Hong Kong. Treasury Management Profile Together we thrive

Transcription

1 Hong Kong Treasury Management Profile 2018 Together we thrive

2 2 3 Contents Introduction and Purpose Introduction and Purpose 3 Legal and Regulatory 6 Taxation 8 Banking 13 Payment Instruments 14 Hong Kong This is one of a series of Treasury Management Profiles designed for finance and treasury professionals worldwide. By providing a snapshot of banking, payments and cash management in selected locations, these profiles can help treasury managers to make informed decisions, manage risks effectively and take advantage of new opportunities. However, this information is not intended to be comprehensive and does not constitute financial, legal, tax or other professional advice. Accordingly you should not act upon the information contained in this document without obtaining your own independent professional advice. The materials contained in this document were assembled in June 2017 (unless otherwise dated) and were based on the law enforceable and information available at that time. Payment Systems 16 Cash Management 19 Electronic Banking 20 Trade Finance 22 Useful Websites 24 Facts and Figures Area: 1,105km 2 Population: 7.4m Languages: Currency: Country telephone code: 852 Weekend: National holidays: Source: Chinese (Cantonese), English Hong Kong dollar (HKD) Saturday and Sunday Jan, 1619 Feb, 30, 31 Mar, 2, 5 Apr, 1, 22 * May, 18 Jun *, 2 Jul, 25 Sep *, 1, 17 * Oct, 25, 26 Dec Stock exchange: Leading share index: Sectoral distribution of GDP (% of GDP): Source: publications/resources/the-worldfactbook/index.html. Hong Kong Stock Exchange (HKEx) Hang Seng (HIS) Agriculture 0.1%, Industry 7.2%, Services 92.8% (2016 estimate) * The date shown may vary by plus or minus one day. These dates are derived by converting from a non Gregorian calendar (e.g., Muslim or Hindu) to the Gregorian calendar. Some of these dates cannot be determined in advance with absolute accuracy, even by the governing authorities. In the case of Muslim dates in particular, the feast days are determined by the sighting of a new/full moon. Country credit rating Fitch Ratings rates Hong Kong for issuer default as: Term Issuer Default Rating Short F1 + Long AA + Long-term rating outlook Stable Source: October 2017.

3 4 5 Exchange rate & Interest rate (%) Economy Consumer inflation & GDP volume growth (%) Hong Kong Hong Kong Exchange rate* (HKD/USD)** Interest rate (MMR) (%) Unemployment (%) Consumer inflation*** (%) GDP volume growth*** (%) GDP (HKD bn) 1,776 1,934 ** 2017 Q1 Q2 Q NA NA NA NA NA NA 2,037 2,138 2,258 2,397 2, GDP (USD bn) GDP per capita (USD) 32,426 34,994 36,991 BoP (goods/services/income) as % GDP * Official rate. ** Period average. *** Year on year ,500 40,277 42,416 43, Sources: IMF, International Financial Statistics, November 2017 and 2017 Yearbook Exchange rate (HKD/USD) Consumer inflation % Interest rate (local currency MMR) % GDP volume growth % Sources: IMF, International Financial Statistics, November 2017 and 2017 Yearbook

