Hong Kong is a Special Administrative Region of the PRC. Otherwise, it is called one of the four "Asian Tigers" - Asian countries, whose economies have shown particularly high growth rates in recent decades. Good legislation, low levels of corruption and clear tax rules have made Hong Kong a very popular jurisdiction for doing international business. Hong Kong is the world's third largest financial center. It houses about 80% of the headquarters and head offices of the largest multinational corporations.
At the same time, the favorable administrative and tax conditions created in Hong Kong had a downside: some countries began to classify Hong Kong as “offshore”. The characteristic features of offshore zones are zero taxes on income, closed registers of directors and shareholders, as well as the absence of requirements to audit. Therefore, they are traditionally used in international tax planning in order to optimize taxation, protect their assets and create corporate structures for international investment and trade.
Officially, Hong Kong is not an offshore zone. However, local legislation is developed in such a way that non-resident companies do not pay any taxes if they do not conduct their business in Hong Kong and do not own any commercial real estate within the jurisdiction of the country. All companies in Hong Kong, whether they do business in the SAR or not, must maintain accounting records, undergo annual audits and file tax returns. Income earned by Hong Kong companies is subject to income tax of 16.5 percent. It is important that only those incomes that are received as a result of activities in Hong Kong are taxed. Income earned by a Hong Kong company from operations outside of Hong Kong is exempt from taxation.
The main advantages that firms receive in Hong kong are legality and respectability. We can also highlight other advantages:
- flexible tax legislation
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complete non-interference in business affairs by the state
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customs privileges for import and export of goods
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developed infrastructure
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lack of foreign exchange controls
At the same time, Hong Kong as an offshore zone has its own characteristics typical of countries with a high tax rate:
- to open a company, you must provide an audit report;
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it is necessary to keep accounting and submit reports annually;
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tax exemption will be valid only if it is proved that the company did not conduct business on the territory of Hong Kong;
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restrictions on the turnover of shares.
Thus, we can conclude that Hong Kong is a midshore - a jurisdiction that is intermediate between classic offshore companies with their characteristic features and countries with a conventional tax regime. Speaking about offshore companies in Hong Kong, first of all, we mean the financial stability of the offshore zone, the absence of taxation when doing business outside the jurisdiction and the need to submit financial reports.
If you have questions or need advice on opening company in Hong Kong, you can leave a request in the feedback form or contact our specialists:
Maxim Kuznetsov - vice-president of the RAUIE
investment@raspp.ru
WeChat: maximkuznetsov
