The tax treatment of carried interest (often referred to simply as “carry”) has been a contentious issue in Hong Kong for a number of years and one which has never been comprehensively addressed by the Inland Revenue Department (IRD). In this article, we examine the practices which have emerged in relation to the issue in Hong Kong, consider the extent to which those practices can be reconciled to the law, and explore ways in which the issue could be dealt with in order to better align with the law and provide an equitable outcome with high levels of certainty.

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