SHANDA CONSULT

Hong Kong

Important note: if requested, Shanda Consult and its local cooperation partners are able to fulfil all prerequisites for Hong Kong companies that are listed in the following text and can offer the necessary services required , including bookkeeping and similar services.

The former British colony Hong Kong has been an economic special zone of the People’s Republic of China since July 1997. Through the transfer agreement concluded at the time, the People’s Republic of China has obliged itself to keep the laws applicable in Hong Kong for the period of 50 years, i.e until July 2047. This applies also to the current tax law which does not prescribe taxation of profits accrued outside of Hong Kong.

Hong Kong does not have Offshore companies but distinguishes taxation of profits according to the territoriality principle. According to this principle, profits accrued in Hong Kong are taxable at the general corporate tax rate of 16.5%. Profits of a Hong Kong company accrued outside of Hong Kong are not taxable with corporate tax.

When determining the profit-making location of the company, the physical sending or reception of goods as well as the place of provision of services are crucial.

Furthermore, the place of management can gain importance if the foreign director of the foreign shareholder of a Hong Kong company are residing in Hong Kong frequently. Generally, the principle applies which sets this time criterion at more than four one-week stays per year. However, usually this is not checked.

Concluding a contractual agreement in Hong Kong leads to the profits of such contract to become taxable in Hong Kong. 

Hong Kong does not have a capital gains tax.

As on September 7, 2012, comprehensive double taxation avoidance agreements had been concluded between Hong Kong and the following countries (with 'in force' dates):

  • Austria (January 1, 2011)
  • Belgium (July 7, 2004)
  • Brunei (December 19, 2010)
  • Czech Republic (January 24, 2012)
  • France (January 1, 2011)
  • Hungary (February 23, 2011)
  • Indonesia (March 28, 2012)
  • Ireland (February 10, 2011)
  • Japan (August 14, 2011)
  • Liechtenstein (July 8, 2011)
  • Luxembourg (January 20, 2009)
  • Mainland China (April 10, 1998, Second Protocol June 11, 2008 and Third Protocol December 20, 2010)
  • Malta (July 18, 2012)
  • Netherlands (October 24, 2011)
  • New Zealand (November 9, 2011)
  • Portugal (June 3, 2012)
  • Spain (April 13, 2012)
  • Thailand (December 7, 2005)
  • UK (December 20, 2010)
  • Vietnam (August 12, 2009)

Double taxation agreements between Hong Kong and the following countries have been signed but are awaiting ratification (with signature dates):

  • Austria (Protocol, June 25, 2012)
  • Jersey (February 22, 2012)
  • Kuwait (May 13, 2010)
  • Malaysia (April 27, 2012)
  • Mexico (June 18, 2012)
  • Switzerland (October 4, 2011)

Hong Kong also has signed double taxation agreements concerning aviation and shipping income with a number of countries (although some of these agreements have been superseded by recently-signed comprehensive double tax avoidance agreements). Countries with which Hong Kong has signed these limited double tax agreements include:

  • Bangladesh - aviation
  • Belgium - aviation
  • Canada - aviation
  • Croatia - aviation
  • Denmark - aviation/shipping
  • Estonia - aviation (awaiting notification)
  • Ethiopia - aviation
  • Fiji - aviation (awaiting notification)
  • Finland - aviation
  • Germany - aviation/shipping
  • Iceland - aviation
  • Israel - aviation
  • Jordan - aviation
  • Kenya - aviation
  • Korea - aviation
  • Kuwait - aviation
  • Laos - aviation (pending)
  • Macao - aviation
  • Mainland China - aviation
  • Maldives - aviation
  • Mauritius - aviation
  • Mexico - aviation
  • Netherlands - aviation/shipping
  • New Zealand - aviation
  • Norway - aviation/shipping
  • Russia - aviation
  • Sweden - aviation
  • Switzerland - aviation
  • UK - aviation/shipping
  • US - shipping

There is also a memorandum of understanding with China under which:

Chinese source income earned by Hong Kong based shipping, aviation and land transport operations is exempt from tax on the mainland;

  • Hong Kong enterprises are only taxable in China if they have a permanent establishment there.(A permanent establishment is defined as an activity which continually lasts for more than 6 out of 12 months).
  • Hong Kong resident individuals are not subject to tax for services rendered in mainland China so long as they do not reside more than 183 days in the country in any tax year.
  • Hong Kong will give a tax credit for any tax paid in mainland China.

