Hongkong Incorporation Required
Authorised and Issued Share Capital
The concept of authorized share capital was abolished effective March 2014 and the minimum number of issued share is 1.
Classes of Shares Permitted
Ordinary shares, preference shares, redeemable shares and shares with or without voting rights, subject to the Articles of Association.
Hong Kong is one of the few jurisdictions in the world that tax on a territorial basis. Many countries levy tax on a different basis and they tax the world-wide profits of a business, including profits derived from an offshore source. Hong Kong profits tax is ONLY charged on profits derived from a trade, profession or business carried on inHong Kong. Consequently, this means that a company which carries on a business in Hong Kong, but derives profits from another place, is not required to pay tax inHong Kong on those profits. Hong Kong sourced profits is currently subject to a rate of taxation of 16.5 per cent. There is no tax in Hong Kong on capital gains, dividends and interest earned.
The principle of Hong Kong profits tax is that it is a tax on profits that has its source in Hong Kong rather than a tax based on residence. Income sourced elsewhere, even remitted to Hong Kong, is not subject to Hong Kong profits tax at all. Consequently, if a Hong Kong company's trading or business activities are based outsideHong Kong no taxation will be levied.
A factor that determines the locality of profits from trading in goods and commodities is generally the place where the contracts for purchase or sale are affected. "Affected" does not only mean that 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 principals. The source of the income is the place where the activities of the commission agent are performed. If such activities are performed through an office in Hong Kong, the income has a source in Hong Kong.
Certain sums, like royalties, paid or payable to non-resident persons for use of or right to use certain intellectual property are subject to withholding tax. The payer who claims deduction for the use of the intellectual property against its assessable income is required to withhold a prescribed percentage from the payment while that recipient is not subject to Hong Kong profits tax. The prescribed percentage is 4.95% on the gross payment if the payer and the recipient are not related, but 16.5% if the payer and recipient are related. The recipients of the royalties may enjoy different treaty rates under double taxation agreements.
Double Taxation Agreements
Hong Kong has comprehensive double tax agreements with Austria, Belgium, Brunei, Czech Republic, France, Hungary, Indonesia, Ireland, Japan, Liechtenstein, Luxembourg, Malaysia, Malta Netherlands, New Zealand, Portugal, Switzerland, Spain, Thailand, United Kingdom, Vietnam and the Mainland China respectively to relieve taxation on income, for instance, dividends, interest income and royalties. The Hong Kong Inland Revenue Department allows a deduction for foreign tax paid on a turnover basis in respect of income which is also subject to tax in Hong Kong. Therefore, businesses operating in Hong Kong do not generally have problems with double taxation of income.
The respective comprehensive double tax agreements with Canada, Jersey, Kuwait, Mexico and Qatar will become effective from 1st April 2014 to relieve the applicable double taxation on various incomes.
The Business Registration Fee of HK$2,250 on the date of incorporation and then annually on the anniversary of the incorporation. (Special tax concession arrangement by the HKSAR is granted until 31 March 2014; the Business Registration fee of each company is HK$250).
Financial Statements Required
A Hong Kong company must keep accounting records for at least 7 years, which may be kept at the registered office address or elsewhere at the discretion of the directors. Every company must appoint an auditor who must be a member of the Hong Kong Institute of Certified Public Accountants and hold a practicing certificate. Although there is no requirement to file accounts with the Registrar, there is a requirement to file accounts with the Hong Kong Inland Revenue Department.
The minimum number of directors is one, who may be a natural person or a body corporate, but at least one of them must be natural person. Directors can be of any nationality, and need not be resident in Hong Kong.
A Hong Kong company must appoint a resident company secretary, who may be a natural person or a body corporate.
Minimum number of shareholders is one.
Company records such as members' resolutions, register of members, register of directors and register of debenture holders, other than accounting records, would generally require to be kept at least 10 years.
Whilst every effort has been made to ensure that the details contained herein are correct and up-to-date, it does not constitute legal or other professional advice. OneIBCHong Kong does not accept any responsibility, legal or otherwise, for any errors or omission.
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