#1KPMG 言 香港信託人公會 rustee Hong Kong Trustees' Association Hong Kong Trust Industry Spotlight: Enhancing its competitive edge Presentation by KPMG October 2017#2Hong Kong Trust Industry Spotlight Four years since the inaugural report Basis of our report: • Quantitative survey - 48 respondents 30 interviews with senior industry practitioners, government officials and regulators Highlights of the report: The compliance conundrum Improving the talent pool KPMG 香港信託人公會 rustee Hong Kong Trustees' Association Hong Kong Trust Industry Spotlight: Enhancing its competitive edge • Streamlining of the regulatory framework Clarity on tax October 2017 KPMG ©2017 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved. Printed in Hong Kong. Document Classification: KPMG Confidential كة 2#3State of the Hong Kong trust industry Pension schemes ⚫ DIS • Offsetting mechanism ⚫ eMPF Corporate trusts • ETF • Mutual • . Investment • restrictions Enhanced governance structure KPMG Recognition of Funds • OFC 21813 10010001828010 • • Private trusts Charitable trusts China Family offices VISTA/STAR- type trusts • High net worth families ⚫ Charitable commission • Private trust • Employee share plan companies • Competition ©2017 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved. Printed in Hong Kong. Document Classification: KPMG Confidential 3#4Impact of the HKTO amendments Many industry participants agree that those statutory enactments have modernised Hong Kong's trust regime and put the city back on the map as a key trust jurisdiction. ▸▸ The impact of 2013 HKTO amendments on the growth of trust-related business >> Proportion of assets held by Hong Kong-domiciled trusts KPMG 20% 39% Increasing 41% Some Relatively static Minimal / No impact ■ Significant Decreasing Source: Joint KPMG and HKTA survey 0% 10% Source: Joint KPMG and HKTA survey 20% 30% 40% 50% 60% ©2017 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved. Printed in Hong Kong. Document Classification: KPMG Confidential#5The Compliance Conundrum ▸▸ Time and effort spent on compliance and regulatory matters over the past 12 months Increased by more than 15 percent Increased by 5 percent to 15 percent Little/No change Rising compliance costs is not a Hong Kong- specific issue, but a global trend that is likely to continue. Decreased by 5 percent to 15 percent Decreased by more than 15 percent 0% 10% 20% 30% 40% 50% 60% 70% 80% Source: Joint KPMG and HKTA survey KPMG Many industry players are turning to technology to meet compliance obligations. ©2017 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved. Printed in Hong Kong. Document Classification: KPMG Confidential LO 5#6Improving the talent pool 1 HKTA Accreditation/Training Programme 2 3 Government's Three-year Pilot Programme to Enhance Talent for the Asset and Wealth Management Sector Other options for students and professionals to undergo trust-related training 4 Technology solution.#7Streamlining of the regulatory framework Streamlining of the regulatory framework would make it easier for Hong Kong to create a vision for the trust industry, which would in turn contribute to the long term development of the market and enhance its international competitiveness. >> Most effective method to grow the Hong Kong trust industry KPMG 16% 8% 11% 30% Regulation of trust companies Government support, training and incentive programs Relaxation of investment requirements Tax law amendments to provide clarity on trust taxation ■Further amendments to HKTO 19% ■ Others 16% Source: Joint KPMG and HKTA survey © 2017 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved. Printed in Hong Kong. Document Classification: KPMG Confidential#8Clarity on tax >> Does tax legislation needs to be amended to provide more certainty to taxation of trusts in Hong Kong? Yes No Not sure 0% 10% Source: Joint KPMG and HKTA survey 20% 30% 40% 50% 60% A trust has no separate legal personality and is not deemed a person under section 2 of the IRO. The general scholarly consensus is that trust profits falling within section 14 of the IRO are chargeable to profits tax in the hands of the trustee. KPMG ©2017 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved. Printed in Hong Kong. Document Classification: KPMG Confidential 8#9Looking ahead Talent development Development of eMPF and enhanced governance structure Streamlining regulatory framework KPMG Technology Clarity on tax Guidelines for PTCs VISTA/STAR-type trusts Establishing a charities commission ©2017 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved. Printed in Hong Kong. Document Classification: KPMG Confidential 9#10KPMG Thank you#11KPMG lin f kpmg.com/cn/socialmedia Intellectual property restriction This document has been prepared specifically for the HKTA 2017 Conference. It contains confidential or proprietary KPMG information, the disclosure of which would provide a competitive advantage to others. It is not to be used or duplicated for any purpose other than to evaluate KPMG and is not to be disclosed or referred to, in whole or in part, without our prior written consent. The restriction pertains to all data throughout the entire document. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. © 2017 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved. Printed in Hong Kong. The KPMG name, logo are registered trademarks or trademarks of KPMG International. Document Classification: KPMG Confidential