4 6 7 Legal and Regulatory Hong Kong conducts the mandatory SECLI for balance of payments purposes. All transactions between residents and non residents must be reported on a quarterly basis. Resident/non-resident status A corporation (or other entity) is resident if it is incorporated in Hong Kong or managed and controlled in Hong Kong. Bank accounts Resident Foreign exchange accounts and domestic currency (HKD) accounts can be held by residents both within Hong Kong and abroad. Resident domestic currency accounts are freely convertible into foreign currency. Residents are permitted to hold Chinese renminbi (RMB) accounts. Non-resident Non-resident bank accounts are permitted in both foreign and domestic currency. Non-resident domestic currency accounts are convertible into foreign currency. Non-residents are permitted to hold Chinese renminbi (RMB) accounts. Interest may be offered on current, demand and time deposit accounts. Overdraft facilities are also available to residents and non-residents. Reporting Hong Kong conducts the mandatory Survey of External Claims, Liabilities and Income (SECLI), under the Census and Statistics Ordinance (Chapter 316 Q), for balance of payments purposes (transactions with mainland China are included in Hong Kong s balance of payments statistics). All transactions between residents and non residents must be reported on a quarterly basis. The Census and Statistics Department samples companies on an individual basis; no automatic reporting is required. Exchange controls The Hong Kong dollar (HKD) is Hong Kong s official currency; the exchange rate is linked to the USD. The fixed exchange rate ratio is HKD 7.80 per USD 1, with a flexible convertibility zone between HKD 7.75 and HKD 7.85 per USD. Hong Kong does not apply exchange controls. Anti-money laundering/counter-terrorist financing 1 Hong Kong has implemented anti-money laundering and counterterrorist financing legislation. Notable legislation includes: Drug Trafficking (Recovery of Proceeds) Ordinance 1997, as amended 2005; Organised and Serious Crime Ordinance 2000, as amended 2012; United Nations (Anti-Terrorism Measures) Ordinance 2002, as amended 2012; and Anti-Money Laundering and Counter-Terrorist Financing (Financial Institutions) Ordinance, Cap , as amended A Financial Action Task Force (FATF) member, Hong Kong observes most of the FATF-49 standards. Hong Kong is also a member of the Asia/Pacific Group on Money Laundering (APG) and the Group of International Finance Centre Supervisors (GIFCS). The Joint Financial Intelligence Unit (JFIU), the country s financial intelligence unit, is a member of the Egmont Group. Financial institutions must apply customer due diligence measures when establishing a business relationship. Beneficial owners (those holding 10% or more voting interests in a corporate) must also be identified and ongoing monitoring of accounts and transactions is required. Individuals carrying out a single transaction exceeding HKD 120,000, or its equivalent in foreign currency, or a series of linked transactions aggregating to a value in excess of HKD 120,000, or its equivalent in foreign currency, must be identified. For wire transfers, the threshold is HKD 8,000, or its equivalent in foreign currency, whether carried out in a single transaction or series of linked transactions. Relationships with shell banks are prohibited. Financial institutions in the broadest sense must record and report suspicious transactions to the JFIU. All records must be maintained for six years following the termination of the business relationship. 1. Data as at May 2017.

