稅務條例釋義及執行指引第 52 號

IRD explains its interpretation of the new law : Departmental Interpretation and Practice Note No. 52 -Corporate treasury centers (CTCs) .......

2 features of the new law are

(i) interest paid by a corporation which carries on an intra-group financing business in Hong Kong to its overseas associated corporations would be tax deductible under certain conditions ;

(ii) certain profits derived by a qualifying CTC would be taxed at a 50% concessionary tax rate.

 In the recently issued Departmental Interpretation and Practice Note No. 52 (DIPN 52), the Inland Revenue Department (IRD) explains, among other things, its interpretation of (i) what constitutes an “intra-group financing business” and (ii) the “subject to tax” requirement that the overseas associated lenders have to satisfy before the interest can be claimed for a tax deduction in Hong Kong by the payer.

Moreover DIPN 52 indicates that a CTC can obtain loans from non-associated financial institutions for on-lending to associated corporations in the course of its “intra-group financing business”, such activities by themselves not affecting the status of a qualifying CTC.

DIPN 52 also outlines an extra-statutory concession under which a holding company which also acts as a CTC would more readily qualify as a qualifying CTC. Taxpayers who wish to avail themselves of the new law however need to be aware that they are expected to adopt proper transfer pricing methodologies in their dealings with associated corporations.

 The application of the new law can be complicated.