Hong Kong: Incentives for intra-group financing activities, corporate treasury centres

Hong Kong: Incentives for intra-group financing

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.

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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:

  • Conduct intra-group financing business
  • Provide corporate treasury services to non-Hong Kong associated corporations, or
  • Enter into corporate treasury transactions with non-Hong Kong associated corporations

Transfer pricing considerations

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:

  • Related-party loans or cash pooling arrangements
  • Foreign exchange and risk management activities
  • Guarantee fees
  • Support services provided by the treasury operation to the wider group
  • Capital structure / thin capitalisation requirements (e.g., in China)


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

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