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Advantages to incorporate in Hong Kong

Why Hong Kong

Hong Kong has a simple, predictable and low tax system. The city only imposes three direct taxes, and filing taxes is straightforward.

According to the 2014 Paying Taxes* study of 189 economies, Hong Kong has one of the most tax-friendly economies in the world. Why? The city only imposes three direct taxes and has generous allowances and deductions which reduce your taxable amount.

  • Profits tax is capped at 16.5 percent
  • Salaries tax is a maximum of 15 percent
  • Property tax is 15 percent
More important are the taxes exemptions in Hong Kong:
  • No sales tax or VAT
  • No withholding tax
  • No capital gains tax
  • No tax on dividends
  • No estate tax

The ease of submitting tax returns is another attractive part of Hong Kong’s business environment. Many people complete their tax returns themselves – a simple process – and can submit them online. Others rely on Hong Kong’s many accountancy firms, large and small, for cost-effective tax services and advice.

Advantages of incorporation in Hong Kong

Hong Kong is a major trading entity and therefore the incorporation of a Hong Kong company is likely to be perceived as ‘legitimate’ and therefore less likely to be seen as a tax avoidance/ minimisation vehicle.
English is an official language and is the main business language. All reporting information and documentation can be produced in English.
The Hong Kong tax system is simple and straight-forward.
There are no restrictions on the use of foreigners as Shareholders or Directors at a Hong Kong company.
Corporate Director and Secretary are allowed.
The incorporation of a Hong Kong company is simple and quick.
Low cost of incorporation and maintenance.
No minimum requirements for share capital.
Only one Director and Shareholder is required to form a limited liability company.
Due to the system of territorial taxation foreign source trade profit is not subject to Hong Kong income tax.
There is no capital gains tax in Hong Kong.
There is no withholding tax on interest, dividends and royalty.
Foreign dividends are not subject to Hong Kong income tax.
Tax credits for foreign tax paid are available in Hong Kong; however it is subject to some conditions.
There is no net worth tax in Hong Kong.
Hong Kong has an excellent banking system and communications infrastructure.

Moreover, Hong Kong is also known for its free port status and easy customs procedures. Duty is paid on very few products, for example, tobacco. One major recent change has been to make the import of wine and beer duty free. This has encouraged a thriving wine import, export and storage business serving retail and individual buyers.

Hong Kong

A former British Colony but now part of the Republic of China, Hong Kong is considered a major international centre for business. Located on the south east coast of China it became part of China on the 1st of July 1997. Hong Kong is classified as a Special Administrative Region (SAR) within the Republic of China and has retained its own legal system. The legal system in Hong Kong is, unsurprisingly, based on the British system with the official languages being English and Chinese.

There is no ‘offshore’ legislation in Hong Kong, all companies are incorporated under the same legislation regardless of whether they do business on or offshore. However companies that do not derive any income from sources in Hong Kong are not subject to tax thereby effectively making it an offshore company in all but name. An excellent infrastructure and strong regulatory frame work are contributors to the success of Hong Kong as a major destination for business.

Hong Kong is one of the world most established and reliable financial centres. The economy in Hong Kong is considered to be one of the freest in the world (as measured by the Index of Economic Freedom) therefore it is an excellent jurisdiction in which to incorporate a company.

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Disclaimer: While TBA & Associates strives to make the information on this website as timely and accurate as possible, the information itself is for reference purposes only. You should not substitute the information provided in this article for competent legal advice. Feel free to contact TBA Customer Services for advice on your specific cases.

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