Hong Kong Corporate Treasury Centre / CTC Services
The external volatility in the global financial environment has generated greater demands for multinational corporations and groups operating across borders to centralise their groups’ treasury management of liquidity and risks, as well as hedging transactions so as to achieve greater operational efficiency.
In essence, a Hong Kong Corporate Treasury Centre / CTC is an “in-house bank” within a multinational corporation focusing on the optimal procurement and usage of capital for the operations of the entire group. Typically, a Hong Kong Corporate Treasury Centre / CTC performs the functions of intra-group financing, optimising multi-currency cash management and liquidity management, cash pooling, central or regional processing of payments to vendors or suppliers for the corporate group, conducting transactions for financial or treasury-related risk management, and supporting the raising of capital by the group.
Hong Kong as an international financial centre is an important hub for Hong Kong Corporate Treasury Centre / CTC and intra-group financing activities. Hong Kong Corporate Treasury Centre / CTC benefit from a world-class financial infrastructure and mature and deep market. They can further utilise on a simple low-tax regime and an additional tax incentive for a qualifying Hong Kong Corporate Treasury Centre / CTC.
The Hong Kong Inland Revenue Department (IRD) has laid down detailed rules on qualifying conditions for every Hong Kong Corporate Treasury Centre / CTC in its Departmental Interpretation and Practice Notes (DIPN) No. 52 and specified the operations test applicable to every Hong Kong Corporate Treasury Centre / CTC:
The corporation carrying on an intra-group financing business is borrowing money from and lending money to its associated corporations in the ordinary course of its business. That is, the corporation borrows money from and lends money to its associated corporations regularly as a business with a view to earning an interest margin. Regard shall be had to all the relevant facts, including:
- frequency, repetitiveness and the amount of the borrowing from and lending to associated corporations of money;
- whether there is borrowing from and lending to associated corporations of money at commercial rates of interest;
- whether there is a degree of system and continuity of laying out and getting back of the loan of money by way of interest and repayment of principal;
- the regularity and frequency of the payment of interest and repayment of principal;
- whether a profit is earned out of the interest differential between the borrowing and lending; and
- whether the interest charged on the borrowing and lending is on an arm’s length basis.
If the qualifying conditions are met, every Hong Kong Corporate Treasury Centre / CTC can claim deduction of interest paid to related entities and a profits tax reduction of 50%. It is to be noted that the activity of a corporation wishing to claim Hong Kong Corporate Treasury Centre / CTC benefits must be dedicated to the activity and transactions of a Hong Kong Corporate Treasury Centre / CTC. Trading or service companies relying on and providing financing from and to related entities should consider to separate the business entities to take advantage of the tax incentives. The regulatory regime has a safe harbour rule in which at least 75% of the profits and assets have to be related to the qualifying activity, in order to be qualified as a Hong Kong Corporate Treasury Centre / CTC.
Singapore has a similar Corporate Treasury Centre / CTC framework. A comparison however shows, that placing the Corporate Treasury Centre / CTC into Hong Kong is more favourable than to place it into Singapore.
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Hong Kong outperforms Singapore as Hong Kong tax rates are generally lower than in Singapore, so that Hong Kong must be seen as the ideal location for Corporate Treasury Centre / CTC in Asia. Especially, for China (PRC) related business, a Hong Kong Corporate Treasury Centre / CTC far exceeds its Singaporean counterparts.
Mühler McKay can assist with structuring your international business and groups of companies to fully meet Hong Kong Corporate Treasury Centre / CTC regulations. Our advisors understand the complicated regulations and are able to advise you in an understandable way.
We offer the full range of Hong Kong Corporate Treasury Centre / CTC services:
- Hong Kong Corporate Treasury Centre / CTC review services
Mühler McKay can conduct a study of suitability and can advise if it makes commercial sense to restructure the business and make use of the regulatory in regard of a Hong Kong Corporate Treasury Centre / CTC.
- Incorporation / company formation services for a Hong Kong Corporate Treasury Centre / CTC
We can incorporate a new Hong Kong Limited Company, which is fully structured to carry out Hong Kong Corporate Treasury Centre / CTC activities.
- Group (Re-) Structuring
We can help you with structuring your group of companies to fully utilise the regulations about a Hong Kong Corporate Treasury Centre / CTC, so that the dedicated business can obtain a profits tax reduction of 50%.
- Hong Kong profits tax services – tax efficient structuring of your business operation
We can help you with structuring your entire business or operations in a tax efficient manner, especially in regard to Hong Kong profits tax. By this your overall tax liability is minimised may it be at entity level or at group level. Also, we advise you for tax efficient project structuring and advise on a tax efficient exit strategy order to maximise your profits.
- Supporting services
Mühler McKay also provides supporting services for business operations such as assistance with incorporation services / company formation services, advising on tax efficient legal structures for (groups of) companies (corporations, for instance a Hong Kong Limited Company, partnerships, branches, representative offices), bookkeeping and accounting (according to Hong Kong principles) as well as audit arrangement, general corporate compliance like provision of company secretary services (in Hong Kong) as well as providing a registered address or virtual office in Hong Kong, obtaining obligatory registrations, permits and licenses, as well as employment advice, including Hong Kong work visa application and general international tax services.
Mühler McKay offers comprehensive international legal, tax and corporate services, especially in regard to a Hong Kong Corporate Treasury Centre / CTC, which include arranging businesses and operations in a tax efficient manner in order to bring down your effective global tax rate, satisfy international tax compliance obligations and mitigate taxation risks.
Please contact us or visit us in Hong Kong for your first consultation for our Hong Kong Corporate Treasury Centre / CTC services.
Mühler McKay based in Hong Kong is a business advisory firm with worldwide reach and renders, among others, Hong Kong Corporate Treasury Centre / CTC services to a diversified international client base from various industries and sizes.