Travel to Hong Kong

If you are an entrepreneur looking to set up a company overseas, Hong Kong is an optimal jurisdiction for many businesses. Whether you own an established company or a startup, Hong Kong's combination of a globalized economy with a low corporate tax advantage make it a prime place to incorporate an offshore company.

Corporate Tax in Hong Kong

Any Hong Kong company conducting business in Hong Kong is liable to corporate tax. Profits sourced in Hong Kong are taxed at a low rate of 16.5%, and unincorporated businesses are taxed at 15%. Profits that are sourced overseas, also known as ‘offshore profits', benefit from a zero tax rate, even when remitted back to Hong Kong. Profits derived from operating ships in Hong Kong are treated as ‘offshore profits' and are not liable to tax, but profits derived by professional reinsurers for reinsuring offshore risks are taxed at 8.25%, i.e. half the corporate tax rate.

Hong Kong has one of the lowest corporate tax rates in Asia and internationally, at 16.5%. Combined with low personal income tax, HK's tax system is an attractive advantage for foreign entrepreneurs looking to expand their business into Asia. An effective tax system allows companies to conduct business without being overpowered by their tax liabilities.

Hong Kong Company Incorporation

A central hub for business in Asia, Hong Kong is extremely popular for its political stability, economic freedom and tax benefits.

Advantages of a Hong Kong Company for Foreigners
Foreign entrepreneurs enjoy a number of advantages from Hong Kong company formation, including:

   1. Legal tax exemption on company profits, if sourced from outside HK.
   2. A company familiar to Chinese suppliers. A Hong Kong company is popular for foreigners wishing to undertake business on Mainland China.
   3. China suppliers can be paid in RMB from a Hong Kong corporate bank account.
   4. No travel is required to incorporate in Hong Kong from overseas.
   5. Hong Kong's reputation as a financial hub continues to grow and is recognized as number 3 in the world after New York and London.

Hong Kong is a reputable, regulated international trading jurisdiction. Hong Kong company formation is especially popular with foreign investors setting up regional or global headquarters, particularly those looking toaccess markets in China.

Hong Kong Company Options
Foreign entrepreneurs wishing to set up a company in Hong Kong have 3 avenues to pursue. The types of business entities available are:
 

1. Hong Kong Limited Company – this form of company, sometimes referred to a subsidiary company, enjoys all the benefits of a fully incorporated business. The term Hong Kong Offshore Company can also be applied to a Limited Company if it sources all of its business income outside of Hong Kong. The HK corporate tax system means that such a company is a tax-free company.

2. Branch Office – a Branch must register with the HK Companies Registry as a non-Hong Kong company and is not a separate legal entity from its parent company.

3. Representative Office – a rep office cannot undertake profit making business operations so is not suitable for objectives of most foreign entrepreneurs.

Fees & support services

Company formation in Hong Kong incurs standard fees, which can include company registration, resident company secretary (if required), virtual office, auditing and tax, government licenses, and opening a Hong Kong corporate bank account. Reputable consultants are the best means to incorporate your business, to ensure all legal paperwork and fees are filed properly. Additionally, virtual office services can be a big money saver as it meets the requirement of having a registered office in Hong Kong and allows you to save the brick-and-mortar hassles of traditional set ups, if your business doesn't justify the extra costs. Hong Kong is an excellent location for international entrepreneurs to register their business. Hong Kong is a diverse multi-cultural environment and its recognition as an international business hub and exciting place to live will continue to support the investment from foreign entrepreneurs.

Hong Kong Offshore Companies and their Tax Liability

Taxes only apply to business profits, salaries and property rental income. This means there is no capital gains tax and no inheritance tax - the two biggest bugbears of expats. The beauty of the Hong Kong tax regime is that it is one of the few jurisdictions in the world that tax on a territorial basis. Many countries levy tax on a different basis and they tax the world-wide profits of a business, including profits derived from an offshore source. Hong Kong offshore companies profits tax is ONLY charged on profits derived from a trade, profession or business carried on in Hong Kong. Consequently, this means that a company which 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. 

Hong Kong sourced profits is currently subject to a rate of taxation of 16.5 per cent. There is no tax in Hong Kong on capital gains, dividends and interest earned. The principle of Hong Kong profits tax is that it is a tax on profits that has its source in Hong Kong rather than a tax based on residence. Income sourced elsewhere, even remitted to Hong Kong, is not subject to Hong Kong profits tax at all. Consequently, if a Hong Kong offshore company's trading or business activities are based outside Hong Kong no taxation will be levied.

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.

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 4.95% on the gross payment if the payer and the recipient are not related, but 16.5% if the payer and recipient are related. The recipients of the royalties who are tax residents of Belgium, Thailand, or Luxembourg enjoy the respective treaty rates.

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 comprehensive double tax agreements with Belgium and Thailand respectively to relieve taxation on income, for instance, dividends, interest and royalties. The Hong Kong Inland Revenue Department allows 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. The respective comprehensive double tax agreements with Brunei, Hungary, Indonesia, Kuwait and Netherlands will become effective from 1 April 2011 to relieve the applicable double taxation on various incomes.

