UK
Malta
Seychelles
Oops! Something went wrong while submitting the form
Hong Kong
Company formation in brief
Accession to China has not affected Hong Kong Companies Act and companies taxation, and until 2047, Hong Kong retains its administrative and legal system virtually unchanged.
Hong Kong has been a very popular jurisdiction in the offshore industry, and foreign investors may be interested in the establishing of entities of such organisational and legal forms as:
• Private company limited by shares
• Public company limited by shares
• Limited partnership
Private company limited by shares may be established by one shareholder and is characterised as follows:
• minimum capital required — HK$1;
• maximum number of shareholders (physical and/or legal persons of any residence) — 50;
• one director (physical or legal person of any residence) may manage the company;
• a company must have a secretary, Hong Kong resident (physical or legal person);
• the law provides for having nominee shareholders, directors and secretary in the company;
• no bearer shares may be issued by the company, all shares shall have a nominal value;
• shares may not be publicly offered, any shares transfer shall be approved by the general shareholders’ meeting;
• annual financial statements certified by a local auditor needs to be duly filed in Hong Kong .
Public company limited by shares may be established by one shareholder and is characterised as follows:
• minimum capital required — HK$1;
• maximum number of shareholders (physical and/or legal persons of any residence) is unlimited;
• one director (physical or legal person of any residence) may manage the company;
• secretary, Hong Kong resident (physical or legal person);
• the law provides for having nominee shareholders, directors and secretary in the company;
• both registered and bearer shares may be issued; all shares shall have a nominal value;
• shares may be publicly offered but prospectus announcing shares issue shall be published before their distribution;
• no shares transfer needs to be approved by the directors’ and shareholders’ majority;
• annual financial statements certified by a local auditor needs to be duly filed in Hong Kong .
Limited Partnership may be established by two physical or legal persons; they are not required to pay any charter capital; it is characterised as follows:
• Maximum number of partners – 20;
• at least one partner is unlimitedly liable for the debts and obligations of the entity. Other partners may have limited liability pro rata to to their shares in the entity;
• Limited Partnership is managed by general partner;
• business license is required. Otherwise, the limited partnership status is lost, and all partners’ liability for their entity’s debts and obligations will be unlimited. Annual financial statements certified by a local auditor needs to be duly filed in Hong Kong .
The Hong Kong law does not provide for any differences in the approach to the establishing and taxation of resident and non-resident entities operating in Hong Kong. Moreover, the law has no provisions specifically regulating operations of offshore companies, i.e. companies operating outside Hong Kong. Resident companies are defined as companies either incorporated in Hong Kong or having a centre of management and control situated in Hong Kong.
In general, Hong Kong tax authorities apply the following method of calculating and collecting taxes to all local companies:
• income generated by companies from local territorial sources is taxed in Hong Kong at a rate of 16.5%;
• income generated from sources outside Hong Kong (offshore profit) is not subject to taxation in Hong Kong.
Please note that Hong Kong has recently introduced a two-tiered profits tax rate regime which reduces the corporate profits tax rate to 8.25% for the first HK$2 million of taxable profits. Taxable profits of companies over HK$2 million will still be subject to the 16.5% rate.
In Hong Kong, neither capital gains, dividends and interests are taxed, nor value-added tax is charged.
It should be noted that each Hong Kong company (if it was active in the reporting period) needs to provide the following documents and information to the auditor for preparation and delivery of its annual financial reporting:
• Description of economic activities, names and addresses of main counterparties, both sellers and buyers;
• Bank statements;
• Bank transactions register (in any form) in respect of receiving and transmitting funds (in chronological order), specifying amounts, recipients’ and payers’ names, account numbers, dates, and purposes of corresponding payments effected to and from the account;
• Purchase and sale invoices register (in any form) in chronological order, specifying amounts, recipients’ and payers’ names, invoice numbers, dates of receipt and dispatch of goods (services), and specific subjects of corresponding invoices;
• Purchase and sale invoices;
• Shipping and logistic documents;
• All costs (and supporting documents) attributed by the company and its directors to business;
• Contracts, if the company or its staff receive fees or other remuneration;
• Information about salary paid to each company’s employee in the reporting period.
