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December 7, 2023

Hong Kong introduces bill to enhance aircraft leasing preferential tax regime

  • A new bill has been gazetted to enhance the aircraft leasing preferential tax regime in Hong Kong.
  • Multinational enterprises in the aircraft leasing business may want to explore the applicability of this enhancement regime.

Legislation aimed at enhancing the preferential tax regime to make Hong Kong a preferred location for aircraft leasing in the region was gazetted on 17 November 2023. Hong Kong had announced in the 2023/24 Budget1 that it will enhance the preferential tax regime to make Hong Kong a preferred location for aircraft leasing in the region. The gazette legislation is now subject to legislative amendments proposed in the Legislative Council.

Detailed discussion

Currently, Hong Kong's aircraft leasing preferential tax regime allows qualifying profits of qualifying aircraft lessors and qualifying aircraft leasing managers to be taxed at the concessionary tax rate of 8.25% and also provides for a 20% tax base concession in lieu of tax depreciation allowance.

The legislation gazetted on 17 November includes the following key proposals:

  • In place of the existing 20% tax base concession, qualifying aircraft lessors will be granted a one-off 100% deduction of the acquisition cost of the aircraft, in the year of acquisition, if specified conditions are met starting from the year of assessment 2023/24. An election is also available for previous acquisitions and the existing anti-avoidance rule will be updated accordingly to facilitate the one-off tax deduction regime.
  • The definition of a qualifying lease will be extended to cover a dry lease2 of less than one year, a wet lease3 and a funding or finance lease for an aircraft. The qualifying aircraft leasing activities will also include leasing to non-aircraft operators, such as private companies, public organizations or individuals.
  • A deduction will be allowed for interest payable to overseas associates to finance the acquisition of aircraft, subject to anti-abuse provisions.
  • A specific substantial activities threshold will be introduced to comply with requirements of the Organisation for Economic Co-operation and Development.

The enhanced measures will be effective for financial years ending on or after 1 April 2023 and thus will have retroactive effect for some taxpayers upon passage of the bill. Meanwhile, the Departmental Interpretation and Practice Notes clarify that bare trust leasing model will also qualify for the entire aircraft leasing tax incentive regime, including the proposed amendments when the bill is passed.


For additional information with respect to this Alert, please contact the following:

Ernst & Young Tax Services Limited, Hong Kong

Ernst & Young LLP (United States), Hong Kong Tax Desk, New York

Ernst & Young LLP (United States), Asia Pacific Business Group, New York

Ernst & Young LLP (United States), Asia Pacific Business Group, Chicago

Published by NTD’s Tax Technical Knowledge Services group; Carolyn Wright, legal editor



1 See EY Global Tax Alert, Hong Kong announces 2023/24 Budget, dated 23 February 2023.

2 In a dry lease, the lessor provides the aircraft but no crew; the lessee is responsible for providing the flight crew and accepts operational control.

3 In a wet lease, the lessor provides the aircraft and at least one crewmember.


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