(1) No profit tax for business activities done outside Hong Kong
Taxation in Hong Kong is based over the territorial source principle rather than based on residency. It results in individuals and companies incorporated in Hong Kong paying tax simply on income or profits earned from activities truly happening in Hong Kong. If there are no activities in Hong Kong, then there's no risk to tax in Hong Kong.
The location of where a company's activities happen is the key to whether a company's profits are taxable in Hong Kong. If profits are earned from activities that happen entirely past Hong Kong, then these profits wouldn't become taxable even if the company's transactions are done through the company's Hong Kong account.
For illustration, a Hong Kong trading company with a account in Hong Kong wouldn't become subject to Hong Kong taxes if:
(a) The company has no physical office in Hong Kong and simply uses our address for receipt of mail;
(b) The organization has no staff in Hong Kong and its staff rarely visits Hong Kong (e.g. total visits are less than 60 days a year);
(c) The company has an overseas office where its staff are based and work;
(d) The organization negotiates and signs contracts with its people and suppliers past Hong Kong;
(e) The organization has no people based in Hong Kong and doesn't have payments from customers' Hong Kong bank accounts;
(f) The organization has no suppliers based in Hong Kong and doesn't make payment to suppliers' Hong Kong bank accounts;
(g) The organization's merchandise don't enter Hong Kong.
It should be noted the question of whether a company has any activity happening in Hong Kong is a question of fact (and not a question of law). It needs be noted the Hong Kong tax authorities can check a company's claim it has no activities happening in Hong Kong by reviewing a randomly used transaction and checking where the many activities inside this transaction happen. It's therefore advisable to keep complete records to illustrate point that activities happening past Hong Kong including emails, faxes, itemised telephone bills (showing that calls are made), memos of meetings with customers and suppliers, travel receipts, passport replicas, purchase orders, sales orders, shipping documents etc.
We give assistance to many overseas buyers to benefit from Hong Kong's favourable tax environment including 1st planning of the corporate structure and on-going monitoring of the structure and business activities to ensure the continuing power run in a tax-free environment.
(2) Low Profit Tax rate for business activities taken place in Hong Kong
Profits tax is levied at a rate of 16.5% on taxable profits arising from activities happening in Hong Kong. Deductions are given for business expenses that are incurred in earning the taxable profits.
(3) Simple Taxation System
The taxation classes are comparatively easy with the following major categories
Profits Tax - based on organization trading profit
Salaries Tax - based on individual income
There's no capital gain tax, withholding tax on dividends, interest tax and sales tax (VAT).
(4) High Reputation
Hong Kong is one of the world's leading reputable international financial centres with recognized and great legal and banking systems. It gives confidence to our clients' business partners and investors for engaging business on.
(5) No Exchange Control
Funds are freely allowed in and out of Hong Kong very well.
(6) No Instant Capital Injection Requirement
In various countries, after the company has been installed, capital injection is required to be made inside a specified period. There's no such requirement in Hong Kong; investors can arrange capital injection according to their business time schedule and system. A high degree of flexibility for investors to arrange their flows.
In Hong Kong, business activities are done in the following forms:
(1) Sole proprietorship;
(2) Partnership; and
(3) Limited Risk Organization.
For Sole Proprietorship and Partnership, investors bear limitless liabilities. Business owners are personally liable for all debts and liabilities arising from their business activities. Also, under Hong Kong Laws, Hong Kong Identity card holders can discover Proprietorship and Enjoy business licences. Therefore, these 2 business forms aren't utilized by foreign investors. Foreign investors like using the third business form (i.e. Limited Risk Companies) where might your excellent benefits of limited business liabilities (limited to the few registered capital), a complete legal entity (person) to enter into any business contracts and agreements, variety of business scopes and free transferrable organization shares.
Hong Kong