Hong Kong is the world’s tenth largest trading economy, and is a popular domicile for company incorporation in the Far East. The main features of company operation include:
• Companies are only taxed on income earned in Hong Kong; the current rate is 17.5 per cent.
• No exchange controls
• No minimum capital required.
• Public companies can issue bearer shares.
• Companies must have a minimum of one shareholders.
• Annually audited accounts must be filed.
Most companies incorporated in Hong Kong are for commercial use within the territory so Hong Kong offshore companies are not generally regarded as tax avoidance vehicles by other countries’ authorities.
Types of company include:
• Trading companies. These are often used by non-residents who use Hong Kong’s facilities to international trade. It include sourcing inexpensive from Asia and selling expensive to Europe, America and Australia. The company may receive a trading profit or commission for the trading, it may trade in its own right so that the ultimate importing company in a high-tax area can open a transferable letter of credit in favour of the Hong Kong company and that company can arrange a partial transfer of credit to the manufacturer. Purchases and sales are negotiated, concluded, enforced and effected wholly outside the Hong Kong, the company can still maintain banking facilities and process its shipping documentation within the territory without it being regarded as having Hong Kong source income and tax zero. It is commonly used to “park the profit in Hong Kong for tax free”.
• Administration companies. These are used as regional headquarters or for administration by international companies, and pay tax on a nominal part of profits. Over 1,300 international businesses have administration companies in Hong Kong.
• Holding companies. Hong Kong imposes no Capital Gains Tax, so companies can sell their subsidiaries for tax free gain; dividends received from subsidiaries are not assessed for Hong Kong tax.
• Licensing companies. These can be used to shift intangible asset profits.