Many countries consider Hong Kong an offshore jurisdiction; the attitude of the Government, however, is that the territory is not an offshore centre in the traditional sense of the word but rather a low tax area which levies tax according to the territorial principle. Anyway, the result is that by using an appropriate corporate structure, the profits from most types of business activity can accrue in Hong Kong without being taxed – only those earning streams which directly result from activity in Hong Kong itself are taxed, and even then at a maximum of 17.5%.
Hong Kong’s tax system activities are as follows:
- There are no capital gains taxes, no withholding taxes, no sales taxes, no VAT, no annual net worth taxes and no accumulated earnings taxes on companies which retain earnings rather than distribute them. Taxes are only levied on income “derived from or arising in” Hong Kong and not on income sourced outside the Territory. The residential or non-residential status of an entity is irrelevant. Advance tax rulings are available on the question of whether or not for profits tax purposes trading income is deemed onshore and taxable or offshore and tax exempt.
- The establishment of an office does not of itself render a company liable to profits tax where that office is not generating profits from within the territory. A key criterion is a place where the contract was negotiated and signed. Income relating to a sale contract negotiated by the seller from the territory by way of facsimile or telephone where the negotiation did not require travel outside the territory is deemed Hong Kong source income for profit tax purposes. Likewise, if the contract is negotiated and signed outside the territory and the goods sold are not sourced from within the territory then any income arising is not deemed Hong Kong source income for profits tax purposes. This is often achieved by utilizing an offshore company which re-registers in the territory as a foreign company but whose directors both remain non-resident and negotiate and execute the contract from the offshore jurisdiction.
- Where the Hong Kong entity is merely a booking center in the sense that it does not negotiate or draft the sale agreement (which is carried out abroad) but merely issues an invoice on instructions, operates a bank account and maintains accounting records covering the transaction then the income from such a transaction is not deemed Hong Kong source income for profits tax purposes.
- An entity whose business is to grant rights to use a trademark, copyright, patent, know-how or other types of intellectual property pays a flat profit tax of 1.75% (17.5% on 10%) of the payment received with all related expenses being non-tax deductible.
- If the recipient of the payment is a related offshore licensing company the Hong Kong company must withhold and hand over 1.75% of the fee paid over.
- Income from the international operations of shipping companies is exempt from tax unless the ships are operating in Hong Kong waters or proximate to the same in which case only that proportion of income earned in Hong Kong is subject to local tax of 17.5%.
- Dividend income received by a Hong Kong parent company from either a resident or foreign subsidiary is not deemed income in the holding company’s hands and is thus not subject to an assessment to profits tax
- There are 100% first year allowances for computer equipment;
In order to start with the company opening procedure please provide us with:
- name of the company (2-3 names of your choice)
- passport copy (of all directors and shareholders)
- utility bill for confirmation purpose
- cash and capital contribution/company structure (in percent for each shareholder)
- business plan
- business proof (business card, leaflet, website or contract)
- payment to the EURO COMMERCE LLC bank account
- Incorporation of the company, taxes and the initial opening fee
Service opening fee
Annual corporate secretary fee (obligatory)
Annual company’s address in Hong Kong fee (obligatory)
- State tax expenses
Business registration expense
Annual tax return submission
Registered agent’s fee
Annual corporate secretary expense
Annual company’s address in Hong Kong fee
About Hong Kong
Hong Kong, officially the Hong Kong Special Administrative Region of the People’s Republic of China, is an autonomous territory on the Pearl River Delta of East Asia. On 1 July 1997, the transfer of sovereignty over Hong Kong from the United Kingdom to the People’s Republic of China took place, officially marking the end of Hong Kong’s 156 years under British colonial governance. This transfer of sovereignty made Hong Kong the first special administrative region of China, an autonomous territory on the Pearl River Delta of East Asia. On 1 July 1997, the transfer of sovereignty over Hong Kong from the United Kingdom to the People’s Republic of China took place, officially marking the end of Hong Kong’s 156 years under British colonial governance. This transfer of sovereignty made Hong Kong the first special administrative region of China.
Hong Kong’s current structure of governance inherits from the British model of the colonial administration set up in the 1850s. The 1984 Sino-British Joint Declaration states that “Hong Kong should enjoy a high degree of autonomy in all areas except defense and foreign affairs” with reference to the underlying principle of one country, two systems. This Declaration stipulates that Hong Kong maintains her capitalist economic system and guarantees the rights and freedoms of her people for at least 50 years after the 1997 handover.
What is Hong Kong Limited Company?
A Limited Company is the most commonly-used company type. This is a company which is incorporated in Hong Kong, which means that the owner can take advantage of all the tax benefits and concessions available to any fully incorporated business, including the Closer Economic Partnership Arrangement (CEPA), a free trade agreement with Mainland China.
Most small to medium-sized companies in Hong Kong are set up as private companies limited by shares’ and are commonly referred to as private limited companies A company limited by shares is the most common type of company for conducting business and trade. A company limited by shares has a share capital which is divided into a number of shares of certain value each. These shares are held by shareholders (investors) who are entitled to a share in the profits of the company and receive a dividend corresponding to their respective percentage of shareholding in the company.
Tax in Hong Kong
There are no capital gains taxes, no withholding taxes, no sales taxes, no VAT, no annual net worth taxes and no accumulated earnings taxes on companies which retain earnings rather than distribute them. Taxes are only levied on income “derived from or arising in” Hong Kong and not on income sourced outside the Territory. The residential or non-residential status of an entity is irrelevant.
Nominee Service is consisted of Nominee Director and/or Nominee Shareholder. Both, corporate and individual Nominee Directors and Shareholders are available internationally.
Accounting and Audit
According to the statutory requirement under the Hong Kong law, the first set of financial statements should be prepared for the period covering not more than 18 months from the date of incorporation. If not yet commenced business, you may report a “Nil” profits tax return (“PTR”) to Inland Revenue Department (“IRD”), Hong Kong Tax Authority, with the declaration of not yet commence business by the director or company secretary of the company. But please note that you are still required to perform the first audit in accordance with the Hong Kong Companies Ordinance which mentioned above.
List of documents received for standard HK Company
- Certificate of Incorporation
- Business Registration Certificates
- Incorporation set of documents (shareholders, directors etc.)
The Hong Kong government makes it mandatory to list the company’s details on the Companies Registry for public viewing. Directors and Shareholders are in both the Government and Public record, but privacy can be maintained through Nominee Service.
Company name can be in English and Chinese language only. A name that is similar or identical to an already existing company will not be approved. Name of the company must end with “Limited” or “Ltd”
For Hong Kong companies we can assist you with the bank account opening in Hong Kong or internationally. The banks we cooperate with are reliable financial institutions with a long tradition in private and corporate banking. Our clients are provided with an excellent customer service, online banking, Visa and/or Master cards, as well as other services, such as factoring, foreign exchange, savings and specialized banking solutions.