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The Singapore Government has recently announced in their budget that, the concessionary tax rate for corporate operations that qualify as Corporate Treasury Centre (CTC) would be 8%, decreased from 10%, and such move set the major tax rate to 0.25% lower than the level proposed by the Hong Kong Government as part of their CTC tax incentive measures which are still undergoing legislative process.

Undoubtedly, most of the attention regarding CTC location had been fallen on Hong Kong during the recent years. The Hong Kong Government announced in February 2015 that they would cut their profits tax rates by half to 8.25% for eligible companies.

Given the abovementioned lower tax rate to be adopted by Singapore, one might ask if Hong Kong can still be able to continue to take the lead in CTC location. The answer is obvious as explained by the following table.

 

 

Hong Kong

Singapore

Tax system

Corporate tax

16.50%

17%

 

Corporate tax (applicable to CTC)

8.25%

8%

 

Withholding tax (WHT) - dividend

0%

0%

 

WHT - interest

0%

15%

 

WHT - interest (applicable to CTC)

0%

10%

 

Foreign tax credits

Yes

Yes

 

Expatriates tax incentives

None

None

 

Indirect tax (VAT/GST)

None

7%

We can see that, despite the slight difference arising from the abovementioned 0.25 of a percentage point, Hong Kong’s tax system is advantageous to Singapore mainly in terms of withholding tax on interest as well as no indirect taxes levied. Coupled with the benefits arising from pool of talents, proximity to Mainland China as well as liquidity of Renminbi (RMB), Hong Kong still takes the lead in CTC location among the nearby cities, particularly for China corporate investors.

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