Landmark Transaction under Hong Kong’s New Tax Regime for Aircraft Leasing

Landmark Transaction under Hong Kong’s New Tax Regime for Aircraft Leasing

A new tax regime for aircraft leasing was introduced by the Hong Kong Government in July 2017, pursuant to which qualifying aircraft lessors conducting qualifying aircraft leasing activities are eligible for tax concessions in Hong Kong.

ICBC Financial Leasing Co., Ltd. (“ICBC Leasing”) instantly saw the benefits of using a Hong Kong platform to lease aircraft to lessees.

In October 2017, the Inland Revenue Department of the Hong Kong Government issued Departmental Interpretation and Practice Notes No.54, which sets out guidelines for implementation of the new tax regime. This prompted ICBC Leasing to spring into action and designate a Korean Air’s Boeing B787-9 aircraft for leasing under the new tax regime. ICBC Leasing arranged for an aircraft lessor to be set up in Hong Kong and enter into an aircraft lease agreement and other transaction documents in respect of the aircraft with Korean Air as lessee.

As the aircraft was scheduled to be delivered by Boeing in December 2017, the parties were left with only two months to complete the negotiation, documentation and logistics for the leasing of the aircraft. ICBC Leasing, Korean Air and their respective legal counsels and tax advisors worked swiftly and seamlessly together, demonstrated commendable cooperation and professionalism and completed the design, due diligence, negotiation, documentation and execution of the transaction in less than two months.

The transaction was successfully closed and the aircraft was delivered to Korean Air without a h itch on 20 December 2017. This transaction shows the smooth functioning of the new tax regime and marks a significant milestone in Hong Kong’s bid to become the leading aircraft leasing and financing centre in the region.

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