Intra-group financing arrangements now form a key part of the transfer pricing Master file under the OECD base erosion and profit shifting (BEPS) project. Given the enhanced focus on information transparency, intra-group financing arrangements need to be properly supported and documented. In addition, Hong Kong is promoting itself as a potential regional treasury hub and has introduced tax incentives for corporate treasury centres.
Under Hong Kong’s newly introduced corporate treasury centre incentives program, an interest deduction is available for certain intra-group financing transactions, and a concessionary profits tax rate of 8.25% applies on certain income of qualifying corporate treasury centres. Hong Kong-based companies with a treasury function (or considering establishing a treasury operation) may be eligible for the new incentives. Under the corporate treasury centre incentives, companies may be eligible if they:
Companies also need to consider transfer pricing, given the more stringent global tax environment and the increase in tax queries on transfer pricing-related matters in Hong Kong. Companies cannot neglect the importance of having proper transfer pricing to support intra-group financing arrangements. Typical treasury-related transactions or areas that companies need to consider when determining transfer pricing include:
Read a September 2016 report prepared by the KPMG member firm in Hong Kong: Intra-group financing activities in Hong Kong and Hong Kong treasury centres
The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.