Hong Kong Offshore Company Banking

At Offshore Formations 247 we work closely with HSBC bank and can therefore combine the formation of your Hong Kong offshore company with a top class bank account.

Hong Kong Offshore Company Formation / Registration

Offshore Formations 247 are able to incorporate a Hong Kong offshore company. Company formation normally takes up to 7 days to register a new company. Hong Kong Offshore Company Shares. The usual authorised share capital is HK$1,000. The minimum issued capital is one share of par value. Ordinary shares, preference shares, redeemable shares and shares with or without voting rights are all permitted.

There is no limitation on the amount of authorised or issued share capital. Capital duty at the rate of 0.1% of the authorised capital is payable to the government on incorporation and subsequent increase of any amount of the authorised capital. Shares must be expressed in a fixed amount. Hong Kong does not permit no par value shares. While it is usual for the share capital to be expressed in Hong Kong dollars, shares may be expressed in other currencies. A multiple currency share capital is also permissible. Our Services - Offshore Company Formation, Nominee Director, Nominee Shareholder, Mail forwarding and Bank Accounts

Offshore Formations 24.7 specialize in Hong Kong company formations ranging from simple company registrations to complex structures including offshore Trusts and in providing a very comprehensive assortment of administrative services to Hong Kong companies, including the provision of Nominee Director, Nominee Shareholder, Mail Forwarding and Bank Account services. We are also able to offer a 'transfer in' service whereby we can take over the management of your existing Hong Kong Offshore Company, often for no cost at all.

Our specialist Hong Kong company formation and company registration team:

In the 2009 Index of Economic Freedom, Hong Kong has once again been placed first, the fifteenth consecutive year it has held this position. The index is an annual survey conducted by The Heritage Foundation and The Wall Street Journal that compares 183 countries in relation to 10 ‘freedom’ variables including business freedom, investment freedom, property rights, freedom from corruption and more. 

Economic freedom is still largely regarded as an important key to growth and prosperity. As free trade is the life-blood of Hong Kong, Hong Kong embraces globalisation of trade and services. There are no barriers to trade – such as tariffs and quotas – being put in place, and there is no foreign exchange controls or restrictions on both inward and outward investments. Additionally, the Hong Kong Government also does not place any nationality restrictions on corporate or sectoral ownership. This makes company formation in Hong Kong an attractive and relatively fuss-free option.

It has been proven that investing in Hong Kong is a very attractive and popular proposition for investors. According to the latest World Investment Report released by the United Nations Conference on Trade and Development (UNCTAD) in 2008, Hong Kong was the world's seventh and Asia's second largest Foreign Direct Investment (FDI) recipient, attracting US$54.4 billion worth of inward investment in 2007. Taking into consideration the small size of Hong Kong, it comes as no surprise that it was also ranked first globally in the report's Inward FDI Performance Index – which measures the amount of FDI relative to the size of the economy.

Gateway to Mainland China

Situated at the mouth of the Pearl River Delta (PRD), Hong Kong is strategically located for trade with Mainland China. China's rapid economic development of increasingly competitive industries has created more opportunities for even greater economic expansion. With the Closer Economic Partnership Arrangement (CEPA) that took effect in 2004, Hong Kong can now benefit from additional and exclusive Mainland market access. Company incorporation in Hong Kong would mean that the vast market of Mainland China is readily accessible.

Mainland China is now Hong Kong's largest trading partner and they are both key to one another's economic success. Hong Kong is the largest source of overseas direct investment in Mainland China. Mainland China’s direct investment in Hong Kong is also a very significant – accounting for 40.7% of the total stock of inward direct investment in 2007. This shows that there is great interdependence between Hong Kong and Mainland China’s economies, and that by incorporating a company in Hong Kong, it serves as a great springboard for expansion into Mainland China.

Low Taxes

At 16.5%, Hong Kong’s corporate tax rate is among the lowest in the world. Hong Kong adopts a territorial basis principle of taxation, where only profits which have been sourced in Hong Kong are taxable.

The effective tax rate is even lower after taking into consideration tax exemptions and deductions such as Industrial Buildings Allowances on Industrial Buildings and Structure, Commercial Buildings Allowances on Commercial Buildings and Structures, Plant and Machinery Allowances, approved Donations and other allowable Deductible Expenses in accordance to Hong Kong’s Inland Revenue Ordinance.

In addition, there is no capital gains tax in Hong Kong and no withholding tax on dividends and interest or collection of social security benefits. There is no Value-Added Tax (VAT) in Hong Kong. The limited tax base, coupled with very low tax rates, makes Hong Kong's tax incidence one of the lowest, if not the lowest, among developed economies, and therefore, Hong Kong company formation makes for a very tax efficient business entity. 

A Hong Kong company is also not perceived to be an offshore company in an international tax haven because Hong Kong is a reputable, regulated international trading jurisdiction. Annual audited financial statements must be submitted to the Hong Kong Inland Revenue Department. Also, Hong Kong company incorporation requires the appointment of a Hong Kong-resident company secretary.

In conclusion, with proper planning, company formation in Hong Kong serves as a highly effective and efficient tool for investors and entrepreneurs alike. With its free and open economy, low taxes, and strategic position as a gateway to Mainland China, Hong Kong is abundant with vast opportunities for investment and growth.