Cost of services
|Service Description||Without nominee services||With nominee services|
|Company incorporation, including state fees||✓||✓|
|Registered office address for 1 year||✓||✓|
|Local secretary for 1 year||✓||✓|
|Sending of documents (from the jurisdiction and from nominee director)||✓||✓|
|Maintenance of “register of beneficial owners”||✓||✓|
|Non-resident nominee director and/or shareholder (issue of one power of attorney with Apostille)||✓|
|Total cost of registration||$1800||$2300|
|Apostille: option 1. Documents are certified by a company secretary||$600 for a set of documents with apostille|
|Apostille: option 2. Documents are certified by a notary public||$990 for the first document in a set, $80 for each subsequent document|
|“Deregistration” of a company||$1000 + overhead expenses (up to $566).|
|“Business address” for 1 year – receipt of correspondence from any persons (registered address is intended to receive correspondence only from state authorities)||$600 + postage expenses|
|Setting up a real presence (substance) of a company||upon request|
Change of director / shareholder
||from $500 + stamp duty|
|Certificate of Incumbency without Apostille
|Certificate of Good Standing / Extract from the registry with Apostille||$600|
|Audit and accounting for an active company||from $3000|
General information about Hong Kong
- Hong Kong (Xianggang) is a special administrative region of the People’s Republic of China, located at the island of Hong Kong and the Kowloon Peninsula. The national currency is Hong Kong dollar (HKD). The official languages are Chinese and English.
- Hong Kong’s legislation has many differences in comparison with Chinese law and is based on English common law.
- Hong Kong is a member of the WTO, FATF, APEC.
- Hong Kong is a recognized center of trade and business in the Asia-Pacific region. The main trading partners are mainland of China, the USA, Japan, United Kingdom, Taiwan.
Advantages of jurisdiction
- Hong Kong has a reputation of one of the most prestigious jurisdictions. For many years, including 2017, it occupies 1 place in the economic freedom rating drawn up by The Heritage Foundation;
- No taxation for companies operating outside of Hong Kong;
- Favorable conditions for business development: a simple taxation system with low tax rates (the base rate of income tax is 16.5%);
- Hong Kong is not an offshore jurisdiction and currently is not included in blacklists of jurisdictions with low or zero taxation of the majority of countries (including Russia since 2017).
General characteristics of Hong Kong companies
Company incorporation in Hong Kong in accordance with the Companies Ordinance is possible in one of the following legal forms:
- Private Company Limited by Shares is a company which capital is divided into shares. No more than 50 shareholders can participate in such company. The company’s shares cannot be placed on the securities exchange, and any transfer of shares is usually regulated by Memorandum and Articles of Association.
- Public Company Limited by Shares is a company which capital is divided into shares. The maximum number of shareholders of such company is not limited. Its shares may be placed on the securities exchange.
- Company Limited by Guarantee is the company in which the liability of its members is limited by the guarantee. The company’s capital is not divided into shares.
- Unlimited Company is the company in which the members are liable for the obligations of the company regardless of the size of their contribution to the capital.
- Limited Partnership is a partnership that may involve no more than 20 partners with limited liability, that can be both private individuals and legal entities of any residence. The liability of partners for the obligations of the partnership is limited by their contribution to partnership’s capital.
In accordance with the Companies Ordinance, all legal entities shall have at least one director and one member. The single director of the company cannot be simultaneously appointed as a secretary of the company. The law establishes the requirement to have at least 1 director who is a private individual. Other directors may be legal entities, except those in public companies, limited companies, as well as private companies that are part of a group of companies. Directors and members can be of any nationality and residents of any country. Information about directors and members is included in the register and is publicly available.
The law provides the definition of “shadow director”: it is a person that gives the instructions and orders in accordance with which the director or the majority of directors act regularly.
Liability of the members in the majority of legal forms is limited by the amount of their contribution to the company’s capital, regardless of whether the capital was paid or not. The amount of the annual stamp duty in Hong Kong depends on the amount of authorized capital, usually the authorized capital of Hong Kong companies is 10 000 Hong Kong dollars. The minimum issued capital is 2 shares with a value of 1 Hong Kong dollar each one.
