Where no profit is derived in or from Hong Kong, they operate tax free, subject to approval by the Inland Revenue.
There is no capital gains tax and dividends received or distributed by a Hong Kong company are also tax free. The standard rate of tax applicable to Hong Kong sourced income is very competitive at 8.25 per cent for the first HKD2 million profit and 16.5 per cent thereafter. In addition, there is no VAT and no withholding tax.
Hong Kong companies are popularly used as a holding company of a Wholly Foreign Owned Enterprise (WFOE) for trading in China.
The Index of Economic Freedom is an annual ranking of 186 countries from property rights to entrepreneurship and is published by The Heritage Foundation, a leading American think tank whose mission is to build and promote conservative public policies. The 2020 report ranked Hong Kong second among 42 countries in the Asia–Pacific region, and its overall score was well above the regional and world averages.
The name of a company must be specified in its Articles of Association. The name can be in English, Chinese or both. The company name must end with the word "Limited" or its equivalent in Chinese characters. A company name may not be the same as an existing company. Ready-made companies are available.
Articles of Association
All companies must have Articles of Association, a document specifying the regulations for a company's operations and defines the company's purpose. The document lays out how tasks are to be accomplished within the organisation including the process for appointing directors and the handling of financial records.
Founder member share
Each founder member is required to have at least one share in the company.
There is no limitation on the number of issued shares. Shares of a Hong Kong company have no par value. No capital duty is payable to the government for the incorporation.
A private company must have at least one registered shareholder, but the shareholder may be a nominee of a third party whose name does not need to appear on official documents. There are no restrictions on the nationality or residence of the shareholder and shareholder meetings may be held in any location. Bearer shares are not permitted.
A Hong Kong company must keep a Significant Controllers Register in its registered office or a designated location in Hong Kong. A company is required to make the SCR available for inspection by law enforcement officers.
A private company must have at least one natural person as a director, other directors may be either an individual or corporate body. Listed companies and their subsidiaries must have at least two individuals as directors. There are no restrictions on the nationality or residence of directors.
Where a company has only one shareholder who is also the sole director, the company can nominate a reserve director who will act in the place of the sole director in the event of their death.
A company secretary must be appointed. An individual secretary must be resident in Hong Kong whilst a corporate secretary must have its registered office or a place of business in Hong Kong. A sole director of a private company cannot serve as the secretary. A corporate body cannot serve as the secretary if the sole director is the only director of that corporate body.
A company must maintain a registered office in Hong Kong, a PO box address in not permitted. The company's registered office must be filed with the Companies Registry when the company is incorporated.
A company is incorporated by filing with the Registrar of Companies. The incorporation takes place when the Registrar issues the certificate of incorporation and this normally takes approximately four to five working days after filing the papers. A company can be incorporated on the same day if using online filing.
Every company is required to register with the Commissioner of Inland Revenue under the Business Registration Ordinance. The application must specify the type of business to be carried on and all places of business maintained in Hong Kong. The certificate is valid for a 12-month period from incorporation and must be renewed annually.
A private single member company is not required to hold an annual general meeting. A private company with more than one member is allowed to dispense with holding an annual general meeting in respect of a particular financial year by passing a members' unanimous resolution. A copy of the resolution must be delivered to the Companies Registry. Otherwise, a general meeting of shareholders must be held at least once every calendar year and where the profit and loss accounts and balance sheet of the company are viewed by shareholders together with the directors' and auditors' reports.
The names and personal particulars of the directors and secretary must be filed with the Companies Registry when the company is incorporated. If shares are issued after a company has been incorporated, a return of allotment must be filed with the Registrar, disclosing the identities of the members and their shareholdings. However, where nominee shareholders and directors are used, the beneficial owners do not need to be disclosed. A private company is required to file an annual return each year within 42 days of the company's anniversary date of incorporation.
Accounts and audit
Directors are required under the Companies Ordinance to maintain proper books of accounts to be kept at its registered office or somewhere the director thinks fit. Every company is required by law to appoint an auditor each year at its general meeting. A director's report and auditor's report must be attached to the company annual accounts and presented at the company's annual general meeting. In the case of a private company its audited accounts must be laid before its annual general meeting not more than nine months from its financial year end.
A Hong Kong company is only taxed on its profits arising in or derived from a trade or business carried on in Hong Kong. Proof is required when inspected by the Inland Revenue. All the offshore claim is subject to approval.
A private company which has no outstanding liabilities may apply to the Registrar of Companies to be de-registered with the unanimous consent of its shareholders. Application can be made to the registrar to de-register defunct, solvent private companies. Prior to the submission of application to the Registrar the applicant must obtain a written notice of no objection from the Commissioner of Inland Revenue. It will take approximately six to eight months to complete the above work and the de-registered process.
Our professional and highly qualified team in Hong Kong is fluent in English, Cantonese and Mandarin. We advise investors and entrepreneurs on appropriate structures, company formation, bank account opening, compliance, administration, book-keeping, accountancy, pensions and payroll.
ILS World can provide a Hong Kong company for a one-off payment which includes first business registration fees and government filing fees.
The team has gained a great deal of experience in advising and administering Hong Kong company related structures for clients and assist with:
• Company administration
• Formation of companies and trusts
• Use of our service companies as intermediaries
• Assistance with contracts
• Invoicing and accounting
• Director and secretary services
• Registered office facilities
• Virtual office facilities
• Physical office facilities
• Accounting services
• Work permit
• Trademark registration.
Please note: ILS World does not offer tax advice. If you are not professionally qualified to give tax advice, we will be happy to make an appropriate introduction.