Hong Kong has cut taxes on aircraft leasing companies as the offshore yuan hub seeks to grow into an international aviation leasing center on par with Ireland.
The bill, expected to take effect next April, offers a number of incentives cutting aircraft lessors' effective corporate tax rate to single digit from 34 percent.
"The new tax rate is lower than that in mature aviation leasing centers such as Ireland and Singapore, making it attractive for aircraft lessors," said Clarence Leung, director of tax services for PwC Hong Kong.
"Supported by the State Council, the Hong Kong government is resolute in developing an international aircraft leasing center to expand the city's roles in international financial services."
A report by Boeing Capital said the number of air passengers was expected to grow at 6 percent a year in the Asia-Pacific region in the next 20 years. This will require 15,000 new aircraft, worth a total of about US.4 trillion. Chinese mainland airlines will account for more than 40 percent of Asia-Pacific demand.
Leung, who advised the government on the new policy, said Hong Kong would work with leasing companies on the mainland and free trade zones to tap the market potential.
John Timpany, tax partner at KPMG China, said Hong Kong would likely become the preferred base for aircraft lessors to set up in order to take advantage of the new incentives, given the preferential arrangements between Hong Kong and the mainland.