The registered office of the company must be located in the territory of Hong Kong. In addition to this, each company must have a local secretary that may be both a private individual and a legal entity, but must be a resident of Hong Kong. The originals of the Certificate of Incorporation, as well as the Registers of directors, Registers of members and Registers of beneficial owners (“significant controllers”) must be kept in the registered office of the company.
Significant controllers are private individuals or legal entities that directly or indirectly hold more than 25% of shares, participation interest or voting rights of the company. Unlike Registers of directors and Registers of members, the Register of significant controllers is not publicly available, and information from it may be provided only to persons determined by the law (e.g. to officials of certain Hong Kong government authorities at their request).
There are some requirements to the name of the company that is to be incorporated in Hong Kong. Names related to the state or royalty are forbidden (e.g. Royal, Federal, etc.). Names that imply financial activities (for example, Building Society, Chamber of Commerce, Chartered, Co-operative, Imperial, Kaifong, Mass Transit, Municipal, Savings, Tourist Association, Trust, Trustee, Underground Railway, Bank, Insurance, Assurance, Reinsurance, Fund Management, Asset Management, and Investment Fund, as well as their equivalents in other languages) are subject to licensing.
The name of a company may be in English, in Chinese or in both languages at the same time. A company cannot be incorporated with the same name that another company previously incorporated has.
Taxation in Hong Kong
Profits tax. The territorial basis of taxation is applied in Hong Kong. It means that income of Hong Kong companies may be taxed only in cases when such income derives from a source in Hong Kong, or the activity to generate such income took place in Hong Kong. If the company does not operate in the territory of Hong Kong and does not receive income from sources in Hong Kong, profit tax is not levied.
In order to be exempt from profit tax in practice, a company in Hong Kong must meet the following requirements:
- Company should not have a physical place of business in Hong Kong, for example, an office, a store, or workplaces;
- The goods sold should not be produced in Hong Kong;
- Employees working in the territory of Hong Kong are not allowed;
- Contracts must be concluded and executed outside the territory of Hong Kong;
- Suppliers and counterparties located in the territory of Hong Kong are not allowed;
- Goods must be transported between ports located outside the territory of Hong Kong.
A company must apply for exemption from profit tax, and in some cases also must provide tax authorities with documentary evidence that its activity does not take place in the territory of Hong Kong.
Hong Kong-sourced incomes are subject to taxation according to two tiered profits regime with the following tax rates:
|Taxable profit||Legal entities||Unincorporated businesses (sole proprietorship, partnership, trust)|
|Less than 2 000 000 Hong Kong Dollars (HKD)||Tax rate 8.25 %||Tax rate 7.5 %|
|Over 2 000 000 HKD||Tax rate 16.5 %||Tax rate 15 %|
If taxable profit exceeds 2 000 000 HKD (that equals approximately 255 000 US Dollars), legal entities profits tax rate 16.5 % will apply only to that part of profits that exceeds 2 000 000 HKD, but not to the whole amount of such profits. The same rule is applicable to unincorporated businesses with corresponding tax rates.
The following companies are excluded from two tiered profits tax regime:
- professional reinsurance companies, captive insurance companies, corporate treasury centers and aircraft leasing companies;
- entities that already use preferential tax regime due to reception of profits from qualifying debt instruments.
In addition, two tiered profits tax regime for groups of connected entities is also restricted. Only one entity of such group can be selected by taxpayer to apply this regime. One entity is deemed to be connected entity of another in following cases:
- one of them has control over the other by holding more than 50 % of shares, participation interest or voting rights;
- all of them are under control of the same entity by holding more than 50 % of shares, participation interest or voting rights;
- if the first entity being a natural person carrying on a sole proprietorship business—the other entity is the same person carrying on another sole proprietorship business.
Dividends paid by a Hong Kong resident company to a foreign company are exempt from withholding tax in all cases. Also dividends paid by a foreign company to Hong Kong company will not be subject to income tax in Hong Kong.
Interest paid by a Hong Kong resident company to a non-resident is not subject to withholding tax.
Royalties paid by a Hong Kong resident company to non-resident may be subject to withholding tax in Hong Kong in cases when the copyright and / or intellectual property is actually used in Hong Kong, or when royalties in fact reduce the tax base for income tax. The effective rate is 4.95% for payments to persons who are not related parties to the Hong Kong royalty payer. If the parties are related, withholding tax at a standard rate of 16.5% is applicable.
