SC revises guidelines to facilitate application for venture capital industry tax incentives

The Securities Commission (SC) today released the revised Guidelines for Annual Certification for Tax Incentives for the Venture Capital Industry (Guidelines), which would assist the venture capital industry in their application for annual certification from the SC in order to enjoy the tax incentives for the sector.

The revised Guidelines supersede the earlier Guidelines that were issued on 28 August 2001.

To facilitate the administration of and application for tax incentives related to the venture capital industry, the Government had in 2001 entrusted the SC with the role of certifying that applicants have complied with the necessary conditions.

The Guidelines have been revised to reflect the following tax incentives, which are effective from the year of assessment 2003:

  • tax exemption for venture capital companies (VCC) registered with the SC upon fulfilling the conditions under the Income Tax (Exemption)(No.11) Order 2005; and
  • tax deduction for any company or individual that has provided venture capital funding, subject to certain criteria as certified by the SC, upon fulfilling the conditions under the Income Tax (Deduction for Investment in a Venture Company) Rules 2005.

In addition to the above incentives, a venture capital management company (VCMC) registered with the SC can also enjoy tax incentives in the form of tax exemption on income arising from a profit-sharing agreement between the VCMC and a VCC. The VCMC, however, need not obtain certification from the SC provided the VCC is registered and has been certified by the SC. This incentive is provided under the Income Tax (Exemption)(No.12) Order 2005.

Applicants are advised to refer to and understand the contents of the Guidelines before submitting any application for annual certification to the SC.

A set of frequently-asked-questions (FAQs) has also been released in conjunction with the revised Guidelines. Both the revised Guidelines and the FAQs are available on the SC website here .

14 April 2005