taxation of carried interest distributions and the ability of a Hong Kong SPV to obtain a tax residency certificate from the IRD.