Why set up your company in Hong Kong?
Hong Kong is your gateway to Asia.
Why Hong Kong?
Economically
- HK is the "gateway" to China
- At the center of one of the world's most populous and fastest-growing regions
- HK is not on the OECD's blacklist of tax havens
From a tax perspective
- Territorial taxation: no corporate tax if the activity is conducted outside HK
- No customs duties (free port)
- Low payroll costs
In banking terms
- A network of large, strong international banks
- Obtaining bank cards
- Efficient e-banking
From a legal standpoint
- Based on Common law: transparency and efficiency
- Optimized registration process
- All documents are in English
General overview of Hong Kong
Hong Kong is an internationally recognized financial center. Located in southeastern China, it joined the People's Republic of China on July 1, 1997. It is a Special Administrative Region within the People's Republic of China, with its own laws and judicial system.
There is no legislation specifically governing "offshore" companies in Hong Kong. All companies are incorporated under the same legislation, whether they conduct local or offshore activities. Hong Kong therefore applies a territorial tax system. The principle of territorial taxation applied in Hong Kong is summarized in the following definition from Hong Kong's Inland Revenue Department: "Hong Kong adopts a territorial basis for taxing profits derived from a trade, profession, or business carried on in Hong Kong. Profits Tax is only charged on profits which arise in or are derived from Hong Kong. In simple terms this means that a person who carries on a business in Hong Kong but derives profits from another place is not required to pay tax in Hong Kong on those profits."
However, it is important to note that this general rule exempting the profits of an "Offshore" company in Hong Kong from tax is now being challenged by Hong Kong's tax authorities. We invite you to read our page concerning the taxes applicable to a Hong Kong company.
The advantages of Hong Kong
The advantages of a company based in Hong Kong are:
International image
Hong Kong has a good international reputation.
Regional implantation
Its location is ideal for a regional hub in Asia. Unlike Singapore, having a resident Director is not required.
Capital gains and dividend taxation
Capital gains and dividends received are not taxed. Distributed dividends are not subject to withholding tax.
Common Law
Local law is based on the English common law legal system (allowing flexibility in the creation and operation of companies).
Banking network
The banking network is excellent, with major international banks and online banks offering Internet Banking and multi-currency accounts.
International trade
A company based in Hong Kong can do business worldwide, and there are no restrictions on a company's directors and shareholders.
The disadvantages of Hong Kong
The disadvantages of a company based in Hong Kong are:
Corporate income tax
Hong Kong is not a tax haven! The profits tax rate is 16.5%, and it is now almost impossible to obtain a tax exemption.
Economic substance
Not suitable for setting up a holding company (parent company) if the company does not have genuine operations in Hong Kong, with an office, staff, etc., to demonstrate “economic substance” and thus benefit from the advantages of tax treaties.
Bank account opening
Opening a bank account locally with certain banks can be somewhat cumbersome (you need to provide proof of activities for the bank's Know Your Customer requirements).
Tax treaty network
A limited network of tax treaties.