Within 155 years the territory of Hong Kong was in the possession of the Great Britain. On July 1, 1997 Hong Kong was returned by the Great Britain under the sovereignty of China and became officially known as a Special Administrative Region (SAR) Xianggang of Hong Kong China. Hong Kong has kept a widely degree of autonomy. It has gained independence in the administrative, legislative and judicial systems (except for matters concerning to the defense and foreign affairs). It has retained the status of free port, a separate customs area, the right to economic and cultural intercourse with various countries and international organizations. Advantageous geographical position of Hong Kong has made it one of the largest monetary and financial centers in the world, as well as a major commercial, industrial and transport center of Asia.
Companies (Private Company Limited by Shares) are incorporated in accordance with the Companies Ordinance in 1933, the Business Registration Ordinance in 1959 and can carry out various activities. In order to incorporate the company it is necessary to have a registered office in Hong Kong and the local secretary (legal or natural person). The company may have one director who may be natural or legal person of any residence. The same is true with regard to shareholder of the company.
The world community recognizes Hong Kong as a perfectly legal (not offshore) state. Hong Kong is not in any “black lists”, that does not evoke the relationship to the company, as to offshore company. International jurisdiction prestige is both a good environment for development of real business: a simple tax system with low tax rates, the absence of exchange control, financial and other professional services, the absence of taxation subject to the requirements of not doing business in Hong Kong.
Thus, the withholding tax on passive income (such as payment of royalties on offshore subsidiary company) is not more than 1, 6%, depending on the situation. The standard rate of tax on wages is 15%, but it can be differentiated. Tax on income derived from sources inside the country is 16%. There may be additional taxes (but only if to do business in Hong Kong): the stamp duty levied in case of the transfer of real property rights (2.75%) and the transfer of rights on securities and shares (0.3%), etc. When profit-making is outside of Hong Kong, the companies do not have obligations to pay taxes in Hong Kong. In this case, they pay a fixed license fee, which depends on the size of registered capital. Term of payment of the fee is annually, at the end of the calendar year from the date of incorporation. Regardless of whether the company led activities, including in Hong Kong, or does not lead, there is a need to submit the report:
Annual Return (so-called administrative report). It contains information about the registered office, partners and the management bodies of the company.
Financial Accounts. It contains information about the company’s financial activities, which are fed to the tax authorities. The reports shall be certified by the auditor. If the company did not carry out the active activity, it may file a “Dormant Accounts”. In any case, bookkeeping is necessary. So, after 18 months from the date of registration of the company tax returns comes to.
Within two months, accountants and auditors of our agent should prepare a report to the tax department of Hong Kong. It will be necessary for the preparation of the report: bank account statements, bills (invoices), receipts, contracts and other documents showing the financial activity of the company. If these documents confirm the absence of doing business in Hong Kong, the company’s profits will not be taxed. In the case of opening an account outside of Hong Kong, the activities of the company (for purposes of accounting and auditing) are automatically recognized as missing. So, is is submitted the zero audit and accounting.