5 8 9 Taxation 1 Resident/non-resident A corporation (or other entity) is resident if it is incorporated in Hong Kong or managed and controlled in Hong Kong. Tax authority Inland Revenue Department (IRD). Tax year/filing The tax year runs from 1 April to 31 March. Taxable profits are assessed based on the company s accounting year that ended in the tax year. The corporate profits tax return is typically issued on the first working day in April following the tax year. Companies whose financial years end between 1 December and 31 March normally are granted an extended period within which to file their tax returns. Companies are required to file a tax return within a prescribed period and a final tax assessment is then issued. Companies also must pay a provisional profits tax for the following tax year, at a rate of 16.5% of the current year s profits. This payment is credited against the final profits tax liability. Any excess payment will be refunded. The same applies for unincorporated businesses. Hong Kong does not allow groups of companies to file consolidated returns and there is no group loss relief for members of a group of companies. Corporate taxation Hong Kong adopts the territorial-source principle in charging profits tax. Both resident and non-resident companies carrying on business in Hong Kong pay tax on profits sourced in Hong Kong. The corporate profits tax rate is 16.5%. Unincorporated businesses are taxed at a standard rate of 15%. There is no surtax or alternative minimum tax. Losses attributable to a business that earns profits subject to profits tax may be carried forward indefinitely and set off against future profits of the company. Specific anti-avoidance rules counteract the purchase of a loss company for the sole or dominant purpose of using the company s losses. Losses cannot be carried back. A profits tax exemption for offshore funds is available for specified transactions if certain conditions are satisfied. Concessionary tax rates are available for qualified corporate treasury centres, offshore business of reinsurance companies and authorised captive insurance companies. Advance tax ruling availability Companies may apply to the Commissioner of the IRD for an advance tax ruling regarding transactions, operations or arrangements that are under serious consideration. The application can determine how the provisions of the Inland Revenue Ordinance apply to a specific scenario. Full details need to be provided before an advance ruling can be given. There is an advance pricing arrangement programme. Capital gains tax There is no capital gains tax in Hong Kong. However, gains on the disposal of assets may be subject to profits tax if the disposal constitutes a transaction in the nature of trade (a factual determination). Withholding tax (subject to tax treaties) There is no withholding tax on interest and dividends paid to resident or non resident companies. There are no requirements to withhold tax on royalties paid to Hong Kong companies. Royalties received by or accrued to non-residents are subject to profits tax at a deemed profit rate of 30%. Applying the corporate tax rate of 16.5%, the amount of tax withheld by the Hong Kong company is normally 4.95% of royalties paid (4.5% for a non-corporate entity). The Hong Kong company paying royalties to the non-resident company is 1. All tax information supplied by Deloitte Touche Tohmatsu ( and Deloitte Highlight, Withholding tax (subject to tax treaties) Payments to: Interest Dividends Royalties Technical fees Branch remittances Resident companies None None None None NA Non-resident companies None None 4.5%/4.95%/ 16.5% required to withhold a sufficient amount from the payment to meet the tax liability of the non resident. The deemed profit rate on royalties paid by a Hong Kong company to an associated non-resident company is 100% where the intellectual property was once owned by any person carrying on business in Hong Kong. In this case, the withholding rate is 16.5% of royalties paid (15% for a non-corporate entity). Tax treaties/tax information exchange agreements (TIEAs) Hong Kong has exchange of information relationships with 36 jurisdictions through 30 double tax treaties and six TIEAs. Thin capitalisation There are no thin capitalisation rules in Hong Kong. However, there are special rules relating to the deduction of interest expenses: Interest paid to non-financial institutions is deductible only when the interest is subject to Hong Kong profits tax in the hands of the recipients. To fulfil the secured-loan test, the borrowing must not be secured by a non taxable income-generating loan or deposit that is made by associates. The interest flow-back test requires that the interest paid on the borrowing will not flow back to an associate of the borrower. None None If any of these conditions applies, the interest paid is not deductible. An exception to the interest flow-back test is when the recipient of the interest is subject to Hong Kong profits tax. Interest paid on debentures or other financial instruments marketed in Hong Kong or in other major financial centres is also subject to the interest flow back test. If the associate that receives the interest is a registered securities dealer, it can be excluded from the interest flow-back test in order to allow genuine commercial external financing arrangements to proceed. The above interest deduction rules do not apply to financial institutions. Interest expenses incurred by financial institutions are generally deductible. Transfer pricing For transactions between a Hong Kong company and a closely connected non resident, where the transactions result in no profit, or less than a normal profit for the Hong Kong company, the non resident is deemed to carry on a business in Hong Kong through the Hong Kong company. Other than the specific transfer-pricing rule that deals with transactions between Hong Kong companies and non-residents, general anti-avoidance provisions are used by the Commissioner to challenge transactions not made at arm s length. The IRD issued the Departmental Interpretation and Practice Notes

6 10 11 Hong Kong adopts the territorial-source principle in charging profits tax. Both resident and non-resident companies carrying on business in Hong Kong pay tax on profits sourced in Hong Kong. No 46 in December 2009, which says that the OECD transfer pricing guidelines are generally applicable. Disclosure requirements Certain related party transactions must be disclosed in the profits tax return. Stamp duty Stamp duty is charged on documents connected with the lease, sale or transfer of immovable property in Hong Kong and the sale of shares. If they are transferred at less than market value, stamp duty may be imposed based on the market value at the date of transfer. Stamp duty on the transfer of Hong Kong shares is 0.2% of the value of the shares transferred, which is shared equally between the buyer and seller. An exemption may be available for an intragroup transaction if certain conditions are satisfied. The rate on the lease of immovable property ranges from: 0.25% of the total rent payable for a short-term lease (one year or less); 0.5% of the annual or average annual rent for a one to threeyear lease; and 1% of the annual or average annual rent for a lease exceeding three years. The maximum ad valorem stamp duty on the sale and conveyance of property is 8.5% of the value of property transferred. The ad valorem stamp duty rate for residential property is proposed to be increased to a flat rate of 15%, other than in specifically exempted and excepted cases, with effect from 5 November For any residential property acquired on or after 27 October 2012, a special stamp duty (SSD) ranging from 5% to 20% is levied, if the property is sold within 36 months of purchase. In addition to ad valorem stamp duty and SSD, a buyer s stamp duty (BSD) at a flat rate of 15% applies to residential property if it is acquired by any person (including a limited company) except a Hong Kong permanent resident on or after 27 October Cash pooling Hong Kong has no specific tax rules for cash pooling arrangements. Property taxes Property owners are subject to property tax on rental income derived from property in Hong Kong. Property tax is charged at the standard rate of 15% of the net assessable value of the property as determined by rent, service charges and fees paid to the owner, less an allowance of 20% for repairs and maintenance. A company that derives rental income from property is subject to profits tax and may apply for an exemption from property tax. There is no tax on the transfer of property. Sales taxes/vat (incl. financial services) There is no sales tax or VAT. Financial transactions/banking services tax There are no specific financial transactions/banking services taxes in Hong Kong. Payroll and social security taxes There is no payroll tax payable by employers. For employees whose monthly income is HKD 7,100 or more, the employer is required to deduct 5% (maximum deduction is HKD 1,500 per month) as the employee s contribution to the Mandatory Provident Fund (MPF) scheme and then pay an additional 5% as its own contribution.

