Page 16 - Building a Treasury Centre for Sustainable Growth

Legal & Regulatory Environment in

Hong Kong SAR

Hong Kong SAR is the premier international financial centre of Asia, with a strong banking system, mature capital
markets, developed financial infrastructure, and quality professional services. With its tax incentives, supportive legal
and regulatory environment, and unique connection with the economy of Mainland China, Hong Kong SAR is a prime
location for multinational corporations to establish RTCs.

TAX INCENTIVES ENCOURAGE THE ESTABLISHMENT OF RTCS

[KNOWN AS CORPORATE TREASURY CENTRE (CTCS)] IN HONG
KONG SAR

In terms of financial incentives, the Hong Kong SAR Government has enacted various tax rules to attract
multinational corporations to set up their CTCs in the region. The amendments to the Inland Revenue Ordinance
(Cap. 112; IRO) introduced in 2016 provide that under specified conditions, qualifying CTCs can enjoy a 50 per cent
tax concession, at a reduced rate of 8.25 per cent, for qualifying profits derived from corporate treasury activities.
CTCs can also enjoy a deduction of interest expenses paid to non-Hong Kong SAR associated corporations in certain
intra-group financing transactions under the IRO.

To be a qualifying CTC, the corporation managing the CTC must be centrally managed and controlled in Hong Kong
SAR and the activities generating profits must be carried out or arranged by the corporation in Hong Kong SAR.
Corporate treasury activities include carrying out intra-group financing business, providing a corporate treasury
service, and entering into corporate treasury transactions. Additionally, the corporation must satisfy one of the
following criteria:

▪ Carried out only corporate treasury activities in Hong Kong SAR
▪ Satisfied the “safe harbour rules” under section 14E of the IRO

▪ Obtained the Commissioner of Inland Revenue’s determination that it is a qualifying CTC in the relevant year of
assessment

EASE OF DOING AND STARTING A BUSINESS

Hong Kong SAR is one of the easiest places to set up a company in Asia. With straightforward rules and regulations,
a streamlined process that allows the completion of both incorporation and business registration in the same
procedure, and low costs, setting up and registering a company with the Companies Registry (CR) in Hong Kong
SAR is fast and easy. Limited company is the preferred form of incorporation thanks to its more straightforward and
advantageous nature.

SETTING UP A BUSINESS TIME TO COMPLETE

Incorporating a new company in Hong Kong SAR Less than one day (online)

Sign up for Employee’s Compensation Insurance and Mandatory One day
Provident Fund (MPF) Schemes with a private company/bank

14 Building a Treasury Centre for Sustainable Growth