Advantages of a Hong Kong Company

1) Taxation

Hong Kong is one of the few countries in the world that tax on a territorial basis. No taxes are levied on income earned outside Hong Kong. Consequently, this means that a company that 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. For example, if shipment of a trading company goes directly from a developing country e.g. China to a developed country e.g. Germany, and the negotiation, conclusion and execution of the contracts are outside Hong Kong as well, the income derived from the trading is not taxable in Hong Kong. If a business earns commission by securing buyers/suppliers for products, and if the arrangement of such business to be transacted between the principals is outside Hong Kong, say in USA, the income earned is also not taxable in Hong Kong. In addition, the location of bank accounts is insignificant. For instance, the above-mentioned HK companies with bank accounts in HK will not be subject to HK taxes.

In fact, Hong Kong is a low taxation city. Its tax laws are simple and straight forward. Even if income of a business is sourced in Hong Kong, the profit derived is subject to 16.5% tax rate only. (Commencing on or after April 1, 2018, the profits tax rate for first HK$2 million of profits of corporations is lowered to 8.25%) Therefore, Hong Kong, as an international financial centre, is considered an extremely cost-effective tax-planning vehicle for business.

2) Banking facilities

Hong Kong is one of the leading Asian centres for both finance and commerce. There are over 135 licensed banks with over 120 foreign banks having representative offices in Hong Kong. There are no exchange controls and tax-free markets exist in gold, stocks and futures. Few restrictions exist in Hong Kong on foreign investment or the transfer of income and capital, meaning that funds can be flown freely in and out of the territory. It is easy and convenient to open bank accounts in Hong Kong and the procedures involved are simple and time saving.

3) No double taxation

Businesses operating in Hong Kong do not generally have any problems with double taxation of income due to the territorial basis of taxation, unilateral tax credit relief for any Hong Kong tax paid on income/profit derived from Hong Kong provided by many countries and deduction for foreign tax paid on turnover basis in respect of an income which is also subject to tax in Hong Kong.

More than that Hong Kong recognizes additional merits in concluding double taxation agreements (DTAs) as the result apart from DTAs restricted to air/shipping income not restricted DTAs were signed with Belgium, Luxembourg, Mainland China, Thailand, Vietnam and many others are in negotiation status.

4) Political

Hong Kong has a very stable social and political environment. It is located at the doorstep of Mainland China and has excellent relationship with China. For a company wishing to establish a presence in China e.g. set up factories in Shenzhen etc., a HK company will certainly facilitate the business. The HK company can be structured to hold the shares for the Chinese company.

5) International city

Hong Kong SAR is a well-known international, industrial and financial centre. It ranks as the world's third largest financial centre after New York and London. It has the world's largest container port and it is a major gateway for investment and finance into China and the rest of Asia. English and Chinese are the official languages.

6) Legal system

With British legal system as background, which is well adopted, each company limited is a separated legal entity and is well protected by laws and regulations.

7) The Closer Economic Partnership Agreement (CEPA)

CEPA was signed in 2003 by Central People's Government and the Government of Hong Kong Special Administrative Region and came into effect on 1 January 2004. It provides preferential access to China market and reduced tariffs for qualified enterprises. This arrangement is exclusive to Hong Kong. Therefore, it further strengthens Hong Kong's position as the ideal location from which to do business with China.