Hong Kong Company Incorporation Overview
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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 16.5 per cent. There is no tax in Hong Kong on capital gains, dividends and interest earned.
The Hong Kong Profits tax is levied on the "assessable profits" of corporate entities, partnerships, trusts and sole proprietorships. It is levied according to the "territorial principle". In other words it is the source of the income, not the nationalities of the entities involved that determines the applicability of the tax. This means that only income which meets the following three conditions is subject to the Hong Kong profits tax:
The residential or non-residential status of the entity is irrelevant. Neither is the tax status of the income in a foreign jurisdiction. Advance tax rulings are available in Hong Kong and you are encouraged to take advantage of it to determine whether your profits are taxable or tax exempt.
The "source of income" for profits tax purposes has been defined as the geographical location of the operation which substantially gave rise to the income, which has been further interpreted to mean that:
A Booking Center is especially applicable to those companies wishing to have a Hong Kong point of presence but actually conduct their business elsewhere. A booking center is an entity that does not negotiate or draft the sale agreement (which is carried out abroad) but merely issues an invoice on instructions, operates a bank account and maintains accounting records covering the transaction, In this case, then the income from such a transaction is not deemed Hong Kong income for profits tax purposes.
Shares & Securities : Gains from shares and securities purchased and sold on the territory's stock exchange are deemed Hong Kong source income for profit tax purposes (assuming the entity is subject to profit tax on such an activity).
Key Corporate Features
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).
Infrastructure & Economy
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.
• Exchange Control
• Type of Law
• Principal Corporate Legislation
• Type of Company for International Trade and Investment
• Restrictions on Trading
• Powers of Company
• Language of Legislation and Corporate Documents
• Shelf Companies Available
• Language of Name
• Registered Office Required
• Name Restrictions
• Names requiring Consent or License
• Suffixes to Denote Limited Liability
• Disclosure of Beneficial Ownership to Authorities?