Legislation of Hong Kong does not establish VAT, and capital gains tax is not levied in most cases. Capital gains may be taxed only in cases when the profits from disposition of assets are recognized as a result of commercial transaction. Thus, capital gains will be included in the income tax base and will be taxed at a standard rate of 16.5%.
In Hong Kong, there are no rules of controlled foreign companies, as well as currency control rules.
Accounting of Hong Kong companies
Unlike offshore jurisdictions, companies in Hong Kong shall not only maintain and keep accounting records, but also file it to the tax authorities. Accounting records should be maintained, kept and filed in accordance with the Companies Ordinance and the Inland Revenue Ordinance, regardless of the place of activity of the company (in the territory or outside the territory of Hong Kong).
Companies are required to maintain and in some cases file the following types of accounting records:
- Annual Return, that contains up-to-date information about shareholders, directors and registered office address of the company, as well as of its authorized share capital. In case if changes in the structure and / or capital of the company were made, the information about such changes shall be reflected in Annual Return. This information is publicly available. The Annual Return shall be approved by the director or secretary of the company, and the obligation to file it to the Register usually lies on the secretary. The annual report shall be filed to the Register in 42 days after the anniversary of the date of incorporation.
- Financial Accounts. Companies in Hong Kong are required to maintain and keep Financial Accounts. It shall be filed to the tax authorities (Inland Revenue Department, IRD) together with audit report and tax return in all cases if the company conducts business. Financial Accounts may be on paper or in electronic form in English or Chinese languages. Financial Accounts for each reporting period must be kept at the registered office address during 7 calendar years from the end date of such period.
- Audit. All active companies incorporated in Hong Kong are required to audit their financial accounts. Audit is not required only in case if the company does not actually conduct business and is “dormant”.
- Profits tax return. Hong Kong company receives from the IRD a form of Profit Tax return in a term from 12 to 18 months after the incorporation date. Such form of Profit tax return shall be filled and filed to the IRD in 1 month after the date of receipt.
The company shall select the date of the end of the first financial year from 12 to 18 months after the incorporation date, and subsequently such date will be the date of the end of each financial year. The first financial year can last up to 18 months, and the subsequent can last only 12 months.
If the company was not active during the reporting period, it may file a “zero” tax return without Financial Accounts. In such case, information about the company’s business activity is not requested in fact.
To prepare Financial Accounts and Audit, the company must provide the auditor with bank statements, invoices, shipping documents for goods and contracts for each transaction.
If profits are received from sources outside of Hong Kong and are not subject to tax in Hong Kong, after filing of application for tax exemption to the IRD, the inspectors may send a request to provide the following information:
- The organizational structure of the company, information about its presence in Hong Kong and / or abroad (location and size of the office, the number of employees and their names, positions, duties and salary);
- Description of the company’s actions during the process of making a profit with indication of the name of the officer and the place of the transaction (including the place of contact with the buyer or supplier, setting of prices, preparing and signing of sale and purchase agreements, the place of storage and delivery of goods);
- Methods of payment;
- Copies of contracts with each of the counterparties, their name and addresses.
Hong Kong Tax Treaties
By the beginning of 2018 Hong Kong has concluded Double Tax Avoidance Treaties (DTAA) with 39 countries and territories:
|Country / Territory||Date of Signature of Agreement||Date of Entry into Force|
|Mainland of China||11.02.1998||10.04.1998|
|United Arab Emirates||11.12.2014||10.12.2015|
Hong Kong’s participation in the exchange of tax information
At the moment, Hong Kong is participating in the exchange of tax information on request with most of the states and territories with which DTAA was previously concluded. The basis for such exchange is the bilateral agreement on the exchange of tax information (Tax Information Exchange Agreements, TIEA).
In addition, Hong Kong is also a party to the Multilateral Agreement of the competent authorities on the automatic exchange of information on financial accounts (MCAA) and has planned to begin exchanging the information in September 2018 (like Russia). According to information from the official website of the Organization for Economic Cooperation and Development, Hong Kong will exchange tax information with seven jurisdictions: Canada, Guernsey, Ireland, Mexico, Netherlands, South Africa, Japan. It is important to note that this version of list for automatic exchange is not final and can be changed before the exchange begins in practice.