Sometimes referred to as the last bastion of laissez-faire capitalism, Hong Kong has long believed in low corporate (and personal) taxation. Companies are easy and fast to form and are not subject to petty restrictions. The maximum tax rate is 16.5% BUT this can be reduced to Zero where all parties to a transaction are outside Hong Kong. This is known as territorial taxation.
HONG KONG COMPANY FORMATION
WHY CHOOSE HONG KONG:
Territorial taxation - profit earned outside Hong Kong is not chargeable to profits tax.
Low (16.5%) maximum rate of profits tax.
Zero withholding taxes on dividends.
Low (4.95%) withholding taxes for royalties etc.
The standard authorised capital of a Hong Kong company is HK $10.000 (c. US $1,300) although a larger authorised capital may be specified.
Directors & Shareholders
A Hong Kong company may have a sole director who need not be resident in Hong Kong. Sole corporate directors are no longer allowed and from 2015 all Hong Kong companies must have one physical person as director. A Hong Kong company may have one shareholder, which, if desired, may be corporate. The use of nominees can protect privacy.
Secretary and Registered Office
Every Hong Kong company must have a local resident secretary, a registered office in Hong Kong and a Business Registration Certificate. A business registration fee is payable within one month of the date of incorporation and then annually on the anniversary of incorporation.
Law & Taxation of Hong Kong companies
Territorial taxation. Income from outside Hong Kong is generally not taxable.
Profit tax is 16.5 % for Hong Kong source income, but 0% for non-Hong Kong source income.
Under the guiding principle of "one country, two systems" which was established before the handover the Chinese Government agreed that Hong Kong's capitalist system would remain unchanged until the year 2047. Within this, the legal system remains English Common Law.
Hong Kong profits tax is only charged territorially on Hong Kong source income at a rate of 16.5%. There is no capital gains tax, no withholding tax, no sales taxes, no VAT, no annual net worth taxes and no accumulated earnings taxes on companies that retain earnings rather than distribute them.
Audit and Accounts requirements
Every Hong Kong company must produce annual audited accounts and appoint a Hong Kong registered auditor except: -
Dormant i.e. Non Trading Companies.
Small companies (Companies whose annual turnover does not exceed HK $500,000 c. US$60-65,000.
Tax Returns are made up annually to 31st March unless the company has chosen a different accounting date. For newly registered companies, a longer period (a maximum of 18 months) applies before the first tax return need be submitted.