However, one ought to note that Hong Kong companies are not covered by Double Taxation Treaties if they cannot prove tax residency in Hong Kong.

 

General Information

Legal System: 
The legal system of Hong Kong is based on British Common Law.

Economy:

With a GDP in 2011 of an estimated USD 49.137 Hong Kong can count itself amongst the wealthy economies in the world.

Hong Kong is one of the largest global finance centres. Hong Kong’s economy is highly dependent on export. Hong Kong serves as an “export gate” to China. 

The city state has limited light industry. Since Hong Kong hardly has any natural resources and since the existing territory is limited, the services sector has been elevated in its importance. 

Nevertheless, Hong Kong’s ports are continuously losing significance as the main trade centre of goods from the People’s Republic of China due to the increasing development of Chinese ports. 

However, the tourism sector is steadily gaining importance. In particular Chinese tourists contribute positively to retail.

Currency

HKD (Hong Kong Dollar )

Language

English and Cantonese are official languages, English is the lingua franca.

Time zones 

GMT+8 hrs

 

Information on companies

Types of companies

The Limited Liability  Company, Ltd, or abbreviated as LLC, constitutes the most commonly used type of company. Besides this, there is also the Limited Partnership.

Company Law

“Companies Ordinance”, published on 10.08.2012

Minimum Capital Requirement 

Shares of Hong Kong companies do not have a legally prescribed nominal value assigned to them and have par value. 

Shareholders of a company can however, decide the company’s nominal capital (“authorised capital” ) at incorporation. 

There is no obligation to pay in the capital. 

Companies must be formed with at least one share.

A share premium is possible and is taxable under the share premium tax of 0.1%.

Companies are commonly formed for instance with a share capital of HKD 10.000 and a number of shares of 10.000 at HKD 1.00 each.

Restrictions 

No significant name restrictions apply in Hong Kong. Company names must end with „Limited“. 

Business restrictions are merely existent in the banking as well as the financial sector.

Taxation 

No taxation of income coming from outside Hong Kong. See text above.

Double Taxation Agreements

See text above

Annual Tax return filing

Mandatory bookkeeping applies, including daily registration of incoming and outgoing flow of funds. Book keeping must be kept for at least 7 years. Accountancy books of a company can also be kept outside of Hong Kong. Annual tax return filing must be done, the annual tax returns are to be kept in Hong Kong.

Financial Statements

Must be drafted, audited and handed in to the financial authorities. The following companies are exempt from this obligation:

  • Companies with an annual income of less than HKD 500.000
  • “dormant” companies (i.e companies without business relevant activities )

Official registered address and agent of incorporation 

Registered address of the company must be in Hong Kong.

One has to appoint an agent of incorporation who is resident in Hong Kong.

Company secretary

A secretary resident in Hong Kong is mandated by law.

Directors

At least one. Nationality and place of residence irrelevant. Can be a natural or a legal person.

Shareholders

At least one.

Disclosure of Ultimate Beneficial Owner 

Yes, must be documented.

Directors publicly known

Yes, Hong Kong‘s register of companies is publicly accessible to natural and legal persons resident in Hong Kong.

Shareholders publicly known

Yes, Hong Kong‘s register of companies is publicly accessible to natural and legal persons resident in Hong Kong.

Bearer Shares

Bearer shares are not permitted in Hong Kong

Foreign Exchange Control 

No

Name of the company 

Can be English or Chinese, or English and Chinese

Language of corporate documents 

English, in parts English and Chinese.

Time needed for formation 

Prior to the company’s formation, the requested name is checked which takes one to two working days. The subsequent registration of the company usually takes two to three working days.

The entire process of incorporation including apostilling corporate documents, usually takes nine to twelve working days.

Shelf companies

Yes, possible.