7 12 13 Banking Overview There are 155 licensed banks (LBs), 21 restricted licensed banks (RLBs) and 17 deposit-taking companies (DTCs) operating in Hong Kong. These banks are collectively known as authorised institutions (AIs). In addition, there are 53 representative offices of foreign banks. Major banks Bank Total assets (USD billions) 30 June 2017 HSBC 982,875 Bank of China (Hong Kong) 338,100 Hang Seng Bank 179,469 Standard Chartered Bank 133,157 (Hong Kong) LBs may accept deposits (of any size) and operate current and savings accounts. LBs also offer renminbi (RMB) services to residents and non-residents. RLBs are engaged in merchant banking and capital market activities. They accept deposits of HKD 500,000 or above. DTCs are typically owned by banks and engage in specialist activities, such as consumer finance. They accept deposits of HKD 100,000 or above. Industrial and Commercial Bank of China (Asia) Source: June ,749 As an international financial centre, Hong Kong has a large foreign bank presence: 133 LBs operate in Hong Kong that are incorporated outside the territory. Foreign banks tend to offer the widest range of sophisticated banking products, although both domestic and foreign banks are authorised to provide a full range of services to corporates. Unlike multiple banking sector s across the globe, Hong Kong s traditional bricks and mortar banking structure remains very firmly part of the banking landscape. However, alongside the physical presence of the bank branch, banks are extending their digital presence through digital branches and capabilities. The government of Hong Kong believes in a maximum support, minimum intervention economic policy, encouraging deregulation in the banking sector. As a result, the number of AIs dropped from 275 in March 2000 to 198 at the end of 2016.

