Advance Ruling Case No. 76

1. The provision of the Ordinance

The ruling applies in respect of section 14D of the Inland Revenue Ordinance (“IRO”).

2. Background

(a)

The Applicant is a member of a multi-national enterprise group (“the Group”) which has operations in various jurisdictions.

(b)

The Applicant is a private company incorporated in Hong Kong which engages in investment holding and provision of agency services and supporting services. The Applicant maintains an office in Hong Kong.

(c)

The Group would like to engage the Applicant as a corporate treasury centre for carrying out corporate treasury activities to serve the Group companies globally.

3. The arrangement

(a)

In addition to the existing business, the Company is contemplating to act as a corporate treasury centre in Hong Kong to be engaged in the following corporate treasury activities:

(i)

carrying on inter-company lending and borrowing activities;

(ii)

providing services in relation to the provision of guarantees and issuing guarantee letters to other associated companies;

(iii)

providing “cash pooling” services by moving cash to the Company to purchase financial assets to achieve a higher yield; and

(iv)

providing payment processing services to associated companies.

(b)

The Company will conduct all of its board meetings in Hong Kong for strategic, financial and operational policy decision making and exercise its central management and control in Hong Kong. Written resolutions of the Company will be passed by the Company’s directors in Hong Kong, depending on operational needs.

(c)

The Company’s directors will also visit Hong Kong frequently for meeting up with financial institution and other potential debt investors and exercise other day-to-day responsibilities of the Company.

(d)

The Company’s contemplated corporate treasury activities will be performed by its directors and employees in Hong Kong through carrying out the following functions of corporate treasury activities in Hong Kong:

(i)

Inter-company lending and borrowing activities

(1)

Lending money to the associated companies – discussing, reviewing and approving funding requests; approving and signing loan agreements; remitting funds to the associated companies; monitoring the receipt of interest income; and

(2)

Borrowing money from external financial institutions – discussing and approving external funding decisions; negotiating with financial institutions; approving borrowing terms and loan agreements; signing loan agreements;

(ii)

Providing services in relation to provision of guarantees

Reviewing the Company’s financial and liquidity position as to whether the Company meets the relevant requirements of the banks as a guarantor; approving the requests for the Company to act as a guarantor; communicating with financial institutions; approving and signing guarantee agreements;

(iii)

Providing “cash pooling” services by moving cash to the Company to purchase financial assets to achieve a higher yield

Reviewing the Group’s idle cash forecast to be put to the Company’s cash pool; discussing and approving a list of potential financial investments for the Company; deciding and approving a daily swap threshold for renewing the Company’s financial investments; approving investments; sending investment instructions to brokers; monitoring the balance of cash pool; arranging for settlement or investment requests; and

(iv)

Providing payment processing services to associated companies

Reviewing and approving payment requests; processing payments.

4. The ruling

The Applicant is a qualifying corporate treasury centre as it satisfies the conditions under section 14D(2) of the IRO. Pursuant to section 14D(1) of the IRO, the Applicant’s assessable profits derived from its intra-group lending transactions; corporate treasury services or corporate treasury transactions, subject to sections 14D(5) and 26AB, are chargeable to profits tax at one-half of the rate specified in Schedule 8.

5. The period for which the ruling applies

The ruling applies for the year of assessment 2025/26 and subsequent years of assessment.

6. The material assumption in respect of a future event or any other matter made by the Commissioner

(a)

The Company will elect in writing that section 14D(1) of the IRO applies to it.

(b)

The Company will satisfy the safe harbour rule under section 14E of the IRO.

(c)

All transactions among the Company and its associated companies in relation to the corporate treasury activities will be entered into on an arm’s length basis.

(d)

The associated companies for which the Company performs the corporate treasury activities are associated corporations within the meaning of section 14C(1) of the IRO.

7. Date of ruling issued

26 March 2025