Hong Kong is in international city, and in fact so many investors prefer to register Hong Kong company as their offshore company and run offshore business. In addition to the above benefits, I would like to highlight some you may not know:
1. Hong Kong economy system is opened and market oriented with a little government intervention. Investors can choose what businesses they do. In fact, from global statistics records, Hong Kong is No. 1 economy freedom.
2. The capital flows of money between Hong Kong and other countries are freedom, and without controls or restrictions. All currencies such as US$, GBP, Japanese yen, etc are remitted freely between Hong Kong and other countries.
3. Offshore business activities are 100% tax free. The Hong Kong tax law has confirmed that only local business is subject to profits tax, overseas business registered in Hong Kong is offshore business and so is not subject to Hong Kong profits tax. For example, if the international businessman engages in international trading in such as way that he buys goods from China and sells to UK or USA. If both buying activities and selling activities are not happened in Hong Kong, then the profits from that trading business are regarded as offshore profits, and are not subject to Hong Kong profits tax.
4. Low tax rate. Even the business is done in Hong Kong, the tax rate is only 16.5% of net profits. The tax rate is absolutely low, with no other tax systems such as VAT, business tax, capital gains tax, etc.
5. Formation requirement is very simple. An overseas person can be appointed as the shareholder and director of a Hong Kong company, he only finds local professional firms to provide appointment of secretary and provide registered office address.
6. No capital investment is required. The shareholder is only required to sign up the M & A to declare that he will contribute capital to the company, and he doesn’t require to pay money to the company.
7. Free use of company name. In other countries, some names are not freely used such as Holding, Group, International ...., etc. However, in Hong Kong, the name is freely used, provided that they are not registered in Hong Kong.
8. It is easy to open an offshore bank account with using Hong Kong company, the investor is required to provide his address proofs, passsport copy, Hong Kong company formation documents and a general description of his business. HSBC and Standard Chartered Bank, as in international bankers, can accept the above documents and open an offshore bank account with multi-currencies and internet banking facilities included within a couple of days, or even in some cases the same day. Hong Kong company is also acceptable from other overseas bankers to open offshore bank accounts.
9. Legal system is using common law and equity that applied in UK and other Commonwealth countries.
10. The common form of Hong Kong company is private limited company. It is private in nature and limited in liability for shareholders.
11. Corporate structuring is allowable. An overseas company can be appointed as corporate shareholder and director of Hong Kong company. For example, a BVI company can be apponinted as a director and shareholder of Hong Kong company.
12. Trust law is applicable in Hong Kong. If the investor, for his personal reasons, wants his status being hidden, he can do so with a trust arrangement that the trustee holds the shares for him (as a beneficiary) and he holds the trust deed which proves him a real owner of the shares. The trust law is applicable in Hong Kong. Remember trust documents or such laws are not enforceable, ineffective, invalid or void in other countries such as China.
13. Accounting records are required to keep, and annual statutory audits are required to file to Hong Kong Tax Departments.
Please note this final point. It seems a disadvantage. However, it is an advantage too. This point is also the reason why we suggest choosing Hong Kong company as an offshore company. Before understanding more, please read some Hong Kong key laws.
In IRD (Inland Revenue Department of Hong Kong) law, S.51 has clearly required Hong Kong Ccmpany to keep proper records and accounts for all businesses so as to ascertain the true figures of incomes, losses or expenses.
S.14 of IRD law says that the profits are chargeable to Hong Kong profits tax if the business activities are done in Hong Kong. In other words, if the business activities are not done in Hong Kong, the profits are not chargeable to Hong Kong profits tax. .The strong leading cases such as Hang Seng Bank case and HK-TVB have ruled out that offshore profits are tax free. Hong Kong only charges local profits tax, not offshore profits tax.
S.121 of Hong Kong Company law also requires the Hong Kong company to keep proper books of accounts so as to produce annual financial statement. S.131 of Hong Kong Company law requires an auditor to be appointed annually to audit the financial statements and issue an auditor report.
What is the purpose ? First, the audited reports are required to lay down before the Annual General Meetings (AGM) for sharehoders to discuss and get approval; secondly, the most important for the investors, it is required to file to the IRD (Inland Revenue Department of Hong Kong) and reported to the IRD that the Company has done business and has made a lot of profits and now request to claim exemption of profits tax. Under the general procedure works, the IRD will give notice to you an evidence that the profits are not subject to Hong Kong profits tax. Government has your proven records that your huge money comes from legal business.
In fact, it is the procedure I never find in other countries that:
1) the offshore company keeps accounts and records;
2) Appointment of auditor to do the audit and issue an auditor report;
3) hold AGM and approve an audited account and file to IRD;
4) file relevant documents to IRD and claim offshore profits;
5) the IRD confirms that your company is not required to pay tax.
How wonderful, isn’t it ? You, as international investors, do international business, and you only find a good offshore professional to handle all the paper works for you, and do annual accounting, auditing, and tax filing, and claim offshore profits. It means you pay zero tax, even you made million, or billion of dollars.