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2016 Tax Loans

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  1. #11

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    Quote Originally Posted by big_panda:
    The interest rate on Tax Reserve Certificates is 0.0433% per annum. Hardly worth the bother.
    Very convenient though. Save a heap of time and avoid risk of forgetting to pay the bill.

  2. #12
    Quote Originally Posted by Seagulls!:
    Do you need to prove that you're using them to pay off your tax? Does anyone use the loan to try and make money through other investments?
    Always thought that was where most so-called tax loan funds ended up!

  3. #13

    Join Date
    Dec 2012
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    So the conclusion then is that the Citi loan is the best one?


  4. #14

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    I've just had an eye opening experience and discovered that these tax loans are NOT for idiots that cannot pay their tax on time, they are just called that because they are offered at this time of year when banks are looking to fill their lending budget for the year. These loans are actually very powerful forms of investment and I have been the idiot for not taking advantage of them earlier!

    I have just borrowed HK$1.5 million from Citibank for 4 years with an APR of 2.03%. This means pay back total $1.56 million over 4 years. It is basically free money! I have then invested this with Standard Chartered Unit trust in UT3051 Allianz growth fund which pays a 10% dividend, paid monthly. You can do this on the online banking but DONT because if you call up and negotiate you can get a much better discount on the subscription fee (I got 1%). Of course I know the risks with unit trusts, but this one in particular has has been paying this consistently every month since 2013 and is a medium risk 3 investment (my profile is a 4 as I found out after spending 3 hours at the bank yesterday where they forced me to watch DVD's and fill out questionnaires).

    Here is the real eye opener. Standard chartered will give me an overdraft up to 80% of this, secured by the unit trust, at an interest rate of PRIME - 3.5% (1.75%). One point seven five fucking percent!! I borrowed money from citibank at 2%, use it to invest in a fund generating 10% dividend, then these guys let me take out 80% of this (HK$1.2m) to do with as I please. It really is fully leveraging your money.

    This HK$1.2m free money I am now sending to Australia because I have a mortgage there that I am paying 4.34% interest rate. So essentially I have borrowed at a low 1.75% rate in Hong Kong to pay off a higher 4.34% rate in Australia. Also the Aussie dollar relatively weak at the moment so a good time to transfer to Aus.

    I've also just discovered concept of premium deposits. Instead of a boring old HKD to AUD FX transfer, I've essentially placed a bet on what the rate will be in one week from now. Whether it goes up or down, I'm going to get 10% interest, but basically they might give me HKD or AUD depending on whichever one is weaker compared to today. If I get HKD then I get 10% interest and I try again, and again, each time getting 10% interest, until finally I get AUD and then I can send this to Aus and put it on my mortgage. To me is a little game

    So I've ended up borrowing, HK$2.7m all up at under 2% APR. I've basically put half of this on a unit trust and the other half send to Aus to pay off a higher interest rate mortgage. In my mind the unit trust carries some risk, but the paying off mortgage part does not, so its quite a balanced strategy than mitigates risk

    Basically these tax loans are free money because its so simple to do things with the money that generate higher returns than the interest you pay on them. Citibank in particular are the ones offering free unsecured money at the moment. Other banks not so generous. That's why I borrowed from Citibank and then gave it to Standard Chartered.

    To top it all off, Standard Chartered are now giving me free Asia miles every month. Every 100k of trusts you hold with then gives 35 miles. So I'm getting 350 miles a month on top. I also walked out of the bank with some lai see envelopes and a Hung Fook Tong turnip cake

    Maybe this is all common knowledge to some of you smart motherfuckers in finance or banking on here, but for me has been a real eye opening experience, especially the concept of being able to invest in a unit trust and then get 80% of that back to do something else with and really fully leverage your investment.

    These tax loans are awesome free money and a great way to invest. Not pay off your tax!

    krisch and gigglinggal like this.

  5. #15

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    Of course, whose tax bill is really 12 times their monthly salary? That would effectively be a 100% tax :-p

    Tax promotion is just the marketing name of the promotion, no one borrows it for tax purposes, they use it for investment, decoration, blah.


  6. #16

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    Feb 2009
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    Original Post Deleted
    Im not going to pretend to be an expert on these premium deposits (this is SCB name, HSBC call them something else), and to me was more of a little game and not the major part of my investment strategy. But essentially you can win or lose depending on how the rates go. But you are guaranteed to get the your desired interest rate, you just dont know whether you will get the money back in HKD or your linked currency. You can choose your own interest rate, 10%, 13%, whatever you want. You can also choose 1 week, 1 month, etc. Then the bank will tell what you will get based on the rate at the fixing time. The screenshot below maybe demonstrates what I am talking about, this is today's situation if you took out a HK$500k premium deposit in HKD linked to AUD for one week:

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  7. #17

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    Original Post Deleted
    I think he mean this one
    HSBC Fund Express

  8. #18

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    Quote Originally Posted by MandM!:
    Of course, whose tax bill is really 12 times their monthly salary?
    What really blows my mind though is these leveraging and investment products that exist that turn your initial tax loan of 12 times salary into 30-50 times your salary and all under 2% APR (the overdraft I have is 1.75% which is even lower than the first tax loan I took that enabled the overdraft in the first place!).

    My local mates are getting overdrafts in Hong Kong to pay out their mortgages! Overdrafts are cheaper than mortgages ffs!!! Overdrafts are 1.7% and typical mortgages around 2%. This totally goes against everything I have ever learnt.

    I was happy with a simple tax loan to borrow at low rates in HK to pay off a higher rate mortgage in Aus. But I have supercharged this now and have both a trust fund earning $$ in Hong Kong as well as extra free cash to do what I originally intended.
    gigglinggal likes this.

  9. #19

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    Original Post Deleted
    Sorry UT3051 maybe the fund code in Standard Chartered online banking site. Its this one on morning star:
    Allianz Income and Growth AM HKD|LU0820561909
    Last edited by bdw; 27-01-2017 at 05:48 PM.

  10. #20

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    Feb 2009
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    Quote Originally Posted by Beuze:
    I think he mean this one
    HSBC Fund Express
    Yeah that look like it. Thanks

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