8 14 15 Payment Instruments Cash Cash remains an important payment medium in Hong Kong, particularly for low value retail transactions. Credit transfers All credit transfers in Hong Kong are automated. High-value and urgent HKD-denominated credit transfers are cleared and settled via HKD CHATS, the national RTGS system, on a same-day basis. Low-value and non-urgent credit transfers are cleared through the ECG system. Low-value credit transfers include payroll, supplier and third-party payments. Credit transfers denominated in USD, EUR or RMB are typically cleared and settled via USD CHATS, EUR CHATS and RMB CHATS respectively. Direct debits Direct debits, known locally as autodebits, are available in Hong Kong for low-value recurring payments such as utility bills. RMB autodebits are also available in Hong Kong and can be made to eligible merchants operating in mainland China s Shenzhen Special Economic Zone and Guangdong province. Autodebits are processed and settled via the ECG system. They are cleared on a Friday and settled on a Monday. Cheques The cheque is a popular cashless payment instrument for both retail and commercial payments. On average, 150 million cheques are issued in Hong Kong every year. Cheques can be denominated in HKD, USD and RMB. RMB-denominated cheques are processed by Hong Kong s RMB CHATS payment system, which facilitates RMB domestic cheque payments, as well as RMB cross-border cheque clearing with mainland China. HKD and USD-denominated cheques issued in Hong Kong can be presented at banks in the Shenzhen Special Economic Zone, Macau and the Guangdong Province in mainland China and delivered back to Hong Kong for clearing. HKD and USD-denominated cheques are cleared through the CLG system, as well as at settlement centres in Guangdong and Shenzhen. Funds are available to the beneficiary on a next day basis. In 2016, the two-way joint cheque-clearing facilities processed about 119,000 HKD and USD cheques, with a value equivalent to HKD 10 billion, and RMB cheques with a total value equivalent to around HKD 2 million. All cheques are truncated into electronic items before being processed by the CLG system. Cheques with a value greater than HKD 100,000 must be physically presented to the paying bank together with their truncated images. e-cheques retain the main features of paper cheques but are signed, issued, delivered and presented electronically. Settlement times are identical to those of paper cheques. e-cheques can be used to settle HKD, USD and RMB payments. They can be deposited electronically via a bank s internet banking platform or via the HKICL s e-cheque Drop Box Service. Nine banks at present offer the e-cheque issuance service via their internet/ mobile banking platforms. Since 20 July 2016 a cross-border, one-way, e-check clearing service of HKD, USD and RMB e-checks between Hong Kong- Guangdong and Hong Kong-Shenzhen has been in operation. Card payments Payment cards, particularly credit cards, are a popular method of payment in Hong Kong. There were million credit card transactions in 2016, with a value of HKD billion, an increase of 7% and 7.4% respectively on 2015 figures. Debit card volume and values increased 6.6% and 10.2% respectively over the same period, to million transactions, with a value of HKD billion. There were more than 19.1 million credit cards in circulation at the end of Visa, MasterCard and China UnionPay (CUP) are the principal credit card brands issued. There are approximately 40,000 EPS terminals in Hong Kong, Macau and Shenzhen. EPS terminals accept CUP cards from mainland China and process RMB payments. EPS terminals are operated by EPSCO, a consortium of 21 Hong Kong banks. There are three electronic non-pos debit instruction services available in Hong Kong: The PPS, operated by EPSCO, offers payment services on the phone and on the internet. Consumers are required to register prior to using the PPS. The JET Payment scheme is operated by JETCO (Joint Electronic Teller Service Ltd). JET is available at JETCO ATMs (by using JETCO member banks ATM cards) and on the internet. JETCO operates the interbank network of ATMs (approximately 3,000 ATMs) among 29 banks in Hong Kong, Macau and over 20 cities across mainland China 1. The ETC Payment service is primarily used for the payment of utility bills. Electronic wallets Electronic money schemes are available and popular in Hong Kong. Approximately 99% of the population aged between 16 and 65 use e-money cards. The Octopus Card, used for public transport and retail transactions, is the most common contactless e-money card. There are over 30 million cards currently in circulation, which are used in over ten million transactions every day 2. Mobile payment services are widely used in Hong Kong, including Apple Pay, MasterPass, TNG Wallet, Samsung Pay and O! epay from Octopus cards. There are currently 13 stored value facilities (SVF) licensees and three licensed banks operating in the SVF market. 1. JETCO. 2. Octopus Cards. e-cheques can be deposited electronically via a bank s internet banking platform or via the HKICL s e-cheque Drop Box Service.

