International business in Hong Kong
Hong Kong has always been open to the world trading. This specific administrative area is one of the biggest ports and commercial centers in the world. Being the main business and financial center of Asia and the third largest international financial center, it remains a very strong business center of the East today. According to the results of the annual report, Hong Kong ranks the third position in the list of countries with the easiest structure of conducting business (official source).
Business culture of Hong Kong involves many foreign companies due to qualified manpower and English as the main language for work.
Despite the taxation in Hong Kong be flexible and low, it is still considered to be the offshore zone. Hong Kong is the perfect example of midshore (hybrid zone). The liberal views to foreign investments and the simplicity of corporate law requirements also make Hong Kong attractive.
Hong Kong (“Xianggang”) in translation means “fragrant harbor”. Today the average gross national income per head is 38 420 US dollars.
Hong Kong Dollar is very stable currency which value is directly related to US dollar. It is important to know that community banks don’t direct currency control, that’s why foreign currency accounts in local banks can be used as “transit” ones.
Here are several advantages of using Hong Kong companies in your business structure:
- The absence of taxation under the condition of running non-resident business.
- Low taxation in business in the Hong Kong.
- The absence of capital gains tax, dividends or rates.
- Worldwide recognition and respect (Hong Kong is not the offshore zone).
- Being one of the world biggest ports it is profitable.
Tax benefits are the main argument for carrying on business in Hong Kong structure. To cooperate with Chinese enterprises is certainly the right decision of many companies that strive for development and increasing their competitive ability on the world market.
Hong Kong Economy
According to the data from Heritage Foundation and Wall Street Journal, Hong Kong economy is the most liberal one in the world. Hong Kong occupies this position for several years.
Its’ typical features:
- the absence of current flow limitations
- own stable currency (Hong Kong dollar)
- the absence of currency control
- low inflation (3,7% in 2014 and 3,5% predicted in 2015)
- small interference of government to the business
- no difficulties for foreign investments
- Hong Kong is the third biggest financial center in the world
- the biggest duty-free container port of the world
- is among 12 countries with the most developed trading economy
- slight limitation in banking and financing activities, etc.
On the territory of Hong Kong there exist about 250 banking institutions and agencies of foreign banks that have the right to credit. In Hong Kong there is the biggest stock exchange. Local gold market is one of the largest in the world; a number of transactions are done by “Chinese Gold” and “Silver Exchange Society”. The absence of state control in financial field made a rapid rise of Hong Kong in world monetary system possible.
There are about 50,000 factories and plants in Hong Kong. The production of fabric and clothes makes 30% of export and is the main branch of industry. About 90% of these goods are exported.
In Hong Kong there is one of the biggest tourist camps. It receives more than 10 million tourists a year. This fact one more time proves the economic stability.
Company registration in Hong Kong
There are two ways of corporate structure building in Hong Kong. The first way is an incorporation of new Hong Kong company. The second way may be done by means of registration of the existing non-resident company in Hong Kong (according to part XI of the Hong Kong Companies Act).
- Private Company Limited By Shares (or LTD)
- Public Company Limited By Shares
- Limited Partnership
- Sole Partnership
Company registration in Hong Kong passes during 2-3 days in 3 procedures. The minimal amount of shareholders is 1. Besides, there must be 1 director. The availability of local company secretary and local registry address are necessary.
Monthly and quarterly accounts are not required, but you need to provide an annual account. The company has to estimate the date of the annual account delivery. This date may be the 31st of December, January, March, etc.
It`s important to remember about 3 authorities for annual civil handling:
- Office on business registry (in this office company registration for next year is maintained).
- Hong Kong companies commercial registrar (report on existing shareholders, directors and secretaries of the company).
- Hong Kong Taxation Department
Taxes in Hong Kong
The peculiarities of tax assessment in Hong Kong:
- Territorial principle of tax assessment: income tax is not charged from the sources of profit that are not based in Hong Kong
- Low rate on income tax of companies operating in Hong Kong (17,5%)
- The omission of direct and indirect taxes like VAT, Uniform Social Tax, customs, etc.
- The omission of taxes on capital gains, return on investment, percents, royalty received from abroad or sent abroad
- Imposition of tax for individuals – up to 16%
- Hong Kong Inland Revenue provides trial scheme of tax preparation
Hong Kong dollar is fully convertible currency. Thus, to handle banking operations, related to international trading, minimal document creation is required in Hong Kong.
Hong Kong has already signed the agreement on avoiding double taxation with the following countries: Belgium, China, Thailand, Austria, Brunei, Czech Republic, France, Hungary, Indonesia, Ireland, Liechtenstein, Luxembourg, Malaysia, Malta, New Zealand, Portugal, Spain, Great Britain.
Hong Kong has also signed a number of tax agreements on maritime and air traffic with the following countries: Bangladesh, Belgium, Great Britain, Croatia, Denmark, Ethiopia, Vietnam, Germany, Israel, Finland, Jordan, Kenya, Kuwait, Macau, Maldives, Mexico, Sweden, Canada, China, the Netherlands, New Zealand, Norway, Russia, the US, Switzerland.
Hong Kong and Singapore
Hong Kong and Singapore compete with each other for a long time when it comes to the best place for life, business and recreation. According to world ratings, Hong Kong has a world lead as the country with free economy while Singapore is considered the most successful country for business handling. Well, let`s compare them.
In case of operating through Singapore company as a trading offshore company one can just carry on business abroad Singapore not transferring the income to this country.
If you running your business using company in Hong Kong, you theoretically need to have a consultation with accountant or auditor in order to prevent possible mistakes and their tax implications.
- Banking accounts
Procedures of opening banking accounts in Hong Kong and Singapore are almost similar, but it`s much easier to set up an account of a Hong Kong company in foreign banks.
- Companies` documents
Documents in Singapore are prepared only in English due to the fact that there are 4 official languages. So it`s not of economic benefit to create documents in all languages. Translation of documents, for instance, from English to Chinese requires legalization in Chinese embassy (the procedure lasts several days). Documents of Hong Kong companies are written in both English and Chinese languages.
- Incorporation of Hong Kong and Singapore companies in the function of holdings
Both countries are free of the tax on capital increase
- Asset security
Both countries have an excellent trust legal system. Of course, the standard time of assets existence doesn`t exceed 100 years.
- Obtaining a permit on building
You have to undergo just 5 procedures for obtaining this permission in Hong Kong while in Singapore 10 procedures is compulsive.
- Tax assessment
The income tax reaches only 17% in Singapore and 16,5% in Hong Kong. However, taxes and deductions from wages and other earnings in Hong Kong are much lower.
The jurisdiction in Hong Kong is far easier, which plays a major role while selecting a country for setting up and develop business.
|Deductions from wages and other earnings||15% max||20% max|
4 reasons to incorporate a company in Hong Kong today:
- An easy and legal way to enter a world market.
- Hong Kong corporations do not pay taxes on business existing outside the city.
- Corporations in Hong Kong provide broader withdrawal pattern.
- Strong and steady jurisdiction.
Should you have any questions – contact us in the most convenient way for you.