New tax rules may help Hong Kong close gap with Singapore as destination for company headquarters
With many mainland Chinese firms starting to move overseas, Hong Kong has a chance to become the location of choice for their corporate treasury operations, analysts say
New tax rules coming into effect could give a boost to Hong Kong’s efforts to attract more multinational companies and Chinese enterprises to set up headquarters and treasury functions in the city, an area where it has been losing ground to Singapore for years.
Bankers warned however that it could be some time before Hong Kong sees the benefits.
Effective last Friday, qualified companies would receive a 50 per cent cut to profits tax, from 16.5 to 8.25 per cent and see all their interest expenses items become tax deductible this financial year, if they choose to set up a corporate treasury centre in Hong Kong.
The two advantages of the city are in renminbi liquidity and the proximity to Chinese corporates
The change eliminates an unfavourable tax regime on interest payments that had seen many big companies decamp to a more friendly Singapore, taking with them the foreign exchange, derivatives trading, risk management and funding operations as well as accounting, legal and financial and banking businesses they might bring.
Between 2005 and 2015, the number of headquarters of global companies in Singapore jumped from 3,600 to 12,600, according to Monetary Authority of Singapore and industry survey figures.
The new rules could help Hong Kong reverse such a trend, as is well timed as many mainland Chinese companies prepare to expand internationally.
“Hong Kong needs to forge its position,” said Howard Yang, country head of Hong Kong for Citi’s Treasury and Trade Solutions.