Hong Kong is a former British colony which became a Special Administrative Region of the People's Republic of China with effect from 1 July 1997. Hong Kong continues to have high autonomy in the running of its affairs under a one country, two systems concept. Hong Kong remains a relative powerhouse in world trade and with a comparatively small population of 6.8 million, is one of the top twenty trading economies, the world's third largest financial centre and vies with Singapore as the largest container port by volume. Hong Kong remains the most significant gateway into Southern China.
LAW AND TAXATION Hong Kong's corporate law is strongly based on British common law. Local businesses are regulated and Hong Kong regards itself as a low tax centre rather than a tax haven. Taxes are levied on profits, salaries and property with rates varying between 15-17.5%. Only profits derived in Hong Kong are assessable for taxation and genuine offshore transactions are not subject to Hong Kong tax, although the Inland Revenue Department ("IRD") is extremely diligent in its determination of onshore and offshore profits. Due to Hong Kong's role as a major trading and entry point to the mainland and Asia generally, the bulk of companies formed in Hong Kong are for trading purposes.
LOCAL CORPORATE REQUIREMENTS
Each Hong Kong company must have a local secretary and a local registered office which must be a physical address and not just a Post Office box.
Effective from 13th February 2004, new companies can be incorporated with only one director and corporate director is permitted for companies that are not subsidiaries of public listed companies.
A minimum of one shareholder is required and a company secretary must be appointed. Details of the company's Director/s, Shareholder/s and Secretary must be filed at the Companies Registry and are on public record.
Each year the company must submit an annual return and penalties will be applied for late filings.
All companies must obtain a Business Registration Certificate from the IRD and on an annual basis must file a set of audited accounts with the IRD. There is ever increasing vigilance by the Companies Registry.
Company names may be expressed in both English and Chinese characters.
LOCAL INFRASTRUCTURE There are in excess of 1,000,000 companies incorporated in Hong Kong. The Companies Registry now has an on-line facility to check limited amounts of company information. Numerous banks, stockbrokers and finance houses as well as all the major international legal and accounting firms are present in Hong Kong. Hong Kong is also well served by local secretarial, corporate management and trust companies. Hong Kong has an efficient, modern and dynamic banking system designed to assist the international business community.
Why Hong Kong?
Hong Kong is the traditional gateway to China and arguably the logical choice as a regional base for Asia Pacific. Hong Kong has developed into an international financial centre and is well served by local banks and branches of international banks. The characteristics and benefits of Hong Kong are described fully in our guide to Hong Kong but Hong Kong can be summarised as reputable, business friendly and importantly a jurisdiction with a very attractive system of taxation including low rates of business tax (most international business can be legally transacted tax - free in Hong Kong), no value added tax, no capital gains tax and no witholding taxes. 1. Hong Kong economy system is opened and market oriented with a little government intervention. Investors can choose what businesses they do. In fact, from global statistics records, Hong Kong is No. 1 economy freedom.
2. The capital flows of money between Hong Kong and other countries are freedom, and without controls or restrictions. All currencies such as US$, GBP, Japanese yen, etc are remitted freely between Hong Kong and other countries.
3. Offshore business activities are 100% tax free. The Hong Kong tax law has confirmed that only local business is subject to profits tax, overseas business registered in Hong Kong is offshore business and so is not subject to Hong Kong profits tax. For example, if the international businessman engages in international trading in such as way that he buys goods from China and sells to UK or USA. If both buying activities and selling activities are not happened in Hong Kong, then the profits from that trading business are regarded as offshore profits, and are not subject to Hong Kong profits tax.
4. Low tax rate. Even the business is done in Hong Kong, the tax rate is only 16.5% of net profits. The tax rate is absolutely low, with no other tax systems such as VAT, business tax, capital gains tax, etc.
5. Formation requirement is very simple. An overseas person can be appointed as the shareholder and director of a Hong Kong company, he only finds local professional firms to provide appointment of secretary and provide registered office address.
6. No capital investment is required. The shareholder is only required to sign up the M & A to declare that he will contribute capital to the company, and he doesn’t require to pay money to the company.
7. Free use of company name. In other countries, some names are not freely used such as Holding, Group, International ...., etc. However, in Hong Kong, the name is freely used, provided that they are not registered in Hong Kong.
8. It is easy to open an offshore bank account with using Hong Kong company, the investor is required to provide his address proofs, passsport copy, Hong Kong company formation documents and a general description of his business. An international bankers can accept the above documents and open an offshore bank account with multi-currencies and internet banking facilities included within a couple of days, or even in some cases the same day.
9. Legal system is using common law and equity that applied in UK and other Commonwealth countries.
10. The common form of Hong Kong company is private limited company. It is private in nature and limited in liability for shareholders.
11. Corporate structuring is allowable. An overseas company can be appointed as corporate shareholder and director of Hong Kong company. For example, a BVI company can be apponinted as a director and shareholder of Hong Kong company.
12. Trust law is applicable in Hong Kong. If the investor, for his personal reasons, wants his status being hidden, he can do so with a trust arrangement that the trustee holds the shares for him (as a beneficiary) and he holds the trust deed which proves him a real owner of the shares. The trust law is applicable in Hong Kong. Remember trust documents or such laws are not enforceable, ineffective, invalid or void in other countries such as China.