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Hong Kong launches consultation on proposed enhancements to corporate treasury centre (CTC) tax concessions
The consultation seeks views on introducing a new two-tier framework designed to attract more multinational groups to establish treasury operations in Hong Kong and enable existing CTCs to expand their activities.
Key enhancements include:
Tier 1 – Refine and broaden existing regime
- Deferral of interest expenses
- Expansion of scope of interest expenses deduction to cover other corporate treasury activities
- Specification of substantial activity requirement
- Clarification of benchmark of intra-group financing business
- Clarification of definition of “corporate treasury transactions”
Tier 2 – Introduce a pre-approval mechanism
- Removal of “dedicated CTC condition” or the “safe harbour rule”
- 50% exemption for interest income earned by pre-approved Hong Kong associated corporations
- Relaxation of “subject to tax condition” for pre-approved qualifying CTCs (QCTCs)
- Relaxation of anti-tax arbitrage rule
- Pre-approval conditions
Clients who are interested in the proposed enhancements should contact their tax executives.