Hong Kong doesn’t have any specific law governing offshore corporate incorporation. It’s one of the popular jurisdictions in the world for establishing an offshore business owing to its relative leniency towards offshore company set up, lack of restrictive international tax rules, easy availability of offshore business registration, and so on. There are even some offices in Hong Kong that are solely dedicated to offshore corporate incorporation. However, despite its apparent popularity, there are still questions about the legality of incorporating in Hong Kong. The following are the answers to your common questions about including in Hong Kong:
Companies that incorporate in Hong Kong must hold a bank account in the Chinese territory. It is believed that in the past, this was the only prerequisite that needed to incorporate. Today, some offshore companies may choose to bypass this requirement. Still, it would be easy to open a bank account in Hong Kong without mixing and establish a corporate bank in the local currency for Hong Kong incorporation. Opening a bank account in China may also require you to be a member of the Chinese People’s Political Association (CPPA). You will need to get this document from your Chinese business agent.
Companies can establish offices globally, but they are only allowed to do so in countries with a tax treaty with Hong Kong. It applies even if you operate your company out of your own country. Suppose you choose to incorporate outside of the UK. In that case, a copy of the Companies Registry (the database of all companies registered in Hong Kong) is required by the Secretary of State’s office. It is also necessary for most high-value trades, like buying or selling foreign assets.
If you choose to establish an offshore company set up in Hong Kong, you will probably want to avail yourself of the following benefits. The first benefit is the high corporate income tax rate in Hong Kong. There are many reasons this area of the world has the lowest corporate tax rate globally. Some of them are that the number of people who live in the area is relatively low, resulting in a higher return rate for businesses there than on the mainland and that the corporate taxes there are low, compared to other places in the world.
Next on the list is the lack of personal taxation. Most of the income tax rate payable in Hong Kong is computed using asset-based tariff instead of the earned income tax rate. It means that corporations and LLCs have no personal income tax obligation and the highest possible individual tax rate. In most cases, the quality is minus 3% below the corporate income tax rate. Again, this makes it ideal for businesses that don’t have many employees or don’t have high earnings per employee.
Another benefit of the Hong Kong offshore company name registration is that the company can easily take advantage of the nominee services offered by Companies House. A company can open a new offshore company by ensuring that its nominee director and shareholder are a Hong Kong resident. Also, suppose the nominee director and shareholder of the company are not a resident of Hong Kong. In that case, he can still take advantage of the offshore company’s registry’s benefits by using his mail address and fax number. It is helpful when companies from different countries need to conduct their business in Hong Kong.
Limited liability companies are another popular choice for businesses that want to incorporate in Hong Kong. Limited liability companies are also known as “restricted liability companies.” Here, the owner can only use his assets to hold the company’s shares and not use his help to benefit his company. Suppose the company incurs debts or loses business, or even receives judgments against it.
There are many other benefits of incorporating in Hong Kong. However, it is essential to note that it does not necessarily follow that all transactions and share sale will be free from any penalties. Registration fees and annual fees may apply. Moreover, dividends may not be paid out to shareholders unless Hong Kong’s laws are strictly followed, including paying income tax.