Response: Submission on the Public Consultation on Proposed Enhancements to the Tax Concession Regime for Corporate Treasury Centres in Hong Kong
Release Date: 2026-09-04
| Division 5, Financial Services Branch | By email |
| Financial Services and the Treasury Bureau | ctc-consult@fstb.gov.hk |
| 24/F, Central Government Offices | |
| Tim Mei Avenue, Tamar Central, Hong Kong |
4th September 2026
To: Financial Services and the Treasury Bureau
Response: Submission on the Public Consultation on Proposed Enhancements to the Tax Concession Regime for Corporate Treasury Centres in Hong Kong
The Hong Kong Securities & Futures Professionals Association (HKSFPA) supports the Government’s initiative to revamp and enhance the tax concession regime for Corporate Treasury Centres (CTCs). In light of evolving global financial dynamics and international tax standards (such as BEPS Pillar Two), a comprehensive optimization of Hong Kong’s CTC framework is crucial to reinforcing Hong Kong’s position as an international financial centre and a premier regional corporate treasury hub.
Below are our views and constructive suggestions regarding the eight consultation questions:
Question 1: Do you agree that the pain points set out in paragraph 1.6 above may not be conducive to CTC development? Do you have other observations about the existing tax concession regime for CTCs that would be worthy of the Government's attention when formulating the enhancement proposals?
- Our Position: Agree.
- Analysis & Observations:
The current "dedicated CTC condition," "safe harbour rule," and rigid "cash tax requirement" regarding interest expense deductions for non-Hong Kong associated corporations create heavy administrative burdens and compliance hurdles for multinational and Mainland enterprises. Additionally, subjecting the interest income derived by Hong Kong associated corporations from local CTCs to full profits tax significantly diminishes the incentive to centralize treasury operations in Hong Kong compared to offshore CTCs or bank deposits.
- Recommendations:
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- Synergy with Capital Markets: We suggest the Government encourage CTCs to connect their cash management with Hong Kong’s capital markets, bond markets, and asset management vehicles, such as deploying treasury funds into HKD/RMB money market funds and high-grade fixed-income instruments, backed by supportive policy measures.
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- Cross-Border Liquidity Pools: We urge the HKMA and the IRD to further collaborate with Mainland authorities to deepen cross-border RMB and multi-currency cash pooling mechanisms (especially within the Greater Bay Area) to reduce operational friction in cross-border capital flows.
Question 2: Do you agree with the proposed introduction of a tiered regime for CTC tax concessions, comprising refinements to the existing regime (Tier 1) and a pre-approval mechanism for enhanced benefits (Tier 2)? If not, please provide other suggestions with details.
- Our Position: Agree
- Analysis & Observations:
Introducing a tiered system is a highly forward-looking and pragmatic approach. Tier 1 caters effectively to mid-sized or newly established CTCs, while Tier 2 provides substantial tax certainty and competitive advantages to large-scale, headquarters-level CTCs with significant economic substance in Hong Kong.
- Recommendations:
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- Streamlined Digital Application: We recommend establishing a dedicated task force (comprising IRD, HKMA, and InvestHK) to offer a "One-Stop Shop" portal for Tier 2 pre-approval applications, thereby ensuring transparency and expediting review timelines.
Question 3: Do you agree with the proposed refinements to the existing regime under Tier 1 as set out in paragraph 2.2? If not, please provide other suggestions with details.
- Our Position: Agree.
- Analysis & Observations:
Allowing the deferral of interest expense deductions to address tax timing mismatches, as well as expanding deductible corporate treasury activities beyond intra-group financing to encompass cash flow forecasting, pooling, and financial instrument investments, directly addresses modern treasury management needs.
- Recommendations:
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- Clear Deferral Window: We suggest specifying a reasonable maximum rollover timeframe (e.g., 5 to 8 years) for deferred tax deductions to enhance long-term corporate financial planning.
Question 4: As regards the proposed clarifications of "monthly threshold of borrowing or lending transactions" mentioned in paragraph 2.2(c)(ii) under Tier 1, would you consider Option (1) or (2) better?
- Our Position: Prefer Option (2), or Option (1) accompanied by Sectoral Safe Harbours.
