Newly published Advance Ruling Case No.76

The decision pertains to section 14D of the Inland Revenue Ordinance ("IRO") and is applicable to a private company incorporated in Hong Kong, engaged in investment holdings and agency services.

The company, part of a group operating across various jurisdictions, seeks to establish itself as a corporate treasury centre in Hong Kong.

The company's planned corporate treasury activities include:

- Engaging in inter-company lending and borrowing activities.

- Providing services related to guarantees and issuing guarantee letters.

- Offering 'cash pooling' services.

- Facilitating payment processing services.

All these activities will be executed by the company's directors and employees in Hong Kong.

Key activities entail:

- Inter-company lending: Lending funds to associated companies, approving loan agreements, and monitoring interest income.

- External borrowing: Discussing, approving, and negotiating terms for loans from external financial institutions.

- Providing guarantees: Reviewing financial positions, approving guarantor requests, and signing guarantee agreements.

- Cash pooling: Monitoring idle cash forecasts, approving financial investments, and managing cash balances.

- Payment processing: Reviewing and approving payment requests.

The company meets the conditions outlined in section 14D(2) of the IRO, thereby qualifying as a corporate treasury centre.

Pursuant to section 14D(1) of the IRO, its assessable profits from intra-group lending and treasury transactions are subject to a tax rate of half of that specified in Schedule 8.

The ruling is effective from the year of assessment 2025/26 and subsequent years.

Assumptions include the company electing section 14D(1) of the IRO, adhering to the safe harbour rule under section 14E of the IRO, conducting transactions on an arm's length basis, and performing treasury activities for associated companies as defined by section 14C(1) of the IRO.

The ruling was issued on 26 March 2025.