Why isn't Hong Kong a tax haven?
As a business leader, you are naturally looking for the best conditions to enable optimal growth for your company. This is why, in particular, you want to launch your company abroad, in a territory that offers certain tax and legal advantages. But be careful about the location you choose for your company: if it is a tax haven, this may not be entirely legal, and you could therefore jeopardize your company's future.
What about Hong Kong? Can you launch an offshore company in Hong Kong? Is this territory on the OECD blacklist? Or on the whitelist? Discover all the explanations from Société HK.
Tax haven and offshore jurisdiction
What is a tax haven?
First of all, it is important to revisit the definition of a tax haven. It is a territory where taxation is reduced or nonexistent. In other words, it is a territory where the tax rate is really very low compared with that applied in OECD countries.
If tax havens have such a bad reputation, it is because they are highly opaque systems that encourage tax evasion.
Is Hong Kong an offshore jurisdiction?
There are a large number of offshore jurisdictions around the world. These may be described as tax havens. This is notably the case with the Bahamas, the British Virgin Islands, and Samoa.
But what about Hong Kong? Quite simply, it is not possible to set up an offshore company in Hong Kong. According to the OECD, Hong Kong is not a territory that can be classified as an offshore jurisdiction or, therefore, as a tax haven.
The explanation is simple. In Hong Kong, taxation is territorial rather than linked to the legal status of companies registered there. In tax havens, on the other hand, taxation depends directly on this legal status (the "International Business Companies").
To put it simply: yes, if you set up a company in Hong Kong, you will benefit from tax, legal, and banking advantages. Nevertheless, the framework is entirely legal, and transparency is the norm in this territory.
For example, a tax treaty has been signed between France and Hong Kong. If you are a French entrepreneur who decides to set up a company in Hong Kong, you will therefore not have to pay tax twice. And the good news is that this is entirely legal.
Transparency and legal framework
A territory on the OECD whitelist
The OECD has a blacklist comprising numerous territories that may be considered tax havens. Hong Kong is not on this list: this small territory in Asia is included on the OECD's white list of countries.
The OECD's white list includes states and territories that have implemented international standards by signing at least 12 agreements on the exchange of tax information. This list notably includes Hong Kong and the United Arab Emirates: territories that demonstrate transparency despite undeniable tax advantages.
Legally establish a company in Hong Kong
If you want to launch an offshore company in Hong Kong, you now understand that this is not a very good idea. At Société HK, we cannot recommend this option, as it is illegal.
However, we can assist you in setting up a fully legal company in Hong Kong. If you choose Société HK, you will have the assurance that your company complies with all applicable rules, so you can enjoy Hong Kong's many advantages without having to worry about the consequences.
Have a question about transparency in Hong Kong? Contact us to find out more!