Q:
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What is a qualifying corporate treasury centre (“QCTC’)?
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A:
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A corporation is a QCTC for a year of assessment if:
1.
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it has carried out in Hong Kong one or more corporate treasury activities, but it has not carried out in Hong Kong any income-generating activity other than a corporate treasury activity;
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2.
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it has carried out in Hong Kong one or more corporate treasury activities and income-generating activity other than a corporate treasury activity, but it has satisfied the safe harbour rule under section 14E of the Inland Revenue Ordinance (“IRO”); or
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3.
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it is a CTC which the Commissioner has determined under section 14F(1) of the IRO to be a QCTC even though it satisfies neither of the conditions in (a) and (b) above.
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Please note that a financial institution is not eligible to be a QCTC.
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Q:
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What is meant by “corporate treasury activity”?
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A:
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Corporate treasury activity is defined as:
1.
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carrying on an intra-group financing business;
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2.
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providing a corporate treasury service; or
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3.
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entering into a corporate treasury transaction.
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Q:
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What is the benchmark of carrying on an intra-group financing business?
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A:
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Generally, Commissioner of the Inland Revenue Department would accept that a corporation is carrying on an intra-group financing business if:
1
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the corporation has not less than four borrowing or lending transactions each month;
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2.
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each borrowing or lending transaction exceeds HK$250,000; and
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3.
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borrowing or lending transactions are with not less than four associated corporations in the relevant basis period.
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Q:
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Once a corporation satisfies the conditions of a QCTC, will all of its assessable profits be taxed under concessionary tax rate?
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A:
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Even though a corporation satisfies the conditions of a QCTC, profits derived from the following corporate treasury activities will be taxed under profits tax at full tax rate:
1.
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intra-group financing transaction under which money is lent to a Hong Kong associated corporation;
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2.
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corporate treasury service which is provided to a Hong Kong associated corporation;
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3.
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corporate treasury transaction that is related to the business of a Hong Kong associated corporations; and
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4.
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corporate treasury transaction that is not related to the business of an associated corporation.
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Q:
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Do QCTC still qualify for the two-tiered profits tax rates?
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A:
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No. A QCTC who has made the election under for the concessionary tax rate will not qualify for the two-tiered profits tax rates.
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