International Tax Update: UK, Malaysia, HK, NZ-India
What changed this week
| Development | Who it affects |
|---|---|
| United Kingdom: Autumn Budget 2026 Raises the Bank Surcharge and Trims Capital Allowances | US groups with UK banking, finance, or industrial operations; founders and investors in UK companies; retail, hospitality, and leisure operators with UK locations; and anyone with UK leasing structures. |
| Malaysia: Budget 2027 Cuts SME Rates and Sweetens the Global Services Hub Incentive | US-headquartered groups considering a regional services, finance, procurement, or supply-chain hub in Southeast Asia, and US owners of Malaysian subsidiaries that qualify as MSMEs. |
| Hong Kong: Bill Expands Tax Deductions for IP Purchases and Licenses | US multinationals and private groups with Hong Kong IP holding or licensing entities, and groups considering Hong Kong as the home for regional IP. |
| New Zealand-India FTA Enters Into Force on October 20, 2026 | US-headquartered groups with a New Zealand or Indian subsidiary that trades between the two countries, and US exporters routing goods or services through either market. |
United Kingdom: Autumn Budget 2026 Raises the Bank Surcharge and Trims Capital Allowances
The UK Autumn Budget was delivered on October 28, 2026. On the business side, the Bank Corporation Tax Surcharge rises from 3 percent to 6 percent on January 1, 2027 and reverts to 3 percent on April 1, 2028, with the existing 100 million pound group allowance unchanged. The main-rate writing-down allowance for plant and machinery falls to 12 percent from April 2027. The Budget also announced a new capital gains tax relief for founders and investors in growing businesses, continued business rates relief for retail, hospitality, and leisure, and an immediate expansion of the finance lease definition in the anti-avoidance rules for lease-and-leaseback arrangements effective October 28, 2026.
Who it affects: US groups with UK banking, finance, or industrial operations; founders and investors in UK companies; retail, hospitality, and leisure operators with UK locations; and anyone with UK leasing structures.
What to do
Model the bank surcharge increase into UK group effective-rate projections for 2027 and 2028. Review 2027 and 2028 capital expenditure plans against the lower 12 percent writing-down rate and whether full expensing remains the better path for your mix of assets. If you lease and lease-back UK equipment or property, test your contracts against the expanded finance lease definition that took effect October 28, 2026.
Primary source: HM Treasury — Autumn Budget 2026 Policy Costings · HMRC — Increase in the Banking Surcharge Rate for a Temporary Period
Malaysia: Budget 2027 Cuts SME Rates and Sweetens the Global Services Hub Incentive
Malaysia’s Budget 2027 was tabled on October 9, 2026. From year of assessment 2027, the corporate income tax rate for qualifying micro, small, and medium enterprises falls to 14 percent on the first RM150,000 of chargeable income (from 15 percent) and to 16 percent on chargeable income between RM150,001 and RM600,000 (from 17 percent). The enhanced Global Services Hub incentive provides a 5 percent corporate income tax rate on qualifying income for eligible new companies, with the incentive period extendable in five-year increments up to 30 years. Applications filed with MIDA from January 1, 2027 are subject to the new terms.
Who it affects: US-headquartered groups considering a regional services, finance, procurement, or supply-chain hub in Southeast Asia, and US owners of Malaysian subsidiaries that qualify as MSMEs.
What to do
If you are deciding where to place a Southeast Asian regional hub, add the enhanced Global Services Hub terms to your short list and run a side-by-side comparison with Singapore and Thailand regimes. US MSMEs operating in Malaysia should confirm with Malaysian counsel that their legal structure captures the 2027 rate cut. For groups in scope of the OECD Pillar Two global minimum tax, model whether top-up tax would claw back part of the Malaysian benefit before relying on it.
Primary source: Malaysia Ministry of Finance — Budget 2027 Speech · Malaysia Ministry of Finance — Budget 2027 Tax Measures
Hong Kong: Bill Expands Tax Deductions for IP Purchases and Licenses
The Hong Kong government gazetted the Inland Revenue (Amendment) (Tax Deductions for Intellectual Property Expenditure) Bill 2026 on October 16, 2026. The bill creates a new deduction for capital expenditure on licenses to use eligible IP (upfront license fees), proportionate deductions where IP income from an overseas licensee is taxable in Hong Kong under the foreign-sourced income exemption regime, and a main-purpose test with a calculation method for IP purchased from associates (including Hong Kong associates). The proposed changes apply to IP, or licenses to use IP, acquired under contracts entered into on or after April 1, 2026.
