<p>Hong Kong is the former dependent territory of Great Britain.  Hong Kong structure includes, firstly, the eponymous island of Hong Kong, and secondly, Kowloon - that is, adjacent territories on the Kowloon peninsula, and, finally, the so-called New Territories. All of them are located in the South China Sea. The name "Hong Kong" can be translated as "Fragrant Harbor".</p><p>Hong Kong is a very popular jurisdiction for doing business, especially for banking purposes. The Hong Kong company can become a powerful tool for various tax strategies. A lot is known about the fact that Hong Kong is the best place to start business in Asia, that there is no tax on offshore revenues and there is no currency control. And it's true, Hong Kong boasts a reliable legal system based on English law, with a world class banking and business infrastructure, and its excellent reputation.</p><p> </p><div><h2><strong>Advantages of Hong Kong companies</strong></h2></div><p>Hong Kong is one of the two largest financial centers in Asia, along with Singapore, which has its own exchange and is very friendly with respect to business. He is the birthplace of most transnational corporations. It supports the free movement of capital, talents, goods and information.</p><p>The basis of the Hong Kong system is English law and in case of any problem, you can count on a logical and honest investigation, as in Western countries. This is consistent with the "One country, two systems" principle, which Hong Kong accepted in 1997.</p><p>In Hong Kong, there is no VAT, capital gains tax, inheritance, etc. Revenues received by Hong Kong companies are subject to income tax at a rate of 16.5 percent only if profits are earned in Hong Kong. There is a territorial principle of taxation, rarely found around the world. It means that the profits received by Hong Kong companies outside of Hong Kong are generally exempt from taxation. But this exemption is not granted "automatically", this right to receive tax exemption must be confirmed before the tax authorities by providing the relevant documents (this is the work of the auditors who represent the company before the tax authorities when filing tax reports).</p><p>Having a company in Hong Kong, you need to conduct a full accounting (hiring accountants who own the accounting procedure in accordance with the requirements of Hong Kong GAAP), audit and submit tax reports (engaging auditors who have a license to practice in Hong Kong). On the one hand, this may seem to be an invoiced one, but on the other hand - the availability of annual audit reports, books and accounts, payment documents or exemption from taxes, correspondence with tax authorities, plus openness of information on directors and shareholders (if not used nominal service) makes Hong Kong companies prestigious corporate tools recognized around the world. Correctly leading the business of the Hong Kong company will not face the problem of proving the legitimacy of the origin of its capital while further investing its funds or performing other operations (for example, obtaining loans) in European and other countries (there are official documents that confirm the legality and purity of the origin of income). In this respect, Hong Kong companies outperform offshore firms from other jurisdictions.</p><p> </p><div><h2><strong>A company in Hong Kong? Who benefits?<br /></strong></h2></div><p>Consider the situations in which it is profitable to open a company in Hong Kong:</p><p><strong>1. You came from a country that has a Double Taxation Agreement with Hong Kong</strong></p><p>Hong Kong has a lot of complex agreements on avoidance of double taxation with countries such as Canada, United Kingdom, Austria, Belgium, France, Hungary, Ireland, Italy, Mexico, Netherlands, New Zealand, Spain, Luxembourg, Liechtenstein, Japan, Korea, Indonesia, Romania, Portugal, Thailand, and, more recently, Russia. There are a little more than thirty of them.</p><p>Double tax agreement's are concluded between countries in order not to tax the same profits twice. This usually refers to passive income (interest, royalties, dividends) earned in one state, and received in another. The contract specifies the country in which the profits received, the tax rate and other conditions are subject to taxation. Having opened a company in Hong Kong, you will be able to structure your business so as to significantly reduce the taxation of your income, paying tax only in Hong Kong at its understated rates.</p><p><em>Example №1.</em> Let's say you are from Canada and you want to open a restaurant there. First, you register a company in Canada, and then register a limited company in Hong Kong. Suppose, for the start you need one million US dollars. These funds you charge to the account of the Hong Kong company, after which you lend these funds to a Canadian firm at a reasonable Hong Kong rate. When a business in Canada begins to generate profits, a Canadian firm begins to pay interest to a Hong Kong company, as it lent money. Typically, the income tax in Canada is quite high - about 31 percent (state tax of 15 percent plus provincial taxes from 10 to 15 percent). But the share that is paid to the Hong Kong company is deducted from this profit, and it turns out that you don't pay the Canadian profit tax from the share that you send to Hong Kong. This whole structure will ultimately help to save a lot of money, as money accumulates in Hong Kong, and there is no tax on interest income, even from foreign jurisdictions, and you also reduce the income tax payable in Canada.</p><p><em>Example №2.</em> You live in UK and have a publishing company that sells content owned by a Hong Kong company. For example, according to the contract, the British company is obligated to pay 20 percent of the royalty of the Hong Kong company from all sales of content. But between the UK and Hong Kong there is a full tax treaty that limits the amount of taxes, so a British company in compliance with it must pay only 3 percent. In fact, you simply take a significant portion of the profits and transfer it to a low-tax jurisdiction.</p><p><em>Example №3.</em> If you come from a high-tax jurisdiction, you can use the Hong Kong company as the company's shares owner in your homeland. For example, if a Hong Kong company owns Canadian shares, the second will pay a profit tax in Canada, but the rest is in Hong Kong. Thus, you move your funds from high-tax jurisdiction to a low-tax jurisdiction, and this is a completely legal method.</p><p><strong> 2. You start a business and decide where to pay some taxes</strong></p><p>It's always better when the company pays somewhere at least some taxes, rather than not paying at all. Experienced entrepreneurs are building strategies to minimize tax burdens, but, nevertheless, somewhere they pay some small tax. In modern conditions, tax authorities are constantly looking for companies that don't pay any taxes at all, and arrange problems for them. Governments want to see that your company pays a tax. And Hong Kong is an ideal place for this - when it comes to tax write-offs, this jurisdiction is very liberal in this regard.</p><p> <strong>3. You are engaged in international trade or online business</strong></p><p>This scheme is especially suitable for those whose client base is located mainly in Asia. Most often in this case, Hong Kong companies are used as a reseller. The Hong Kong company is an intermediate link between a buyer from one country and a supplier of goods or services from another. The product is directly sent to the buyer by the manufacturer, and the money and documents go through the Hong Kong firm. If you comply with all the conditions of the taxation territorial principle, you can significantly reduce the tax burden. This option is also popular because contractors are more willing to enter into contracts with Hong Kong companies than with offshore companies from other jurisdictions. In particular, the presence of the Hong Kong company makes it much easier to work with China.</p><p> </p><p>It is very convenient for foreigners to register a Hong Kong company, open an account with one of the many famous Hong Kong banks and conduct activities outside its territory: in this case, taxes are not necessary and the money is reliably protected in the Hong Kong accounts. If you are interested, we will help you in opening such a company in Hong Kong. Russian entrepreneurs especially like to use Hong Kong companies to import goods from China and for produce products in China.</p><p>Also, Hong Kong is an unofficial but very important offshore for China, which has a very large volume of foreign trade.</p><p> </p><p> </p><p style="text-align: center;"><em>You can ask a question about doing business in Hong Kong to <em><strong>Castle Family Office</strong> </em>specialists! Write to us at: <strong><em><span face="Calibri" size="3"><span lang="EN-US"><span face="Calibri" size="3"><a href="mailto:info@castle-familyoffice.sg">info@castle-familyoffice.sg</a></span></span></span></em></strong> </em></p>