About HKTDC | Media Room | Contact HKTDC | Wish List Wish List () | My HKTDC |
Save As PDF Email this page Print this page
Qzone

Tax Cuts Benefit Corporate Treasuries

New tax rules, introduced in June, make Hong Kong more attractive for multinational corporations and Chinese mainland enterprises to set up headquarters and treasury functions in the city.

The key benefits, as outlined in a briefing by accounting network Grant Thornton, are substantial tax concessions. “Analysts believe that the move is a timely one in reinforcing Hong Kong’s credentials as a hub for corporate treasury centres (CTCs), at a time when many mainland Chinese companies are expanding overseas,” noted Grant Thornton.

Norman Chan
Norman Chan, Chief Executive of the Hong Kong Monetary Authority

Professional services firm PwC explains a CTC as being, in effect, an organisation’s “in-house bank,” responsible for a range of finance functions, including regional processing of payments, liquidity management, intra-group financing and capital-raising.
 
As of the current financial year, qualified companies can have their profits tax halved (from 16.5 per cent to 8.25 per cent), and see all their interest expenses become tax deductible if they choose to set up a CTC in Hong Kong.

 

   
  Brand Hong Kong
 
  
Norman Chan, Chief Executive of the Hong Kong Monetary Authority, described the tax changes as a further step towards building Hong Kong as a world-class brand for financial services.

“We have finally succeeded in changing our tax regime to help make Hong Kong a more attractive platform for multinational corporates to conduct their group cash management and treasury functions here,” said Mr Chan in a keynote speech at the Treasury Markets Summit 2016 in September.

CTCs have great demand for banking, financing, risk management, taxation and legal advisory services, he said, which will bring about tremendous business opportunities for the financial, business and professional services sectors in Hong Kong.

“In addition, many multinational corporations co-locate their CTCs with their regional headquarters. By attracting more CTCs here, we are also providing further impetus to the development of a headquarters economy in Hong Kong.”

Setting up CTCs is still at an early stage for mainland enterprises – a position on which Hong Kong can capitalise, he said.

“Traditionally, we are the first choice as a base for mainland enterprises to go global, and we believe that the same will apply when it comes to the location of CTCs,” said Mr Chan. “Similarly, Hong Kong is a springboard for overseas corporations to gain a foothold in the mainland market.”
 
   

Other Favourable Factors

Albert Lo
Albert Lo, Finance Consulting Partner, PwC Hong Kong

Cost considerations aside, Albert Lo, Finance Consulting Partner, PwC Hong Kong, said other factors come into play when choosing the right CTC location; proximity to a corporate’s underlying businesses, availability of talent pool, strength of legal framework and structure, and accessibility to debt capital markets.

Describing the city as “the most vibrant international financial centre in Asia,” as well as the world’s top offshore renminbi centre, PwC said Hong Kong’s new CTC policy is “a very positive and important step towards establishing Hong Kong as a corporate treasury hub,” and an official recognition of the importance of professional treasury management.
 
“Our view is that this initiative provides corporations the opportunity to improve their competitiveness by adopting a professionally managed CTC platform and achieve substantial tax savings that will support their global business development,” said Mr Lo.

Icing on the Cake

Samantha Tan
Samantha Tan, Tax Senior Manager, International and M&A Tax at Deloitte Advisory Hong Kong

Samantha Tan, Tax Senior Manager, International and M&A Tax at Deloitte Advisory (Hong Kong), said the new CTC rules provide Hong Kong with another tool in its competitiveness playbook.

“However many multinationals and Chinese mainland enterprises looking to establish bases here may already have been attracted to Hong Kong's deep renminbi pool, robust infrastructure and proximity to China. For these groups, the tax benefits of the CTC rules will now be the icing on the cake.”

She noted that the move is among several initiatives the Hong Kong Government is pushing to boost the financial services industry. “For example, the Hong Kong Monetary Authority is spearheading the Fintech Supervisory Sandbox and Infrastructure Financing Facilitation Office in a bid to enhance Hong Kong's competitiveness as a hub for Fintech innovation and infrastructure financing in the Asia-Pacific region.”

Closing the Gap

Howard Yang
Howard Yang, Country Head for Treasury and Trade Solutions, Citi Hong Kong  

Howard Yang, Country Head for Treasury and Trade Solutions, Citi Hong Kong, said Hong Kong is always the first-choice destination for mainland corporates on the path of internationalisation, due to its geographical proximity and renminbi liquidity. The recent tax changes make the city even more attractive.

“Hong Kong has been one of the major treasury and financial centres in Asia with well-established regulatory and legal regimes, matured banking and finance sectors, superior infrastructure, strong import/export trades and a great talent pool,” said Mr Yang. “The newly introduced tax incentives eliminated the only gap that Hong Kong had compared to other established financial centres in the region.”

“The newly introduced tax incentives eliminated the only gap that Hong Kong had compared to other established financial centres in the region.”

The new tax change should also spur Hong Kong's development as a place for a "headquarters economy," creating great businesses as well as demand for banking, financing, risk management, taxation and legal advisory services, said Mr Yang, who expects Hong Kong’s future CTC development to pick up speed.

Related Links
Citi Hong Kong
Deloitte 
Grant Thornton
PwC Hong Kong

Content provided by Hong Kong Trade Development Council
Comments (0)
Shows local time in Hong Kong (GMT+8 hours)

HKTDC welcomes your views. Please stay on topic and be respectful of other readers.
Review our Comment Policy

*Add a comment (up to 5,000 characters)