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Advantage of carrying on business in Hong Kong




Hong Kong is widely recognised as one of the freest liberal business economies over the world. Thanks to its reputation of sound and comprehensive legal and financial system, many foreign investors are attracted to Hong Kong to setup their business and explore new business opportunities. In the Global Competitiveness Report 2019 published by World Economic Forum, Hong Kong ranks third overall and ranks first on four pillars: Macroeconomic stability, Health, Financial system and Product market. It further solidifies Hong Kong’s position as the international finance center over the world.


Setting up a business in Hong Kong is definitely beneficial to the investors in a number of ways, AOGB has summarized the top benefits below and is ready to give a “BIG HAND” to your business.


Tax benefits


Hong Kong is renowned for its low-tax regime compared to other countries. In addition, the simple and competitive tax system also creates a business-friendly environment to operate business. It means the investors could retain more profits in the company for their future development and expansion. Below are the main features of Hong Kong’s tax system.


(i) Low-tax regime

There are mainly three types of taxes directly imposed in Hong Kong:

  • Profits tax (two-tiered tax rate)

  • Salaries tax (progressive rates on net chargeable income after deductions and allowances, capped at standard rate of 15%)

  • Property tax (15%)

Below taxes are not imposed in Hong Kong:

  • No sales tax or VAT

  • No withholding tax on dividends and interest

  • No capital gains tax

  • No tax on dividends

  • No estate tax

Hong Kong adopts a two-tiered tax rate for profits of corporation and unincorporated business (i.e. partnerships and sole proprietorships).


For corporation:

  • 8.25% for the first HK$2 million and 16.5% for the profits above HK$2 million


For unincorporated business (i.e. partnerships and sole proprietorships)

  • 7.5% for the first HK$2 million and 15% for the profits above HK$2 million


(ii) Territorial source principle of taxation

Hong Kong adopts a territorial basis for taxing profits. It means only the profits derived from a trade, profession, or business carried on in Hong Kong are subject to the Hong Kong Profits tax. Foreign investors who carry business in Hong Kong but derive profits outside Hong Kong are able to claim exemption for offshore profits. It further lowers the business operating cost for multinational corporations in avoidance of double taxation.



(iii) Double taxation arrangement

Hong Kong has signed Double Taxation Arrangements (“DTAs”) with a number of jurisdictions such as China, United Kingdom, Japan, Italy, Canada, Korea, India, Switzerland and so on. DTAs help foreign investors to avoid double taxation issues if they carried business in a several countries which have entered DTAs.



(iv) Free trade port

Hong Kong does not maintain a trade barrier on trade and no tariff is charged on import or export of goods. Only a few controls are imposed on import, export and re-export in Hong Kong and it makes Hong Kong as a popular transport hub in Asia.



AOGB offers comprehensive tax advisory services in relation to tax efficient structure and optimized business model, tax compliance services, sharing any insights in accordance with relevant tax laws and regulations.


Far more benefits for operating or setting up business in Hong Kong are coming soon in the next articles 😊



References

https://www.investhk.gov.hk/en/why-hong-kong/low-simple-and-competitive-tax-system.html

http://www.hkctoa.com/overview

https://www.ird.gov.hk/eng/





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