Hong Kong Company Incoporation & Setup

Incorporating your business in Hong Kong provides a tax efficient jurisdiction for trade, investment and business. For many years we have been assisting Australian companys benefit from the internaitonally superior taxation structure found in Hong Kong.

Som of the benefits of incorporating a company in Hong Kong includes: 

  • Tax free or 16.5% profits tax
  • Zero tax on dividend income
  • Zero tax on Capital gains
  • No local director / shareholder requirements

Advanced economy

Hong Kong is the ideal location to setup a business not only because it is one of the world’s top financial centres, but also because it is a stable and well respected jurisdiction with beneficial tax regulations. 

Hong Kong is not normally regarded as an offshore country as it is a famous for being a major financial centre, however, it is one of the few countries in the world that tax on a territorial basis. Many countries levy corporate income tax on a different basis and they tax the world-wide profits of a business, which includes profits derived from activities outside of the country. Unlike other Asian countries such as Japan, Korea, Thailand, India and China; Hong Kong does not have any exchange or capital controls which therefore allow funds to flow freely in and out of the territory.

CMS Australia has been setting up offshore Hong Kong companies for its clients for many years. Book a free consultation to learn more about how setting up a Hong Kong company can benefit your business.

Hong Kong Company requirements

Annual audited accounts

Hong Kong companies are legally required to file annual audited accounts. Setting up a Hong Kong company also provides companies with the opportunity to apply for credit facilities with banks, trade services and credit card companies. This is beneficial as Hong Kong interest rates are often more competitive than Australian interest rates.

A Hong Kong company search can be conducted using trusted agencies such as Dun and Bradstreet.

Accounting records

All Hong Kong Companies are required to keep accounting records of the following:

  1. All sums of money received and expended, and the matters in respect of which the receipts and expenditure take place;
  2. Sales and purchase orders;
  3. All assets and liabilities.

The accounting records kept must meet the GAAP international accounting standards and contain the information necessary to give a true and fair view of the state of the company’s affairs and to explain its transactions.
CMS Australia is able to assist clients in preparing annual Profit/Loss accounts and Balance sheets. We are also able to arrange independent audits. Please note that we will never audit financial accounts that have been prepared by ourselves due to potential conflict of interests.

Incorporating a Hong Kong Company

CMS Australia always advises clients to set up a private limited company in Hong Kong so as to provide protection to directors and shareholders by limiting liability of shareholder to the capital subscribed and assets held by the company.

A Hong Kong company can conduct any type of business and the activities of the Hong Kong Company are not restricted by the company name registered in Hong Kong.

Hong Kong Company Registry

The Hong Kong company registry in Hong Kong is open to the public. Therefore details of the company’s Director(s) and Shareholder(s) are easily accessible to the public. However, should you wish your personal details private and not to appear on the company register, CMS Australia can provide other possible options.

Hong Kong Taxes

Hong Kong profits tax is only charged on profits derived from trade, profession or business carried on in Hong Kong. Consequently, a company which carries on a business in Hong Kong but derives profits from another place is not required to pay tax in Hong Kong on those profits. Hong Kong source income is currently subject to a rate of taxation of 16.5%. There is no tax in Hong Kong on capital gains, dividends or interest earned. 

The factor which determines the locality of profits from trading in goods and commodities is generally the place where the contracts for purchase and sale are effected. The term “effected” does not only mean where the contracts are legally executed, it also covers the negotiation, conclusion and execution of the terms of the contracts.

If a business earns commission by securing buyers for products or by securing suppliers of products required by customers, the activity which gives rise to the commission income is the arrangement of the business to be transacted between the principles. The source of the income is the place where the activities are performed. If such activities are performed in Hong Kong, the income has a source in Hong Kong. Consequently, if a Hong Kong company’s trading or business activities are based outside Hong Kong, such as China, USA, Europe etc, no income tax will be levied in Hong Kong. This makes Hong Kong an extremely cost-effective tax planning vehicle for trading.

Offshore Income

The Tax Law in Hong Kong states that profits arising or derived outside Hong Kong are not subject to Hong Kong tax. However, it is the responsibility of the taxpayer to provide sufficient evidence and documentations to satisfy the Tax Department in Hong Kong of their offshore claim, a case of “Guilty until proven Innocent”.
In order to claim that a company’s business activities were not carried on in Hong Kong, and hence the profits earned not subject to Hong Kong Profits Tax, the company must provide evidence to the Tax Department to support their offshore claim. This simple concept can however produce cases which are not clear cut and therefore make it difficult to ascertain the final outcome of an offshore claim. 


If a company has no presence in Hong Kong (i.e. no office and no staff) and is involved in the trading of goods, buying from overseas suppliers and selling to overseas customers then the offshore claim is clearer and matters can be easily resolved with the Tax Department.
However, if a company has no presence in Hong Kong by is involved in the trading of goods, buying from Hong Kong suppliers and selling to overseas customers then the offshore claim becomes more problematic. The offshore concept is that profits arising or deriving outside Hong Kong are not subject to Hong Kong Profits Tax. However, if the company is engaged in business with a Hong Kong supplier, is becomes more difficult to prove to the Tax Department that the work performed by the offshore Hong Kong company was not performed in Hong Kong.

Commissions

If a company is receives commissions, the determining factor for tax liability is what type of work was performed to earn the commission. If the work involved in earning the commission was conducted overseas then an offshore claim can be submitted. Again the Company must successfully provide evidence to the Hong Kong Tax Department to support its offshore claim. 
A Hong Kong company can claim “Tax Apportionment” for its offshore activities and therefore only need to pay tax on its Hong Kong sourced income. To succeed, such a claim must be supported by relevant documentation. 


CMS Australia are leaders in offshore Hong Kong company setup & can provide security through these complex environments. Our expert team of accountants have over 10 years’ experience incorporating hong kong companies and assisting Australian companies with their tax matters.

Sydney Office

CMS AUSTRALIA
Suite 1101, Level 11, 37 Bligh Street,
Sydney, NSW 2000

+61 2 9221 5755   Directions