Who it affects: US multinationals and private groups with Hong Kong IP holding or licensing entities, and groups considering Hong Kong as the home for regional IP.
What to do
If you have a Hong Kong IP holding company or are planning IP acquisitions through Hong Kong, revisit your deduction model: upfront license fees that were historically non-deductible may now be deductible, and intercompany IP transactions need to pass the new main-purpose test. Document commercial rationale now, well ahead of enactment, so the file supports the deduction when claimed.
Primary source: Hong Kong Inland Revenue Department — Press Release on IP Tax Deduction Bill (Oct 16, 2026)
New Zealand-India FTA Enters Into Force on October 20, 2026
The New Zealand-India Free Trade Agreement, signed in New Delhi on April 27, 2026, entered into force on October 20, 2026. The agreement lowers tariffs on most goods and sets out services and mobility commitments. The Ministry of Foreign Affairs and Trade publishes the full agreement text, tariff schedules, and services commitments on its FTA page.
Who it affects: US-headquartered groups with a New Zealand or Indian subsidiary that trades between the two countries, and US exporters routing goods or services through either market.
What to do
Pull your 2026 bills of lading and services invoices for NZ-India flows and check which goods lines move to lower duty rates under the FTA. Confirm rules-of-origin and documentation requirements with your freight forwarder before claiming preferential duty on the first few shipments. Services-side teams should check the specific services commitments against their delivery model (branch, subsidiary, remote work) before changing structures.
Primary source: New Zealand MFAT — New Zealand-India Free Trade Agreement Overview
What this means for your business
- UK groups: refresh effective-rate forecasts for 2027 and 2028 with the higher 6 percent bank surcharge and the lower 12 percent main-rate writing-down allowance.
- Malaysia: SMEs get a one-point corporate rate cut from YA 2027, and a 5 percent Global Services Hub rate is on the table for new regional hubs.
- Hong Kong: a wider set of IP spending, including upfront license fees and arms-length related-party IP purchases, is poised to become deductible — but only with a clean main-purpose file.
- NZ-India FTA is live. Review your tariff codes and services commitments if you move goods or services between New Zealand and India.
This week’s international tax takeaway
Four cross-border moves to flag: the UK’s Autumn Budget raises the bank surcharge and trims capital allowances; Malaysia cuts SME corporate tax and offers a 5 percent Global Services Hub rate; Hong Kong broadens IP deductions through a new bill; and the New Zealand-India FTA entered into force on October 20, 2026, cutting tariffs between the two countries.
Frequently asked questions
Q. Our group has UK banking and lending subsidiaries. When does the higher bank surcharge actually bite?
The UK bank corporation tax surcharge increases from 3 percent to 6 percent on January 1, 2027, and reverts to 3 percent on April 1, 2028. The existing 100 million pound group allowance stays in place, so the increase only hits group banking profits above that threshold. HM Treasury has stated that the temporary period will not be extended, so forecasts should assume it reverts in 2028.
Q. Can a US-owned Malaysian subsidiary claim the new 5 percent Global Services Hub rate?
Possibly. The enhanced Global Services Hub incentive is open to eligible new companies that meet substance, headcount, and qualifying-activity conditions set by the Malaysian Investment Development Authority (MIDA), with applications filed from January 1, 2027. Existing Principal Hub and GSH companies have separate terms for income above a baseline. Confirm eligibility with Malaysian counsel and model whether Pillar Two top-up tax would offset the benefit for your group.
Q. Our Hong Kong IP company has been paying upfront license fees. Were those deductible before?
Historically Hong Kong’s deduction rules focused on capital expenditure to acquire IP outright, not on upfront fees for a license to use IP. The new bill creates a specific deduction for capital expenditure on licenses, which captures those upfront fees for eligible IP acquired under contracts entered into on or after April 1, 2026. The deduction will depend on the final enacted text, so watch for passage of the bill before relying on it.
