The draft tax law on corporate treasury centre in Hong Kong
The Inland Revenue (Amendment) (No.4) Bill 2015 was gazetted on 4 December 2015 to: (1) introduce a concessionary profits tax rate of 8.25% for certain profits derived by a corporate treasury centre (CTC) in Hong Kong, (2) enhance the interest expense deduction rules for an intra-group financing business carried on by a corporation but at the same time, (3) deem the interest income and certain profits derived from such business as taxable trading receipts, and (4) clarify the profits tax and stamp duty treatments in respect of regulatory capital securities issued by financial institutions in compliance with Basel III capital adequacy requirements.
The Bill will be introduced to the Legislative Council on 16 December 2015, and will be subject to the scrutiny and approval of the Legislative Council before enacting into law. Once enacted, the provisions on the concessionary tax rate applicable to CTCs and the new interest expense deduction rules for intra-group financing business are expected to apply from 1 April 2016.
Multinational corporations that would like to benefit from these tax incentives need to review their current corporate treasury operation in light of the proposed tax legislation and consider if any restructuring of such operation is necessary or desirable in order to fit into the requirements of the draft law.
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