Hong Kong is a key jurisdiction in the offshore world. Hong Kong is considered one of the top tax havens because the Country has no financial products restrictions that other tax havens may face, yet has a territorial tax system that offers you 0% tax on income not generated or with no connection to Hong Kong, solid banking system.
Hong Kong is a great jurisdiction for those who search for 0% corporate tax with the possibility to have a trading company, meaning not just a company that will only be used for tax planning, but to perform online trade by having the possibility to have process payments, a key feature for a global company in today's economy.
Yearly Compliance Requirements
Unlike other tax friendly jurisdictions where you only pay a fixed yearly tax fee of around USD 1,000 on average in exchange of 0% corporate income tax rate, confidentiality, and no need to file any type of tax return or accounts, in Hong Kong I am required to file yearly accounts which are audited by a private auditor, so that brings me two yearly steady costs: (1) bookkeeper, and (2) auditor, which may cost me around from 2 thousand dollars - 3 dollars per year, or even more depending on the amount of transaction per year of my Company.
If Hong Kong did not require me to file those audited returns, it would be blacklisted and therefore my Hong Kong Company would not be able to access some of the financial products that some lax compliance tax havens can't access because they are blacklisted.
So if a Hong Company yearly compliance cost of an estimated minimum of USD 4,000 is much less than the amount I would pay by having my trading company in my tax residency jurisdiction or in another country, then having a Hong Kong company makes total sense.
Financial Secrecy Index
Hong Kong is ranked as the 4th most secrecy jurisdiction according to the Tax Justice Network's Financial Secrecy Index. I am not by any means promoting hiding your financial assets, I am just stating facts. The legality or illegality of keeping your assets offshore and out the reach and knowledge of your tax authority will depend on your nationality or country of tax residency's tax system and laws.
Unless this is the first publication you read about Offshore Hong Kong Companies, you might have read that besides the tax filing and auditing requirements, Hong Kong loses its charm when banks, unlike in the past, are very resilient about who the open an account to, that is not completely true. In Hong Kong there are ways that I can open a bank account online (remotely) without the need to visit the Country, have a business merchant account, process online payments, but this Service is restricted or prohibited to certain nationalities.
Incorporation fee: HK$1,720 (+/- USD222). If unsuccessful, an application for a refund of HK$1,425 may be obtained.
Business registration fee and levy: HK250 (+/- USD33) for a one-year certificate.
Incorporation state fees total: USD 255
Company Director, Company Secretary, and Registered Address
Hong Kong Companies Director can be of any nationality or residency, this reduces me a lot of money in yearly maintenance expenses. For example, a Singapore Company requires me to have a Singaporean Resident Director which on averager costs me USD 2,000 per year, plus a deposit of that same amount.
It is mandatory, under 154 CO, to appoint a Company Secretary. This costs on average USD180 per year.
Small Companies Exemptions
All Hong Kong Companies, regardless of their size, are required to provide audited accounts except for dormant companies. A director all HK Companies must prepare a yearly financial statement that is later audited, but Small Companies can prepare simplified accounts (accounts with less reporting and formal requirements).
Other tax benefits
No tax on dividends
No estate tax
No sales tax or VAT
No capital gains tax
No withholding tax
About the author: Jean Franco Fernández Clark. Corporate and International Tax Lawyer from Nicaragua, Central America. Speaks English, Spanish, French, Italian, Russian. 学习普通话
Disclaimer: Nothing in this article shall be considered legal, financial, or tax advice. If you wish to obtain advice you must address your tax consultant or attorney. The publication of this article is for information purposes only and the content in this article comes from personal experiences and it is not by any means a legal or tax advice. Information may not be updated or correct.