- Analysis & Observations:
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- First Choice — Option (2) (Removing the benchmark from DIPN 52 and assessing based on facts and circumstances): Transaction frequency varies dramatically across industries. Capital-intensive sectors (e.g., infrastructure, mining, aircraft leasing) often engage in low-frequency, high-value transactions, making a rigid monthly transaction count impractical.
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- Alternative Choice — Option (1) (Revising to "at least, on average, four transactions each month"): If Option (1) is adopted for administrative clarity, it should include an "industry exemption clause" or a "value-based override" (where large-value transactions override the count requirement).
Question 5: Do you agree with the additional tax benefits or flexibilities to be provided to pre-approved QCTCs and their associated corporations as set out in paragraph 2.5 above? If not, please provide other suggestions with details.
- Our Position: Endorse and Support.
- Analysis & Observations:
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- Waiving the "dedicated CTC condition" and "safe harbour rule" removes the legal and administrative costs of setting up separate corporate entities solely for treasury purposes.
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- Providing a 50% tax exemption on interest income derived by Hong Kong associated corporations from the pre-approved CTC significantly strengthens the incentive to retain funds in Hong Kong.
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- Removing the "subject to tax condition" and easing anti-tax arbitrage rules (capping interest deductions at 30% of EBITDA) aligns smoothly with international standards while offering essential flexibility.
Question 6: Do you agree with the proposed objective conditions for pre-approval under Tier 2? If not, please provide other suggestions with details.
- Our Position: Agree in Principle, with Suggested Practical Flexibilities.
- Analysis & Observations:
The proposed criteria, HK$100 million annual group turnover, servicing at least 6 associated corporations (with at least 1 overseas), HK$4 million annual local operating expenditure, and 2 professional staff, are reasonable and ensure benefits are directed at genuine economic contributors.
- Recommendations:
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- Broad Professional Definition: The definition of "professional staff" should explicitly include licensed financial/securities professionals, certified public accountants, legal practitioners, and charter holders such as CFA or CTP (Certified Treasury Professional).
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- Primary Bank Account Transition Period: While requiring the primary bank account to be with an Authorized Institution in Hong Kong is logical, we suggest granting a 6 to 12 month grace period for newly established CTCs to complete account opening and fund migration.
Question 7: Do you agree with providing a flexibility to grant a pre-approval on an exceptional basis set out in paragraph 2.7? Do you agree with the proposed factors of consideration? If not, please provide other suggestions with details.
- Our Position: Agree.
- Analysis & Observations:
Enterprises establishing regional headquarters or CTCs require a setup phase and may not satisfy all objective metrics on Day 1. Providing discretionary flexibility based on growth potential and economic contribution demonstrates Hong Kong's proactive approach to attracting top-tier enterprises.
- Recommendations:
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- Grace Period Commitment: We suggest granting a formal 2-year "transition period" for such applicants, allowing them to enjoy pre-approval benefits upfront provided they present a credible business plan to meet the standard criteria of paragraph 2.6 within 2 years.
Question 8: Do you agree with the proposed pre-approval period of five years, and the proposed renewal thresholds? If not, please provide other suggestions with details.
- Our Position: Support the 5-Year Approval Period; Recommend Fine-Tuning Renewal Thresholds.
- Analysis & Observations:
A 5-year validity period offers policy stability and certainty, enabling corporations to execute medium-to-long-term strategic plans.
- Recommendation on Renewal:
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- The consultation document proposes increasing the operating expenditure threshold by HK 1 million (to HK 5 million) and adding 1 professional staff (to 3 staff) upon renewal.
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- Suggestion: To account for macroeconomic fluctuations, we recommend incorporating an "economic adjustment mechanism." In times of broader economic slowdown, the IRD should retain the flexibility to maintain the baseline threshold (HK$4 million / 2 staff) to avoid penalizing CTCs affected by temporary market downturns.
Conclusion:
The Hong Kong Securities & Futures Professionals Association believes the proposed revamp effectively targets industry pain points. We hope the legislative amendments will be smoothly introduced and enacted to further enhance Hong Kong’s overall financial market competitiveness and capital aggregation capability.
We remain happy to discuss any details further and hope that the final plan will take due account of market feedback to gain broad industry acceptance. Should you have any questions regarding this reply, please do not hesitate to contact myself (tel: / email: ).
Your Sincerely,
Mofiz Chan
Chairman
Hong Kong Securities & Futures Professionals Association
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