Hong Kong

During 1842–1997 Hong Kong used to be a colony of the British Empire. In 1997 China regained sovereignty and the territory was transferred to the People’s Republic of China. However Britain and China discussed the issue of Hong Kong sovereignty, and the two countries signed the Sino-British Joint Declaration, agreeing that Hong Kong would be governed as a special administrative region, retaining its laws and a high degree of autonomy for at least until 2047. It means that Hong Kong retains full autonomy, and controls the Law system, police forces, currency issuance, immigration policy and taxation; also Hong Kong represents the country in the international organizations and quorums. Under the principle of “one country, two systems”, Hong Kong runs on economic and political systems different from those of mainland China.

Currency — Hong Kong dollar (HK$ or HKD). The currency has been pegged to the US dollar since 1983. The sliding peg can be among 7,75 and 7,85 HKD for 1 USD.

Official languages – Chinese, English.

Hong Kong has got one of the most capitalist economic systems in the World, with a major capitalist service economy characterized by low taxation, free trade and minimum government intervention under the ethos of positive non-interventionism. According to the 2007 Index of the World Financial Centers, Hong Kong was the third best financial center in the World and the first one in Asia. The Hong Kong Stock Exchange is the seventh largest Stock Exchange in the World. 
 

Main act of legislation is Inland Revenue Ordinance which covers three types of taxes:

• Profits tax — 16,5 %
• Property tax — 15 %
• Salaries tax — 2-17 %

Hong Kong is not a classic offshore jurisdiction in traditional sense, but a free port with rather low taxation. A Hong Kong company is exempted from any kind of taxation if all income is sourced outside the territory. The taxes are levied according to the “territorial principle”. To be tax exempted a company must provide Hong Kong tax authorities with an audit report proving that the company does not receive onshore profits. As of today the use of Hong Kong company is a good instrument to be used in the tax schemes when running a trade business.

Advantages of Hong Kong company use:

• Hong Kong companies are more respectable in comparison with classical offshores
• Hong Kong has the largest free container port in the World
• A Hong Kong company is exempted from profit tax if receives income from outside the territory
• There is rather low profit tax rate on the profit received from onshore sources
• There is no capital gains tax, dividend distribution tax, interests or royalty tax as received from offshore or sent to outside the territory
• There is no Value Added Tax
• A director or / and shareholder can be a person of any residence, minimum number of directors and shareholders possible is one person
• Responsibility of shareholders is limited by amounts of their share interests in the authorized capital of the company with no matter if the authorized capital has been paid in
• Rather advanced regulations on banking and financial activities
• No limits on capital flows. Local banks do not exercise currency control and banking accounts can be used as transit accounts
• Hong Kong has double taxation treaties with the countries: Belgium, Brunei, Indonesia, Luxembourg, Mainland China, the Netherlands, Thailand, Vietnam; a rage of double treaty agreements will be signed soon with some other countries
• Hong Kong has 24 double taxation agreements for airline income with other countries, six agreements on shipping income and two airline and shipping agreements
• The country is included into the 1st group of the Central Bank of the Russian Federation direction (Appendix 1 to the Bank of the Russian Federation instruction dated on the 7th of August 2003 № 1317-У)  

 Disadvantages of Hong Kong companies comparing with classic offshore companies:

• The data about the directors and the shareholders of a Hong Kong company is open from the moment of its registration, i.e. the information is in public success
• A Hong Kong company must keep account books and give in financial accounts about its financing and operating activities; there is a requirement to present the first report after 18 months of the company’s incorporation date, subsequent reports must be presented annually
• To prove offshore sources income a Hong Kong company must conduct an audit and provide an audit report

 We recommend using a Hong Kong company:

• For export and import of goods and services to and from China and Asia
• To manufactures and processors of raw materials
• To Cinema, music and other intellectual property producers
• To carrier and shipment enterprises
• To vessel fleets
• To telecommunication companies
• To service-related companies and many others