Hong Kong is one of the most famous and leading Asian centers for both finance and commerce. Its enduring appeal is built on political stability, pro-business governance, rule of law and an independent legal system, free market principles, free flow of information, and English as the language of business.
Advantages of a Hong Kong company
Gateway to China
For more than 150 years, Hong Kong is a major gateway for investment and finance into China (the second largest economy after United States) and the rest of Asia. Its’ renowned free economy and international business environment continues to provide a safe, familiar and smarter route into Mainland China for overseas businesses.
The Closer Economic Partnership Agreement (CEPA) was signed in 2003 by Central People’s Government and the Government of Hong Kong Special Administrative Region. It provides preferential access to China market and reduced tariffs for qualified enterprises. This arrangement is exclusive to Hong Kong. Therefore, it further strengthens Hong Kong’s position as the ideal location from which to do business with China.
Hong Kong is one of the few countries in the world that tax is charged on a territorial basis. No taxes are levied on income earned outside Hong Kong. Consequently, this means that a company that carries on a business in Hong Kong but derives profits from another place, is not required to pay tax in Hong Kong on those profits. For example, if shipment of a trading company goes directly from a developing country e.g. China to a developed country e.g. Germany, and the negotiation, conclusion and execution of the contracts are outside Hong Kong as well, the income derived from the trading is not taxable in Hong Kong. If a business earns commission by securing buyers/suppliers for products, and if the arrangement of such business to be transacted between the principals is outside Hong Kong, say in USA, the income earned is also not taxable in Hong Kong. In addition, the location of bank accounts is insignificant. For instance, the above-mentioned HK companies with bank accounts in HK will not be subject of HK taxes. In fact, Hong Kong is a low taxation city. Its tax laws are simple and straight forward. Even if income of a business is sourced in Hong Kong, the profit derived is subject to 16.5% tax rate only. Therefore, Hong Kong, as an international financial centre, is considered an extremely cost-effective tax-planning vehicle for business.
With British legal system as background, which is well adopted, each company limited is a separated legal entity and is well protected by laws and regulations.
Hong Kong is one of the leading Asian centers for both finance and commerce.135 licensed banks with over 120 foreign banks having representative offices in Hong Kong. There are no exchange controls and tax-free markets exist in gold, stocks and futures. Few restrictions exist in Hong Kong on foreign investment or the transfer of income and capital, meaning that funds can be flown freely in and out of the territory. However, to open bank account in Hong Kong, the client must visit the bank there and pass through the demanding due diligence procedure.
Hong Kong company formation
We can incorporate a Hong Kong company with a name of your choice or from our shelf list. We can do this quickly and efficiently, while providing the best advice as to how to structure your new business.
Use of a Hong Kong company
– Trading company, e.g. handling shipment goods, invoicing etc
– Market entry, we help Hong Kong companies to enter market, expand research, promote planning and promote trading.
– Investment: Investment accounts for securities, bonds, options, precious metals etc. can be opened for Hong Kong companies. Capital gains and dividends are tax-free in Hong Kong.
– Re invoicing: a Hong Kong company can be used for re-invoicing purposes. Profit made on buying goods from one country (e.g. China) and reselling to another (e.g. Bulgaria) will be tax-free as goods are shipped directly between two countries, without going through Hong Kong.
– Income: Overseas commissions, royalties from patents, books, rights, consultation fees, rental fees, interest, dividends etc are tax free in Hong Kong and can be received in the name of a Hong Kong company.
– Asset Holding: Hong Kong companies may hold overseas or local real estate, vessels, companies, stock, etc. to protect owners from estate tax, probate, and divorce settlements. Asset can change hands easier and cheaper by transferring the shares of the holding company.
The companies incorporated in the Hong Kong are governed by the New Companies Ordinance Chapter 622 introduced as from 3.3.2014 and the main requirements are shown below:
1. At least 1 director who can be an individual of any nationality or in case the director is corporate entity, then a second director physical person is required
2. At least 1 shareholder who can be an individual of any nationality or a corporate entity
3. At least 1 company secretary who must be a HK company or a HK resident
4. Registered address in Hong Kong is required.
5. Director and shareholder can be the same person or the same corporate entity.
6. Company names must end with “Limited”. Shelf companies are available and it takes 1-2 days for document preparation. Or you may tailor-make the name of your choice which may take 6 days for incorporation.
7. The memorandum and articles are the legal documents of a company. They must be filed to Companies Registry at the time of incorporation.
8. The New Company Ordinance abolished the concept of nominal value of shares as from 03.03.2014. Under the new legislation, shares are issued at:
– No par value
– There is no minimum amount of numbers or paid up capital under the previous legislation Companies Ordinance Chapter 32 (there was a minimum authorized capital of HK$ 10.000 with 10.000 shares of HK$1,00 per share).
1. Duty to Business Registration Office – renew business registration
2. Duty to Company Registry – file Annual Return
3. Duty to Inland Revenue Department – file Tax Return and maintain proper accounting records for 7 years
4. File Employer’s Return for payroll information.
5. Prepare audited financial statements; under the new Companies Ordinance, it is possible for companies who meet certain conditions to file simplified financial statements.
6. Offshore tax exemption claim: if the income is generated outside the territory of Hong Kong, then claim for offshore tax exemption is lodged together with:
– Profits tax return
– Financial Statements
– Auditor’s report
– Tax computation