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Offshore: Hong Kong
Hong Kong is the leading Asian centre for both finance and commerce and ranks as the world's third largest financial centre after New York and London.
Hong Kong is not normally regarded as an offshore country as it is a famous for being a major financial centre. However, it is one of the few countries in the world that impose income tax on territorial basis. The corporate income tax rate is currently 17.5 per cent, one of the lowest in the region. There is no tax in Hong Kong on capital gains, dividends and interest earned.
With China pushing forward with the modernisation of its own economy, the PRC has expressed the wish that Hong Kong should assist in this endeavour. It has stated that its future development will be based on market led reforms with socialist characteristics and this has led to the opening up of its economy to foreign investments. It is widely recognised that Hong Kong is and will continue to be a significant gateway to China.
ABOUT HONG KONG
Hong Kong is on the south east coast of China and consists of a large number of islands and a part of the mainland totalling approximately 1,025 square kilometres. The principal areas are Hong Kong Island, Kowloon and the New Territories. The population of Hong Kong is currently 6 million made up principally of people of Chinese origin and is one of the most densely populated areas in the world.
The official languages are English and Chinese with English being used in the commercial and political context and Cantonese Chinese used widely in industry and domestic trade. Hong Kong Dollar which is officially pegged to the U.S. Dollar at a rate of US $1.00 equals approximately HK $7.80.
Political and Legal Structure
Hong Kong has been a British Crown Colony since 1842. The Governor appointed by the Queen presides over the Hong Kong Government which consists of two Houses, the Executive and Legislative Councils. As of the1st July 1997 under the Sino-British Agreement of December 1984, Hong Kong became a Special Administrative Region (HKSAR) of the People's Republic of China.
The legal system of Hong Kong is English Common Law supplemented by locally enacted Ordinances. Under the 'one country - two systems' philosophy, the SAR has executive, legislative and independent judicial power. The capitalist system, legal structure and lifestyle remain unchanged. Hong Kong remains a free port with a free flow of capital and a freely convertible Hong Kong dollar.
Infrastructure and Economy
Separating Hong Kong island and the Kowloon peninsular is Victoria Harbour which is recognised internationally as one of the world's perfect natural harbours. An additional two million square feet of land has been reclaimed in the New Territories to provide additional dockyard and warehousing facilities. It is estimated that 100,000 containers per month pass through the port and it serves more than 9,000 ocean going vessels.
Hong Kong is the leading south east Asian centre for both finance and commerce and ranks as the world's third largest financial centre after New York and London. There are more than 160 licensed banks with 128 foreign banks having representative offices in Hong Kong and a further 225 licensed deposit taking Finance Companies all of which play an active role in the financing of international trade and commerce.
ADVANTAGES OF HONG KONG COMPANY
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The incorporation requirements are simple. Each company only requires a minimum of one director and one shareholder, could be the same individual or corporate entity with no restriction of nationalities. A local Company Secretary and Registered Address are also required in accordance with Hong Kong Company Ordinance and could be provided by local professional company secretarial companies.
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Hong Kong tax regime is based on territorial basis. Its corporate tax rate is 17.5%, the second lowest in the region.
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Hong Kong's highly efficient and developed financial and legal infrastructures makes comprehensive and low costs financing and credit facilities available to Hong Kong companies.
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Mainland China domestic company can use HK company not only as a listing vehicle to capitalize its assets but also to use good reputations of Hong Kong banks to enhance its lines of credit Hong Kong company's advantages can be further realized by applying for Hong Kong government's small and medium-sized enterprise loans.
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Hong Kong has no exchange control. Major foreign currencies could be freely exchanged, remitted in or out.
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Hong Kong is a metropolitan city with good reputation in the world. As a window to the world for domestic companies and also a gateway to mainland China, Hong Kong is an ideal place for companies to polish their image, achieve brands recognition and acceptance, develop international and domestic markets and improve their competitive edge.
FORMATION AND STATUTORY REQUIREMENTS
Time to Incorporate
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The time taken to incorporate the Company is approximately two weeks from the submission of documentation.
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Ready-incorporated shelf companies are available on an immediate basis and can be delivered by courier within 48 hours.
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Please feel free to contact us or request for a list of ready-incorporated shelf Hong Kong Companies.
