Why Hong Kong?
Hong Kong is an exceptional place with a low taxation rate and high standard of living, attracting hundreds of thousands of people from all around the world to do business. Hong Kong International Airport is one of the busiest airports in the world, connecting to half of world’s population within a five hours’ flight. Being Asia’s second largest and the world’s third largest Foreign Direct Investment recipient, Hong Kong welcomes people from all backgrounds with no discrimination.
- Its low taxation and high standard of living, attract hundreds of thousands of people all around the world.
- Hong Kong International Airport is one of the busiest airports in the world.
- Being Asia’s second largest and the world’s third largest Foreign Direct Investment recipient.
- English and Chinese both are official languages. Hong Kong has distinct advantages as a hub for:
- A large number of trading companies and banks are based here, which has resulted in the availability of excellent trade finance facilities.
- Financial center with major international banks.
- The world’s leading offshore RMB center.
- Freeport with no import tariffs.
- A simple and low tax system with a territorial basis of taxation, it means, the profits that are sourced from Hong Kong are only subject to corporate income tax.
- Hong Kong’s strategic location makes it an ideal business gateway in Asia.
- Hong Kong is a historic export and import hub of the Asian continent.
- Hong Kong is in five hours’ flight accessibility from most major cities of the world and is well-connected by ferries and trains along with other efficient and affordable public transportation networks.
- Centre of free trade and ideal place to do business.
- Impose fewer restrictions and allowing free market forces to regulate exports and imports.
- Protective measures and subsidies as a means for avoiding balance-of-trade deficits.
- More than 60 million affluent shoppers, largely from Mainland China, visit the territory every year, which makes Hong Kong a perfect testing ground for your products prior to entering other Asian markets such as China or Japan.
Regional holding companies
- Asia’s 41st most leviable city, with a blossoming multinational population.
- Expansion of double tax treaty network (DTT).
- Tax-efficient jurisdiction to hold intellectual property.
- Given sound infrastructure, an expanded network of treaties, and the existence of tax on local source income.
- Hong Kong is compliant with international standards for tax transparency.
Simple Tax Regime
Hong Kong benefits investors with its low-tax regime. Tax in Hong Kong is bifurcated in slabs and is levied annually ;
- In the first slab, profit up to 2 million HKD is taxed at the rate of 8.25%.
- Profit beyond that amount would be subject to be taxed at 16.5%.
- For proprietorship and partnership two tax slab of 7.5% and 15% are laid down.
- The tax is levied only when corporations makes profit.
However, corporations established in Hong Kong can take advantage of a tax exemption by Inland Revenue Department (IRD) for their gains from the outward of the country. Hong Kong maintains three fundamental types of tax –
- Corporate profits tax: Inward profits taxed at 8.25 to 16.5%. Outward profits not taxable.
- Salary tax: Net Chargeable Income Tax rate;
- Income from HKD 1 to HKD 50,000 is liable to tax at a rate of 2% ;
- Income from HKD 50,001 to HKD 100,000 is liable to tax at a rate of 6%;
- Income from HKD 100,001 to HKD 150,000 is liable to tax at a rate of 10%;
- Income from HKD 150,001 to HKD 200,000 is liable to tax at a rate of 14% ; and
- Income from Above HKD 200,000 is liable to tax at a rate of 17%.
- Property tax: 15% on the net assessable value of the property.
In Hong Kong taxes not applicable in –
- Capital gains tax.
- Dividend tax.
- Hotel accommodation tax (HAT).
- Value-added tax, Goods & Services Tax, or Sales tax.
- No withholding tax (except on royalties) .
- No inheritance tax.
- No estate duty.
- No debt to equity rules.
Hong Kong Companies
Hong Kong Law offers various legal structures. The most appropriate type of entity will depend on the intended activities, financial aspects, willingness to take on ongoing obligations, tax issues, and other factors. To establish in Hong Kong, a representative office, a branch, or a subsidiary (limited liability Company) can be considered in this respect.
- No legal restriction for registration or institution of sole proprietorship except business registration compliance.
- Partnership Ordinance governs unlimited and general partnerships in Hong Kong.
- Company limited by shares – Members’ liability is limited by the articles of association to the amount due on the shares held by them.
- Company limited by guarantee – Non-profit-making organizations are mostly registered under this category.
Procedure to establish an entity in Hong Kong –
- Name & type of a company
- Submission of an application.
- Collection of certificates.
- Authorizations or licenses
Hong Kong companies need to renew their Certificate of Business Registration, prepare accounts and undertake an audit and file a tax return on annual basis. A representative office is not required to register with the Hong Kong Companies Registry.
Our Hong Kong office is a Licensed Trust or Company Service Provider (TCSP) with a highly qualified and committed team that will give you the support you need to set up your business in Hong Kong and to remain fully compliant at all times. Our team also has extensive experience with trusts, wealth planning and family office support and will help you to identify and put in place proper structures and saving strategies to ensure you can achieve what is most important for you.
Hong Kong is an attractive destination to Indian companies and it is recognized as a successful business center because of its stable political environment, productive legal system, and a pro-business setup that offers plenty of lucrative opportunities for businesses and productive workforce.
In addition to this, the strategic location of the jurisdiction, attractive tax regime, and high-end infrastructure combined to interest Indian clients in setting up business in Hong Kong.
To know more, please download our simple guide on Hong Kong – India Trade Relations.
Author: Chandrawat & Partners
Topic: Hong Kong India Trade Relations