China Tax/Business News Flash

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May 2015, Issue 22

Hong Kong as the ‘Going Global’ platform for Chinese MNCs

Proposals announced by the Hong Kong Special Administrative Region (HKSAR) Government in its 2015/16 Budget look to provide a more commercial friendly environment for operating a corporate treasury centre (CTC) or an intellectual property (IP) hub in HK. It seeks to attract multinational enterprises (MNEs), including Chinese MNEs, to manage their regional treasury activities or to hold their intellectual property in HK by removing ineffective HK tax treatments in these areas.

In particular, the Proposals aim to remove the mismatch in the HK tax treatments for interest expenses and interest income which are the major concerns for CTCs. For IP hub, the scope of tax deduction for capital expenditure incurred on the purchase of IP rights would be extended to cover more types of IP rights as appropriate. Coupled with expanding HK tax treaty network, this is aimed to enhance the tax effectiveness of using a HK company as the holder of IP.

These Proposals would be welcome by Chinese MNEs which are taking advantage of the State strategy of ‘Going Global’ adopted by the Chinese Government since 2000.

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