9 16 17 Payment Systems 1 A two-way clearing service guarantees that HKD/USD cheques drawn on banks in Guangdong Province in China and Macau are delivered back to Hong Kong and cleared and settled on a next-day basis. Type HKD CHATS (Clearing House Automated Transfer System), Hong Kong s national real-time gross settlement (RTGS) system, is operated by Hong Kong Interbank Clearing Ltd (HKICL). HKD CHATS is linked to a PVP (payment versus payment) mechanism, which ensures that USD/HKD and EUR/HKD transactions are settled simultaneously. HKD Chats processed HKD 146 billion of transactions in 2016, a fall of 4.1% on 2015 figures. USD CHATS, an RTGS for USD payments, is operated by the HKICL and provides settlement for USD transactions. USD CHATS is linked to a PVP mechanism for USD/EUR, USD/CNY, USD/HKD, USD/MYR and USD/INR transactions. The USD settlement institution is HSBC. USD Chats processed USD 6,490.9 billion of transactions in 2016, an increase of 10.4% on 2015 figures. EUR CHATS, an RTGS for EUR payments, is operated by the HKICL and provides settlement for EUR transactions. EUR CHATS is linked to a PVP mechanism for EUR/USD and EUR/ HKD transactions. The EUR settlement institution is Standard Chartered Bank (HK). EUR Chats processed EUR 79,412 million of transactions in 2016, a fall of 11.9% on 2015 figures. RMB CHATS, an RTGS for RMB payments, is operated by the HKICL and provides settlement for RMB transactions. RMB CHATS is linked to a PVP mechanism for USD/RMB and EUR/ RMB transactions. The RMB settlement institution is Bank of China (HK). The CLG processed HKD 7,248.7 billion of HKD-denominated cheques in 2016, a decrease of 8.1% on 2015 figures, and USD 83,214 million of USD-denominated cheques, a year-onyear increase of 8.6%. ECG (Electronic Clearing), a low-value electronic payments system, is operated by the HKICL. The ECG processed HKD 30,315.8 billion of transactions in 2016, a fall of 38% on 2015 figures, and USD 8,806 million of transactions, a year-on-year increase of 22.3%. Participants HKD CHATS has 154 direct participants. Restricted licensed banks can access HKD CHATS, provided they can demonstrate a business need to do so. USD CHATS has 105 direct participants and 112 indirect participants from outside Hong Kong. Direct participants are required to open and maintain a settlement account with the USD settlement institution, HSBC. EUR CHATS has 38 direct and 17 indirect participants. Direct participants are required to open and maintain a settlement account with the EUR settlement institution, Standard Chartered Bank. RMB CHATS has 212 direct participants and 66 indirect participants outside Hong Kong. Direct participants are required to open and maintain a settlement account with the RMB settlement institution, Bank of China (HK). The CLG has 133 participants clearing HKD paper-based items, 105 participants clearing USD paper-based items and 82 participants clearing RMB paper based items. Transaction types processed HKD CHATS processes all HKD interbank transactions. There is no value threshold. USD CHATS settles all USD transactions. There is no value threshold. EUR CHATS settles all EUR transactions. There is no value threshold. RMB CHATS settles all RMB transactions. There is no value threshold. The CLG processes cheques and all other paper-based items such as demand drafts and remittance advices. The ECG processes low-value and high-volume electronic items such as autopay, EPSCO POS transactions and JETCO ATM items. Operating hours All payment systems in Hong Kong operate on a five-day clearing week. The CHATS payment systems for HKD, USD and EUR payments operate from 08:30 to 18:30 HKT, Monday to Friday. RMB CHATS operates from 08:30 to 05:00 T+1 HKT, Monday to Friday. Clearing cycle details HKD CHATS 08:3018:30 HKT: HKD CHATS settles transactions in real time and with immediate finality. 18:00 HKT: cut-off time for customer-related transactions. CLG (Paper Cheque Clearing), a Cheque Imaging and Truncation System (CITS), is operated by the HKICL. The ECG has 134 participants in its HKD operations, 110 in its USD operations and 91 in its RMB operations. USD CHATS 08:3018:30 HKT: USD CHATS settles transactions in real time and with immediate finality.

