The Inland Revenue Department (IRD) issued a practice note providing guidance on recent amendments made to the Inland Revenue Ordinance with respect to “qualifying corporate treasury centres” (QCTC).
Under the QCTC regime, certain interest income and other gains are deemed to be Hong Kong sourced, and deductions are allowed for interest incurred on certain intra-group lending transactions. Eligible entities can qualify for a concessionary rate of profits tax of 8.25%.
The IRD guidance—Practice Note No. 52 (9 September 2016)—clarifies certain areas relating to the QCTC regime and the interest deduction provisions. For instance, the guidance addresses the treatment of deductions for money borrowed from related entities and expands the deeming provisions with respect to interest and related profits or gains beyond the new corporate treasury centre regime.
The expanded interest deductibility rules are complex and require careful monitoring. Despite this complexity, eligible companies may find opportunities to benefit from the QCTC initiative.
Read a September 2016 report [PDF 168 KB] prepared by the KPMG member firm in Hong Kong: Corporate Treasury Centres in Hong Kong, Inland Revenue Department issues guidance
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