Hong Kong Consults on a Two-Tier Tax Regime for Corporate Treasury Centres: What Multinational Groups Should Review

A consultation, not a tax change already in force

On 27 July 2026, the Financial Services and the Treasury Bureau (FSTB) and the Inland Revenue Department (IRD) launched a six-week public consultation on proposed enhancements to Hong Kong’s tax concession regime for corporate treasury centres (CTCs). Submissions close on 4 September 2026.

The proposals have not been enacted, gazetted or brought into force. After considering responses, the Government targets to issue administrative clarifications on the existing regime within 2026 and introduce proposed amendments to the Inland Revenue Ordinance into the Legislative Council in the first half of 2027. Final terms may change.

The existing regime provides qualifying CTCs with a 50% profits-tax reduction on specified corporate treasury activities, reducing the applicable rate from 16.5% to 8.25%, subject to conditions.

Tier 1: refine and broaden the existing regime

Tier 1 would retain the existing regime while proposing to:

• allow interest-deduction claims to be deferred where interest is paid or payable to a non-Hong Kong associated corporation that is not yet subject to tax in the relevant period, subject to the proposed conditions and limits;
• expand interest deductions beyond intra-group financing to other corporate treasury activities, including cash forecasting, cash pooling and investment of associated corporations’ funds in financial instruments;
• specify an example substantial-activity threshold of at least two professional staff and at least HK$2 million annual operating expenditure on corporate treasury activities;
• clarify that the current intra-group financing benchmark is guidance rather than a strict qualification rule, while consulting on whether to average the monthly transaction threshold or remove that benchmark; and
• clarify the definition of corporate treasury transactions, including the treatment of in-house factoring connected with associated corporations’ business.

Tier 2: five-year pre-approval for additional benefits

Tier 2 would create an IRD pre-approval mechanism, generally valid for five years and renewable. A pre-approved qualifying CTC and specified associated corporations could receive additional benefits or flexibility, including:

• relief from the dedicated CTC condition and safe harbour rule, with alternative safeguards;
• a 50% exemption for interest income derived by a pre-approved Hong Kong associated corporation from the pre-approved CTC;
• relief from the subject-to-tax condition for qualifying interest expenses paid by the pre-approved CTC to pre-approved non-Hong Kong associated corporations; and
• removal of the anti-tax arbitrage rule for a pre-approved Hong Kong associated corporation, allowing full deduction for expenses paid or payable to the pre-approved CTC, while interest-expense deductions would be capped at 30% of EBITDA.

Proposed objective conditions include group annual turnover of at least HK$100 million; treasury activities for at least six associated corporations, including at least one outside Hong Kong; at least HK$4 million annual Hong Kong operating expenditure and two professional staff; separate bank accounts and financial statements for CTC and non-CTC business; a separate audit of the CTC business or separate certified financial statements for assessment; and a primary bank account with a Hong Kong authorised institution. For renewal, the operating-expenditure and staffing thresholds would increase by HK$1 million and one additional professional respectively in the year before renewal. Exceptional approval may be considered for high-growth or strategically contributing groups. The anticipated processing time for a complete application is six weeks.

What multinational groups should review now

During the consultation period, management, tax and finance teams can:

1. map intra-group loans, interest income and expenses, cash pooling, hedging, investment and in-house factoring;
2. identify the legal entities earning or paying interest and their tax position by jurisdiction and period;
3. test current eligibility for the 8.25% regime and compare the proposed Tier 1 and Tier 2 routes;
4. assess Hong Kong substance, including staff, operating expenditure, management or control, banking and decision-making;
5. estimate the impact of the proposed 50% interest-income exemption and 30%-of-EBITDA cap under different funding scenarios;
6. consider whether separate bank accounts, financial statements, audit or certification can be maintained; and
7. document practical concerns and submit comments by 4 September 2026 where appropriate.

Comments may be emailed to ctc-consult@fstb.gov.hk or posted to Division 5, Financial Services Branch, Financial Services and the Treasury Bureau, 24/F, Central Government Offices, 2 Tim Mei Avenue, Tamar, Hong Kong.

HKBSCL can assist with Hong Kong corporate and group-structure reviews, accounting records, interest and expense analysis, tax-compliance readiness and implementation planning. Any position should be confirmed against the final law, IRD guidance and advice appropriate to the group’s circumstances.

Sources

• HKSAR Government press release, 27 July 2026: https://www.info.gov.hk/gia/general/202607/27/P2026072700391.htm
• FSTB and IRD consultation paper: https://www.fstb.gov.hk/fsb/en/publication/consult/doc/ctcConsultEn.pdf

Disclaimer

This article provides general information only and does not constitute tax, legal, accounting, audit, investment or regulatory advice. The proposals are under consultation and may change. Obtain professional advice before making decisions or submissions.