FAQs

Corporates do not need to be licensed to set up CTCs in Hong Kong.

While corporates do not need to be licensed to set up a CTC, corporates are advised to seek professional advice as to whether proper licenses are required for a CTC to carry out regulated activities (such as a money changing service or a remittance service).

The HKMA does not regulate corporates’ CTC activities. Its main role is to promote Hong Kong as a leading CTC hub and to facilitate market development.

Corporates’ decisions to set up CTC should be based on their treasury business plans and risk management needs, rather than merely pursuing tax benefits.

Hong Kong’s CTC regime allows interest deductions with respect to profits tax, and profits tax reduction for specified treasury activities by 50 per cent. Corporates should pay attention to the corresponding conditions when designing their CTC structures. They can also consult tax advisors for details.

In addition, the relevant law does not stipulate requirements on the scale of the CTCs. The size of the CTCs should be based on the operational needs of the corporates.

There is no specific requirement on corporate structure for enjoying the interest expense deduction with respect to profits tax for CTCs.

Corporates intending to apply for the half rate profits tax concession should pay attention to the safe harbor rule that requires corporate treasury profits percentage and corporate treasury assets percentage to be no lower than 75% respectively. In order to fulfil this requirement, many corporates chose to establish a new entity, or conducted restructuring on existing companies to specialise on or primarily conduct corporate treasury activities.

Each corporate might face unique operational challenges and technical issues. Corporates are recommended to take reference from peers and seek advice from professional tax consultants and banks to ensure sufficient planning.

The HKMA and InvestHK jointly published the "Hong Kong Corporate Treasury Centre Case Studies" that illustrates a wide spectrum of corporate treasury activities being conducted in Hong Kong across different industries. It outlines the corporates’ considerations in arranging corporate treasury activities and how they structured their CTCs in Hong Kong. For details, please refer to here.

Hong Kong presents multiple edges as a CTC hub. It has mature and competitive financing platforms, the largest and most liquid offshore RMB market, a deep pool of talents, and a superior geographical location. All these have made Hong Kong one of Chinese and foreign corporates’ preferred locations in setting up regional headquarters and CTCs.

Corporates can centralise the management of their overseas funds and foreign exchange risks through setting up CTCs in Hong Kong. They can leverage on Hong Kong’s mature banking system and capital market, diversified financing channels, and holistic professional services to expand their offshore businesses, improve risk management capabilities, and align themselves with international standard.

Hong Kong possesses several unique advantages that are not easy to be replicated by other financial centres. First, Hong Kong is a premier offshore RMB hub, with the largest offshore RMB liquidity pool, and being the largest offshore RMB trade settlement and financing centre. About 70% of RMB payments via SWIFT and 40% of RMB foreign exchange transactions in the world are handled through Hong Kong.

In addition, Hong Kong is geographically adjacent to the Mainland, acting as a bridge between Mainland corporates and the overseas markets. The implementation of “One Country, Two Systems” allows Mainland corporates to enjoy the advantages of operating in an onshore and offshore market at the same time. Hong Kong being the only economy in the world that exercises bilingual common law system in English and Chinese also complement the above in facilitating Mainland corporates’ management of overseas businesses via Hong Kong.

The overall tax environment in Hong Kong is conducive to CTCs’ cross-border operations. Only three direct taxes are imposed in Hong Kong: profits tax, salaries tax and property tax. Hong Kong does not impose indirect taxes such as sales tax and value-added tax. In addition, many treasury management-related taxes, such as interest withholding tax, are not levied in Hong Kong.

Hong Kong’s CTC regime differs from that of other jurisdictions in the following aspects of application system, conditions, and concession period.

• There is no approval process involved in Hong Kong’s CTC regime. Corporates only need to elect the regime in their annual tax returns. This reduces corporates’ application costs;
• All requirements are enlisted in the Inland Revenue Ordinance. Corporates can enjoy the incentives as long as the requirements are met; Furthermore,
• The regime does not contain sunset clauses, which brings greater certainty for corporates’ long-term planning.

Setting up CTCs in Hong Kong does not require approval process. In addition, not all CTCs have applied for tax concessions. Therefore, the HKMA does not have such data.

Since the amendment of the Inland Revenue Ordinance, there has been growing interest among corporates in setting up CTCs in Hong Kong. Corporates’ enquiries raised to the HKMA have also become more in-depth and specific. Such trend has also been observed by banks and tax consultants. Setting up a CTC is a long-term strategic deployment of the corporate. We believe that corporate treasury activities in Hong Kong will continue to grow in the future.

Hong Kong has signed CDTAs with major economies and trading partners, with substantial benefits provided in these tax treaties. For example, the terms under the CDTA between Mainland China and Hong Kong are more favourable vis-à-vis Mainland China’s corresponding agreements with other advanced economies. In particular, the agreement with Hong Kong offers a lower withholding tax rate than the agreements signed with many other major economies.