10 18 19 Cash Management 18:00 HKT: cut-off time for customer-related transactions. Settlement takes place across the participant banks accounts at HSBC. EUR CHATS 08:3018:30 HKT: EUR CHATS settles transactions in real time and with immediate finality. 18:00 HKT: cut-off time for customer-related transactions. Settlement takes place across the participant banks accounts at Standard Chartered bank. RMB CHATS 08:3005:00 T+1 HKT: RMB CHATS settles transactions in real time and with immediate finality. 05:00 T+1 HKT: cut-off time for customer-related transactions. Settlement takes place across the participant banks accounts at the Bank of China (HK). CLG Paper-based cheques are truncated into electronic items before being processed. e-cheques are initiated and processed electronically. Final settlement of HKD payments takes place via HKD CHATS. Funds are available to the beneficiary on a next-day basis. USD payments are settled across the participant banks correspondent accounts at HSBC via USD CHATS. Funds are available to the beneficiary on a next-day basis. RMB-denominated cheques are settled across the participant banks correspondent accounts at Bank of China (Hong Kong) via RMB CHATS. Funds are available to the beneficiary on a next-day basis. Items cleared on a Friday are settled on the following Monday. A two-way clearing service guarantees that HKD/USD cheques drawn on banks in the Guangdong Province (including the Shenzhen Special Economic Zone) in mainland China and in Macau are delivered back to Hong Kong, cleared through the HKICL (via the CLG) and settled on a next-day basis. Cheques drawn on banks in Hong Kong and presented to banks in the Guangdong Province (including the Shenzhen Special Economic Zone) and in Macau are also settled on a next-day basis via the Shenzhen Financial Electronic Settlement Centre and the Guangzhou Electronic Banking Settlement Centre. ECG 09:00 HKT: cut-off time for net settlement of autodebit transactions. 09:00 and 11:30 HKT: cut-off for net settlement of JETCO transactions. 10:00 HKT: cut-off time for net settlement of EPSCO and autocredit transactions. Interbank settlement for electronic clearing takes place on the following business day on a bulk clearing basis. Currency centre holidays Jan, 1619 Feb, 30, 31 Mar, 2, 5 Apr, 1, 22 * May, 18 Jun *, 2 Jul, 25 Sep *, 1, 17 * Oct, 25, 26 Dec Source: 1. Hong Kong Interbank Clearing Limited. Domestic Notional pooling Single and cross-currency notional pooling is permitted between resident and non-resident companies. One or more legal entities may be included. Cross-border notional pooling is permitted. Cash concentration Cash concentration is permitted between resident and nonresident companies. One or more legal entities may be included. Cross-border cash concentration is permitted. Collections Licensed banks in Hong Kong offer a range of collections options to corporate clients, including lockbox services and regular cash and cheque collection services via couriers. Cross-border Cross-border payments are routed via SWIFT and settled through accounts held with correspondent banks abroad. EUR CHATS has direct access to TARGET, the RTGS system for the EUR, through its settlement institution, Standard Chartered Bank. Lifting fees Fees are applied on funds transfers between resident and nonresident accounts. Short-term investments Interest can be earned on resident and non-resident demand deposit accounts such as current and savings accounts. Time deposits are available for a range of maturities in HKD or major foreign currencies. Licensed banks are permitted to issue deposits of any size or maturity. Restricted licensed banks are limited to offering time deposits of HKD 500,000 or more while deposit-taking companies are confined to offering deposits of HKD100,000 or more, with a maturity of at least three months. Certificates of deposit are issued by banks in Hong Kong, with fixed and floating interest rates. Commercial paper is available. Treasury bills are issued in the form of Exchange Fund Bills. Maturities range from one week to one year. The minimum investment amount is HKD 500,000. Repurchase agreements are available in Hong Kong, although they are typically only used by large companies. Money market funds are widely available in Hong Kong. Custody and securities settlement 1 Depositories Hong Kong Securities Clearing Company (HKSCC). Central Clearing And Settlement System (CCASS). Central Monetary Unit (CMU). The CCASS is operated by the HKSCC. The company provides securities clearing and settlement, electronic instructions for money settlement, depository, common nominee and share registration services. It also provides stock borrowing and lending services, electronic initial public offering services, and tendering and settlement services for exchange fund notes and Hong Kong Mortgage Corporation notes. The CMU provides, inter alia, custodial services for HKD debt instruments. For equities, the T+2 settlement cycle requires prepayment for cash to achieve T+2, otherwise the cash element occurs one day later. Exchange trades are settled in the CCASS either through a continuous net settlement (CNS) system or as isolated trades. For CNS trades, the HKSCC acts as central counterparty and is responsible for settlement to both parties to the trade. For isolated trades, the HKSCC only facilitates the settlement between buyer and seller, with each bearing counterparty risk. BIS Model Model 1. Model 3. Settlement cycle T+2 for equities; varies for bonds and cash. 1. Data as at February 2017.

11 20 Electronic Banking At present, 19 banks operating over nine million internet banking accounts provide the EBPP service through their internet banking platforms. Payments can be on a crossborder basis and can be denominated in HKD, USD and RMB. Electronic banking is offered by the majority of the country s banks. There is no bank-independent electronic banking standard; each bank offers its own proprietary system for corporate banking purposes. Internet and mobile banking is offered by Hong Kong s leading commercial banks for both corporate and retail purposes. Hong Kong s Electronic Bill Presentment and Payment (EBPP) platform allows individuals and companies to pay for a number of transactions through online and mobile banking accounts. Electronic bills are sent, and payments received, via a single consolidated platform with straight-through processing. Payments can be on a cross-border basis and can be denominated in HKD, USD and RMB. At present, 19 banks operating over nine million internet banking accounts provide the EBPP service through their internet banking platforms. Hong Kong had an internet penetration rate of 93.2% at the end of May 2017; mobile penetration was 235.5%1. 1. Household broadband penetration rate. Office of the Communications Authority. 21