Restrictions on Trading
Cannot undertake banking or insurance activities. It cannot solicit funds from or sell its shares to the Public.
Language of Legislation and Corporate Documents
English, but Chinese Characters may be added if desired. The Chinese characters do not form part of the name, but are merely a translation.
Name Restrictions
A name that is similar to or identical to an existing company. A name that implies illegal activities. A name that implies Royal or U.K. or Hong Kong Government Patronage.
Names requiring Consent or a Licence
British, Building Society, Chamber of Commerce, Chartered, Co-operative, Imperial, Kaifong , Mass Transit, Municipal, Royal, Savings , Tourist Association , Trust , Trustee , Underground Railway , Insurance, Assurance , Re-Insurance , Fund Management , Asset Management , Investment Fund.
Authorised and Issued Share Capital
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The standard authorised share capital is HK $1,000. The minimum issued capital is one share of par value.
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Classes of Shares Permitted are Registered shares, Preference shares and Redeemable shares. The shares can be with or without voting rights. Bearer Shares is not permitted.
Shareholders, Directors, Company Secretary and Registered Office
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The minimum number of shareholders and directors is one, who may be natural persons or bodies corporate. They may be of any nationality, and need not be resident in Hong Kong.
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A Hong Kong company must appoint a company secretary, who may be a natural person or a body corporate, but the company secretary must be resident in Hong Kong.
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Registered Office is required and must be maintained in Hong Kong.
Licence Fees
The Business Registration Fee (BRF), currently HK$2,250.00, is due and payable within one month of the date of incorporation and then annually on the anniversary of the first payment.
Financial Report Requirements
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Every company must appoint a Hong Kong Registered auditor.
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Although there is no requirement to file financial report with the Registrar, there is a requirement to file the financial report with the tax authorities.
HONG KONG CORPORATE TAX REGIME
Territorial Basis of Taxation
The Hong Kong income tax regime is that of Territorial Basis. This means Hong Kong income tax is only charged on income derived from a trade, profession or business done in Hong Kong. Consequently, income sourced from outside Hong Kong is not subject to income tax in Hong Kong even when remitted to Hong Kong.
Hong Kong sourced profits is currently subject to a rate of taxation of 17.5 per cent. There is no tax in Hong Kong on capital gains, dividends and interest earned.
A factor that determines the locality of profits from trading in goods and commodities is generally the place where the contracts for purchase or sale are effected. "Effected" does not only mean that the contracts are legally executed. It also covers the negotiation, conclusion and execution of the terms of the contracts.
If a business earns commission by securing buyers for products or by securing suppliers of products required by customers, the activity which gives rise to the commission income is the arrangement of the business to be transacted between the principals. The source of the income is the place where the activities of the commission agent are performed. If such activities are performed through an office in Hong Kong, the income has a source in Hong Kong. Consequently, if a Hong Kong company's trading or business activities are based outside Hong Kong, say in USA , no income tax will be levied in Hong Kong . This makes Hong Kong an extremely cost- effective tax planning vehicle for trading.
Certain sums, like royalties, paid or payable to non-resident persons for use of or right to use certain intellectual property are subject to withholding tax. The payer who claims deduction for the use of the intellectual property against its assessable income is required to withhold a prescribed percentage from the payment while that recipient is not subject to Hong Kong profits tax. The prescribed percentage is 5.25% on the gross payment if the payer and the recipient is not related, but 17.5% if the payer and recipient are related. For a Belgian recipient of royalties, a treaty rate of 5% is applicable.
There is no sales tax or value-added tax in Hong Kong.
Double Taxation Agreements
Hong Kong has arrangement with a number of jurisdictions for double taxation relief of shipping or airline income. It has also a comprehensive double tax agreement with the Kingdom of Belgium to relieve taxation on income, for instance, dividends, interest and royalties. As Hong Kong taxes are on a territorial basis, this means that income derived from a local company from outside Hong Kong will not generally suffer double taxation in Hong Kong. Many countries which tax their residents on a world-wide basis also provide their companies operating in Hong Kong with unilateral tax credit relief for Hong Kong tax paid on income derived in Hong Kong. The Hong Kong tax authorities allow a deduction for foreign tax paid on a turnover basis in respect of income which is also subject to tax in Hong Kong. Therefore, businesses operating in Hong Kong do not generally have problems with double taxation of income.
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