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Komfie Manalo, Opalesque Asia:

Industry players are calling on hedge fund managers in Hong Kong to go to court and challenge the city’s Inland Revenue Department policy on taxation of remuneration.

The call was issued after some 12 hedge fund firms based in Hong Kong have settled with the IRD on the tax issue. But industry players said litigating against the IRD policy would hopefully stop the wave of tax-related audits by the government tax department. The IRD has been doing tax audits since 2011, reports said.

Since launching the audits, the IRD has conducted 50 audit assessments that targeted alternative investment firms, of which 60% are hedge funds and real estate private equity firms.

The number comprised some 10% of the 348 hedge fund firms operating in Hong Kong with an estimated $87.1bn in assets under management between them.

"The inconvenient truth of the matter is that there is no legal basis for the IRD’s approach or for its assessment position," Travis Benjamin, a tax partner at Deacons was quoted as saying. He added that the IRD just wanted a return on its investment, "This has resulted in a rather aggressive IRD position, where the underlying message to asset managers is to settle the audit by paying tax or take your chances in litigation."......................

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