Hong Kong

Key facts Hong Kong taxation

Hong Kong does not have Offshore companies but distinguishes taxation of profits according to the territoriality principle. According to this principle, profits accrued in Hong Kong are taxable at the general corporate tax rate of 16.5%. Profits of a Hong Kong company accrued outside of Hong Kong are not taxable with corporate tax.

When determining the profit-making location of the company, the physical sending or reception of goods as well as the place of provision of services are crucial.

Furthermore, the place of management can gain importance if the foreign director of the foreign shareholder of a Hong Kong company are residing in Hong Kong frequently. Generally, the principle applies which sets this time criterion at more than four one-week stays per year. However, usually this is not checked.

Concluding a contractual agreement in Hong Kong leads to the profits of such contract to become taxable in Hong Kong.

Hong Kong does not have a capital gains tax.

General Information

Economy: With a GDP in 2011 of an estimated USD 49.137 Hong Kong can count itself amongst the wealthy economies in the world.
Hong Kong is one of the largest global finance centres. Hong Kong’s economy is highly dependent on export. Hong Kong serves as an “export gate” to China.

Types of companies: The Limited Liability Company, Ltd, or abbreviated as LLC, constitutes the most commonly used type of company. Besides this, there is also the Limited Partnership.

Minimum Capital Requirement: Shares of Hong Kong companies do not have a legally prescribed nominal value assigned to them and have par value.
There is no obligation to pay in the capital. Companies must be formed with at least one share. A share premium is possible and is taxable under the share premium tax of 0.1%.

Companies are commonly formed for instance with a share capital of HKD 10.000 and a number of shares of 10.000 at HKD 1.00 each.

Restrictions: Business restrictions are merely existent in the banking as well as the financial sector.

Taxation: No taxation of income coming from outside Hong Kong. See text above.

Annual Tax return filing: Mandatory bookkeeping applies, including daily registration of incoming and outgoing flow of funds. Book keeping must be kept for at least 7 years. Accountancy books of a company can also be kept outside of Hong Kong. Annual tax return filing must be done, the annual tax returns are to be kept in Hong Kong.

Financial Statements: Must be drafted, audited and handed in to the financial authorities. The following companies are exempt from this obligation:

  • Companies with an annual income of less than HKD 500.000
  • “dormant” companies (i.e companies without business relevant activities )

Official registered address and agent of incorporation: Registered address of the company must be in Hong Kong. One has to appoint an agent of incorporation who is resident in Hong Kong.

Company secretary: A secretary resident in Hong Kong is mandated by law.

Directors: At least one. Nationality and place of residence irrelevant. Can be a natural or a legal person.

Shareholders: At least one.

Disclosure of Ultimate Beneficial Owner: Yes, must be documented.

Directors publicly known: Yes, Hong Kong‘s register of companies is publicly accessible to natural and legal persons resident in Hong Kong.

Shareholders publicly known: Yes, Hong Kong‘s register of companies is publicly accessible to natural and legal persons resident in Hong Kong.

Bearer Shares: Bearer shares are not permitted in Hong Kong

Language of corporate documents: English, in parts English and Chinese.

Time needed for formation: Prior to the company’s formation, the requested name is checked which takes one to two working days. The subsequent registration of the company usually takes two to three working days. The entire process of incorporation including apostilling corporate documents, usually takes nine to twelve working days.