Source: Hong Kong Government special administrative region
The Financial Services and the Treasury Bureau (FSTB) and the Inland Revenue Department (IRD) today (July 27) launched a public consultation on proposed enhancements to the tax concession regime for corporate treasury centres (CTCs). The public consultation will last for six weeks until September 4.
In June this year, the Government published the Action Plan to Promote the Development of CTCs in Hong Kong (Action Plan), which sets out a “4T” framework covering (i) tax revamp, (ii) tax agreements, (iii) targeted promotions, and (iv) talent and dialogue, with a view to attracting more multinational corporations to establish CTCs in Hong Kong, and enabling existing CTCs operating in Hong Kong to scale up their operations and fully leverage the city’s comprehensive financial ecosystem.- expanding the scope of tax deduction of interest expenses to cover a broader range of corporations, including those carrying on a business of carrying out corporate treasury activities; and
– making legal and administrative clarifications (such as the substantial activity requirement, the benchmark for intra-group financing business, and the definition of corporate treasury transactions, etc) to enhance tax certainty.- a 50 per cent tax exemption for interest income derived by pre-approved Hong Kong associated corporations from the pre-approved QCTC;
– exemption for a pre-approved QCTC from complying with the “subject to tax condition” on interest paid to its pre-approved non-Hong Kong associated corporations; and
– removal of the “anti-tax arbitrage rule” for pre-approved Hong Kong associated corporations. Such corporations may claim full tax deduction for expenses paid or payable to the pre-approved QCTC, subject to a cap set at 30 per cent of its earnings before interest, taxes, depreciation and amortisation (i.e. EBITDA) for interest expense deduction.