Hong Kong

Key Corporate Features
General Information
Company Information
Compliance

Key Corporate Features

General Information

Hong Kong is on the south east coast of China and consists of a large number of islands and a part of the mainland totalling approximately 1.064 sq km. On 1 July 1997 all of Hong Kong reverted from British Control back to China and became a Special Administration Region -SAR- within the People's Republic of China (PRC).

The number of inhabitants is about 7 million.

Hong Kong elects its own legislature and maintains its own court structure.

The future of Hong Kong under the one country - two systems philosophy: the SAR has executive, legislative and independent judicial power. The capitalist system, legal structure and lifestyle remain unchanged. Hong Kong remains a free port with a free flow of capital and a freely convertible Hong Kong dollar.
With China pushing forward with the modernisation of its own economy, the PRC has expressed the wish that Hong Kong should assist in this endeavour. It has stated that its future development will be based on market led reforms with socialist characteristics and this has led to the opening up of its economy to foreign investments. It is widely recognised that Hong Kong is and will continue to be a significant gateway to China.

Hong Kong has excellent communication facilities and a major new international airport.
Hong Kong is the leading South East Asian centre for both finance and commerce and ranks as the world's third largest financial centre after New York and London. The Hong Kong Stock Exchange is the most active in Asia outside Japan.

The official languages are English and Chinese, with English being used in the commercial and political context and Cantonese Chinese used widely in industry and domestic trade.

The currency is the Hong Kong Dollar, which is officially pegged to the US Dollar. (approx: 1 US$ = HK$ 7.74 to HK$ 7.82)

There is no exchange control.
The type of law is Common Law based on English Common Law.
The principal corporate legalisation is the Companies Ordinance (Cap. 32).

Company Information

The type of company for international trade and investment is the Private Company limited by shares.

The procedure to incorporate: submission of Memorandum and Articles of Association and a Declaration of Compliance. A notice of situation of registered office is also required to be filed within fourteen days of the date of incorporation.

The following restrictions on trading apply: it can’t undertake banking or insurance activities or solicit funds from or sell its shares to the public.

A Hong Kong Company has all the powers of a natural person.

The languages of legislation and corporate documents are Chinese and English.

A registered office is required, it must be maintained in Hong Kong.

It is not possible to reserve a name. It is essential to check that there is no similar or identical name on the register, which would prevent the company being incorporated.

Shelf companies are available.

The time to incorporate: approximately two weeks from the submission of documentation.

The following name restrictions apply: a name that is similar to or identical to an existing company; a name that constitutes a criminal offence or is otherwise contrary to the public interest; a name that implies royal or government patronage.

Names requiring consent or licence: building society, Chamber of Commerce, co-operative, imperial, Kaifong, mass transit, municipal, royal, savings, tourist association, trust, trustee, underground railway, bank, insurance, assurance, reinsurance, fund management, asset management and investment fund.

The following suffix denotes limited liability: Limited.

There is no disclosure of beneficial ownership to authorities.

Compliance

The standard authorised share capital is HK$ 1.000. The minimum issued capital is two shares of par value. Shares of no par value are not permitted.

The following classes of shares are permitted: ordinary shares, preference shares, redeemable shares and shares with or without voting rights.

The types of shares permitted include deferred, founders and management shares.

Hong Kong is one of the few countries in the world that tax on a territorial basis. Many countries levy tax on a different basis and they tax the world-wide profits of a business, including profits derived from an offshore source. Hong Kong profits tax is ONLY charged on profits derived from a trade, profession or business carried on in Hong Kong. Consequently, this means that a company which 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. Hong Kong sourced income is currently subject to a rate of taxation of 17,5 per cent. There is no tax in Hong Kong on capital gains, dividends and interest earned.
The principle of Hong Kong income tax is that it is a tax on income that has its source in Hong Kong rather than a tax based on residence. Income sourced elsewhere, even remitted to Hong Kong, is not subject to Hong Kong profits tax at all. Consequently, if a Hong Kong company's trading or business activities are based outside Hong Kong no taxation will be levied.
The factor that determines the locality of profits from trading in goods and commodities is generally the place where the contracts for purchase and sale are effected. Effected does not only mean that the contracts are legally executed. It also covers the negotiation, conclusion and execution of the terms of the contracts.
If a business earns commission by securing buyers for products or by securing suppliers of products required by customers, the activity which gives rise to the commission income is the arrangement of the business to be transacted between the principals. The source of the income is the place where the activities of the commission agent are performed. If such activities are performed through an office in Hong Kong, the income has a source in Hong Kong.

Hong Kong has no double taxation agreement with any country, with the exception of a limited treaty with the United States of America relating to shipping matters only.
As Hong Kong taxes on a territorial basis, this means that income derived from a local company from outside Hong Kong will not generally suffer double taxation in Hong Kong. Many countries which tax their residents on a world-wide basis also provide their companies operating in Hong Kong with unilateral tax credit relief for Hong Kong tax paid on income derived in Hong Kong. The Hong Kong Inland Revenue allow a deduction for foreign tax paid on a turnover basis in respect of income which is also subject to tax in Hong Kong. Therefore, businesses operating in Hong Kong do not generally have problems with double taxation of income.
Withholding taxes, currently being 5,25%, are only imposed on royalties paid to non-resident recipients not related to the payers. If they are related parties then a tax rate of 17,5% will be applicable.

The Business Registration Fee (BRF), currently HK$ 2.600, is due and payable within one month of the date of incorporation and then annually on the anniversary of the first payment.

A Hong Kong company must keep accounting records, which may be kept at the registered office address or elsewhere at the discretion of the directors. Every company must appoint an auditor who must be a member of the Hong Kong Society of Accountants and hold a practicing certificate. Although there is no requirement to file accounts with the Registrar, there is a requirement to file accounts with the tax authorities.

The minimum number of directors is two, who may be natural persons or bodies corporate. They may be of any nationality, and need not be resident in Hong Kong.

A Hong Kong company must appoint a company secretary, who may be a natural person or a body corporate, but the company secretary must be resident in Hong Kong.

The minimum number of shareholders is two. If the number of shareholders falls to one, the remaining shareholder is personally liable.

Contact: info@personaloffice-bv.com