The Hong Kong government on June 3 gazetted Inland Revenue (Amendment) (No. 2) Ordinance 2016, which provides a concessionary profits tax rate of 8.25 percent for qualifying corporate treasury centers and more generous rules for interest deductibility of intragroup financing.
The new law, passed by the Legislative Council on May 26, also modifies the profits tax and stamp duty treatment in respect of regulatory capital securities issued by banks to comply with the Basel III capital adequacy requirement.
Secretary for Financial Services and the Treasury, Professor K C Chan, said the new corporate treasury center scheme, effective retroactively to April 1, “provides a conducive environment for attracting multinational and Mainland corporations to centralise their treasury functions in Hong Kong, thereby enhancing the competitiveness of our financial markets and contributing to the development of a headquarters economy.”
The changes to the rules on intragroup financing, also effective April 1, remove current restrictions that limit interest deductions to cases where the interest income of the lender is chargeable to Hong Kong profits tax.
The government said it will issue further guidance on the operation of the new rules and on antiavoidance provisions.
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