12 22 23 Trade Finance An import declaration must be filed with the Commissioner of Customs and Excise within 14 days of goods being imported into Hong Kong. Key import partners China 49.0% Japan 6.9% South Korea 6.1% USA 5.2% Switzerland 3.7% India 3.3% Malaysia 3.3% Key export partners China 56.0% USA 8.3% India 3.0% Japan 3.0% UK 2.2% Source: The World Factbook. Washington, DC: Central Intelligence Agency, 2017 ( Imports Documents In order to import goods into Hong Kong, documentation, including a commercial invoice (including a full description of the imported goods), pro-forma invoice, bill of lading and packing list, may be required in specific circumstances. A company must file an import declaration with the Commissioner of Customs and Excise within 14 days of goods being imported into Hong Kong, unless the imported item is an exempted article. Licences Licences are required for the import of certain items on the grounds of national security, the environment, or public health and safety. Licences are needed for dutiable commodities such as tobacco and alcohol. The Director General of Trade and Industry issues import licences. Taxes/tariffs and other fees Hong Kong is a member of the 21-member Asia-Pacific Economic Cooperation (APEC) forum, which intends to lift all trade and investment barriers in the region. Hong Kong is a duty-free port. Excise duties is collected on tobacco, liquor, methyl alcohol and hydrocarbon oils. Prohibited imports A negative list (of products that may not be imported) is in operation. It is prohibited to import certain commodities into Hong Kong, in order to protect fauna and flora and for national security reasons. Exports Documents In order to export goods from Hong Kong, documentation, including a customs declaration, commercial invoice, pro-forma invoice, bill of lading, packing list and certificate of origin, may be required in specific circumstances. Licences Licences are required for exporting certain items on the grounds of national security, the environment, or for public health and safety. The Director General of Trade and Industry issues export licences. Taxes/tariffs and other fees No taxes are charged on exports from Hong Kong. Prohibited exports A negative list (of products that may not be exported) is in operation. Financing imports and exports Imports There are no financing requirements for imports. Exports There are no financing requirements for exports.

13 24 25 Useful Websites Trade and Industry Department Disclaimer Hong Kong Interbank Clearing Ltd Hong Kong Association of Bankers Hong Kong Institute of Bankers Hong Kong General Chamber of Commerce Hong Kong Exchanges and Clearing Ltd Treasury Markets Association HSBC website details HSBC Commercial Banking HSBC Global Banking and Markets This document has been produced by HSBC Bank plc and members of the HSBC Group ( HSBC ), together with their third-party contributor, WWCP Limited. We make no representations, warranties or guarantees (express or implied) that the information in this document is complete, accurate or up to date. We will not be liable for any liabilities arising under or in connection with the use of, or any reliance on, this document or the information contained within it. It is not intended as an offer or solicitation for business to anyone in any jurisdiction. The information contained in this document is of a general nature only. It is not meant to be comprehensive and does not constitute financial, legal, tax or other professional advice. You should not act upon the information contained in this document without obtaining your own independent professional advice. The information contained in this document has not been independently verified by HSBC. This document contains information relating to third parties. The information does not constitute any form of endorsement by these third parties of the products and/or services provided by HSBC or any form of cooperation between HSBC and the respective third parties. Under no circumstances will HSBC or the third-party contributor be liable for (i) the accuracy or sufficiency of this document or of any information, statement, assumption or projection contained in this document or any other written or oral information provided in connection with the same, or (ii) any loss or damage (whether direct, indirect, consequential or other) arising out of reliance upon this document and the information contained within it. HSBC and the third-party contributor do not undertake, and are under no obligation, to provide any additional information, to update this document, to correct any inaccuracies or to remedy any errors or omissions. No part of this document may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior written permission of HSBC and the third-party contributor. Any products or services to be provided by HSBC in connection with the information contained in this document shall be subject to the terms of separate legally binding documentation and nothing in this document constitutes an offer to provide any products or services.

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