Staff employed by Hong Kong companies include both directors and other physical persons, residents and non-residents in Hong Kong, who provide services to the company within or outside Hong Kong and who are employed by the company full-time or part-time. This requirement does not apply to corporate directors, secretaries and agents.
It should be noted that the relevant form of the Employer's Return of Remuneration and Pensions (B.I.R. 56A и I.R. 56B) must be submitted to the Inland Revenue Department (“IRD”) within one month from 2 April to 1 May.
The Employer's Return must include information in respect of each employee if he/she:
• is not married, and his/her annual income is HK$100’000 or more;
• is married (regardless of the earned income);
• does not work full-time (regardless of the earned income);
• is a director (regardless of the earned income).
The unmarried person’s income not to be taxed in Hong Kong in the 2006-2007 reporting period is HK$100’000.
The Employer's Return shall be submitted to the Inland Revenue Department within one month even if:
• the company has no staff (a "zero" return to be submitted);
• the company has not started business operations;
• The company has ceased its operations.
If, as of the time of completion of the Employer's Return, an employee has no ID card issued in Hong Kong, the company has to specify his/her passport number,
position, place of residence and marital status (married/unmarried).
The Employer's Return is submitted for a period of 1 April of current year through 31 March of next year.
Each director shall specify his/her remuneration received, both in the form of salary and in another form, for example, as marketing services fee, etc.
As for remuneration for such other services provided to the company by its directors outside Hong Kong, it is generally not subject to Hong Kong payroll tax.
However, if the employee is paid for holding the Director’s position only, such remuneration may be subject to Hong Kong payroll tax. And the Hong Kong Inland Revenue Department may ask any questions and request any supporting documentation (such as travel documents) to determine whether the director's remuneration is subject to payroll tax.
Therefore, in order to avoid undue questions, Hong Kong auditors recommend that directors who earn a formal paycheck should sign a simple contract with the company to reflect the services provided by them related to making and signing agreements, issuing invoices, holding consultations and negotiations, etc.
As to the other staff, in order to avoid Hong Kong payroll tax, it is usually sufficient for them to perform all paid work outside Hong Kong, and not to come to Hong Kong for carrying out any business activities.
If a “zero” return is filed which means that the company has been idle, the director must also sign a relevant statement to enable the auditor in Hong Kong to file the return on behalf of the company. At the same time, the Hong Kong tax authorities do not consider “inadequate” Hong Kong company directors and staff having no formal paycheck because they assume that everyone may have more than one source of income.
Late filing of the Return with the Inland Revenue Department entails fines or judicial sanctions.
In accordance with the double taxation agreement between Hong Kong and Mainland China:
- dividends paid by a Chinese company to its shareholder, a company in Hong Kong, are subject to taxation in China at a reduced tax rate. However, for the Hong Kong company to enjoy the reduced tax rate it must hold at least 25% in the Chinese company;
- interest and royalties paid by a Chinese company to its shareholder, a company in Hong Kong, are subject to taxation in China at a reduced tax rate. However, for the Hong Kong company to enjoy the reduced tax rate it must also hold at least 25% in the Chinese company;
- capital gains received by a Hong Kong company from selling a Chinese company’s shares are not subject to taxation in China.
Austria, Belarus, Belgium, Brunei, Cambodia, Canada, China, Czech Republic, Estonia, Finland, France, Georgia, Guernsey, Hungary, India, Indonesia, Ireland, Italy, Japan, Jersey, Korea, Kuwait, Latvia, Liechtenstein, Luxembourg, Macau, Malaysia, Malta, Mauritius, Mexico, New Zealand, Pakistan, Portugal, Qatar, Romania, Russia, Saudi Arabia, Serbia, South Africa, Spain, Switzerland, Thailand, The Netherlands, United Arab Emirates, United Kingdom, Vietnam.
Denmark, Faroes, Greenland, Iceland, Norway, Sweden, United States.
There are more than 100 reportable jurisdictions effective from 1 January 2020. However, Hong Kong will only conduct AEOI with a reportable jurisdiction when an agreement is in place with that reportable jurisdiction to provide the basis for exchange.
As of October 2022, Hong Kong has activated exchange relationships for CRS purposes with more than 70 jurisdictions based on either a bilateral or multilateral competent authority agreement for CRS.
Oops! Something went wrong while submitting the form
