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All you need to know to set up your Business Company in Hong Kong
This jurisdiction has one of the most liberal, competitive and laissez-faire economies worldwide. Characterized by simple taxation with a competitive level of corporation tax (8,25% / 16,5%), capital gains and dividends free from taxes, no sales tax, and no customs duties.
Although there is no specific legislation for international companies, due to its territorial tax system, a correctly structured and managed company may qualify for a 0% tax for its business carried out outside the jurisdiction.
Supported by a legal system derived from the Common Law, which is very scrupulous in respect of private property, and an independent judicial system in which the rule of law applies to legal and contractual procedures.
A high international reputation and business-friendly jurisdiction, with great facility to establish companies, it can be done in as little as 2 days and remotely, and move capitals from Hong Kong abroad.
Hong Kong is also one of the safest and convenient places to do banking. Being home to some of the most solid banks worldwide, with the highest levels of solvency and liquidity. No exchange controls and availability of multi-currencies accounts, merchant accounts, and payment processing services.
In addition, it is the gateway to one of the largest and fastest-growing markets worldwide, China. The Closer Economic Partnership Arrangement (CEPA) provides to companies incorporated in Hong Kong preferential access for goods and services entering the mainland China market.
Hong Kong participates in the OECD’s Automatic Exchange of Information for tax purposes (AEoI) and is undertaking exchanges of information through Common Reporting Standard (CRS).
All in all, Hong Kong is an excellent jurisdiction to incorporate and its company limited, a powerful vehicle for international trading, start-ups, internet entrepreneurs, investment businesses, IP holdings and as a holding company.
Legal Basis – Common law.
Legal framework – Companies Ordinance.
Company Form – Private company limited by shares (Ltd.).
Liability– The liability of the shareholders for the company is limited to the amount of their respective shareholdings.
Share Capital – There is no minimum share capital established, but usually the authorized share capital is HKD 10,000 represented by 10,000 ordinary shares of HKD 1.00 each. Minimum issued share capital is HKD 1.00. It may be denominated in any currency. Bearer shares are not allowed.
Shareholders – One minimum shareholder and a maximum of 50, who can be either individuals or corporations, residents or non-residents, without limitations. Details of shareholders are publicly disclosed.
Directors – At least one director, who may be a natural or legal person, resident or non-resident. A director must be not bankrupt or have been convicted due to malpractices. A sole shareholder may be also the director. Directors’ details are disclosed to the public registrar.
Secretary – A local secretary must be appointed, either a corporation or an individual. Secretary must maintain statutory books and company records, in addition, to ensure company compliance.
Registered Address – Limited companies must have a local registered physical address, a P.O. Box is not allowed.
General Meeting – A shareholders general meeting must be held annually, without restrictions on its location. The first general meeting after incorporation must be held within 18 months. Instead of a general meeting, a written resolution is allowed.
Electronic Signature – Permitted.
Re-domiciliation – Not permitted.
Tax Residency – A legal entity is deemed to be tax resident in Hong Kong if it is incorporated and/or managed and controlled in Hong Kong.
Basis – Corporate income tax is levied on profits derived from Hong-Kong, foreign-source profits may be exempt from taxation, whether remitted or not.
Tax Rate – Companies incorporated in Hong Kong are subject to profits tax at 8,25% for the first HKD 2,000,000 and 16,5% on profits over HKD 2,000,000.
Capital Gains – Capital gains are usually not subject to taxation.
Dividends – Dividends received from resident entities are tax-exempt, whereas dividends received from non-resident entities are usually considered foreign-source income and exempt from taxation.
Interests – Interest income derived from Hong Kong is subject to profits tax, except interest derived from any deposit in a financial institution.
Foreign-source Income – Foreign-source profits are usually exempt from taxation. The profits source is usually determined by the place where the purchases and sales contracts are affected or the place where the key activities to generate the profits are carried out.
Withholding Taxes – Payments to non-residents on dividends and interests are exempt from taxation. Royalties are subject to a withholding effective tax rate of 4,95% if are paid to a resident of a jurisdiction where the royalty payments are deductible for profits tax purposes. If royalties are derived from the use of intangibles that previously were owned by a person carrying business in Hong Kong, they may be subject to an effective withholding tax rate of 16,5%.
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