Government launches consultation on proposed enhancements to tax concession regime for corporate treasury centres
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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.
Following the direction of tax revamp under the Action Plan, the consultation paper proposes the introduction of a tiered regime for CTC tax concessions, with key features as follows:
(1) Tier 1: refine and broaden existing regime
Tier 1 of the proposed tiered regime comprises refinements to the existing tax concessionary measures applicable to qualifying corporate treasury centres (QCTCs) and corporations conducting intra-group financing business in Hong Kong. The key proposals include:
- allowing a CTC to defer tax deduction of interest expenses paid to a non-Hong Kong associated corporation to a year in which that corporation becomes subject to tax, if that corporation is not required to pay tax on the interest income in a particular year of assessment;
- 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.
(2) Tier 2: introduce a pre-approval mechanism
Under Tier 2 of the proposed tiered regime, CTCs and their associated corporations that meet a set of specified conditions may, upon pre-approval by the IRD, enjoy additional tax benefits or flexibilities within a validity period of five years, including:
- exemption for a pre-approved QCTC from complying with the "dedicated CTC condition" and the "safe harbour rule";
- 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.
The Secretary for Financial Services and the Treasury, Mr Christopher Hui, said, "This public consultation is a major initiative to revamp the tax regime and a significant step towards implementing the Action Plan. We have been in close communication with the industry. The tiered tax regime proposed in the consultation paper is precisely designed to address the pain points of the industry in a targeted manner, providing eligible corporations with more comprehensive tax benefits, greater tax certainty, and enhanced compliance flexibility. These innovative, pragmatic, and competitive measures are expected to attract more multinational corporations from different regions and sectors to make full use of Hong Kong's role as a platform for 'bringing in and going global', and to bring their funds and core business to Hong Kong for centralised management, thereby strengthening Hong Kong's position as a major base for CTCs."
The consultation paper is available on the webpage of the FSTB: (https://www.fstb.gov.hk/fsb/en/publication/consult/doc/ctcConsultEn.pdf). The FSTB and the IRD welcome views from the public on the proposals set out in the consultation paper by post (24/F, Central Government Offices, 2 Tim Mei Avenue, Tamar, Hong Kong) or by email (ctc-consult@fstb.gov.hk) on or before September 4.
Taking into account the comments to be collected, the Government targets to issue administrative clarifications for enhancing the existing tax concession regime for CTCs within this year, and introduce legislative amendments to the Legislative Council in the first half of next year.
Ends/Monday, July 27, 2026
Issued at HKT 17:00
Issued at HKT 17:00
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