Hong Kong has unveiled some incentives to encourage multinational and mainland enterprises to establish corporate treasury centers (CTCs) in the city.
Financial Secretary John Tsang said in his budget speech Wednesday that the government will amend the Inland Revenue Ordinance to allow, under specified conditions, interest deductions under profits tax for CTCs.
Also, the profits tax for specified treasury activities will be reduced by 50 percent, he said.
The tax incentives are aimed at prodding multinational firms to establish CTCs within their regional headquarters in the city.
A CTC effectively functions as an in-house bank within a multinational corporation, focusing on the optimal procurement and usage of capital for the operations of the group.
Improving the operational efficiency, securing the best external and internal funding, and lowering the costs by standardizing multi-currency transactions and payment systems are some of the things that CTCs can ensure as they perform treasury services for group companies.
The Hong Kong Monetary Authority (HKMA), the city’s de facto central bank, welcomed the government’s announcement, saying the new rules on CTCs will help Hong Kong consolidate its position as a prime financial center.
“Relaxation of the interest deduction rules for qualifying CTC activities and a concessionary half-rate regime for qualifying CTCs will enhance Hong Kong’s competitiveness,” a HKMA spokesperson said.
“The development of Hong Kong as a regional CTC hub would benefit the financial and business sectors, and help deepen our capital markets, including the offshore RMB market,” the spokesperson added.
– Contact us at [email protected]