Hong Kong Government tightens laws on Occupational Retirement Schemes
21 May 2019
A bill to amend the Occupational Retirement Schemes Ordinance (Cap. 426) (the “Ordinance”) was introduced to the Legislative Council on 17 April 2019. The bill aims to: ensure there is a genuine employment relationship for participants in an occupational retirement scheme; and enhance enforcement powers of the Mandatory Provident Fund (“MPF”) Schemes Authority which acts as the Registrar of Occupational Retirement Schemes.
Occupational Retirement Schemes (“ORSO” schemes) are voluntary retirement schemes that were set up by employers before the introduction of MPF Schemes in December 2000. Employees participating in eligible ORSO schemes are exempt from enrolling into an MPF Scheme.
In recent years, some ORSO schemes have been used as investment planning and tax mitigation vehicles. The amendment bill aims to ensure that ORSO schemes which are registered or exempted under the Ordinance are genuinely based on employment relationships and those schemes which fail to meet the requirement will lose the registration or exemption under the Ordinance (and thus lose the tax and regulatory advantages).
The bill also tightens the circumstances under which ORSO schemes can be exempted for registration and widens the powers of the MPF Schemes Authority to inspect and investigate ORSO schemes and to issue guidelines.
An employer operating an ORSO scheme will need to review its scheme for compliance once the bill is passed.
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