Hong Kong Company

Why Hong Kong is the Ideal Jurisdiction for Company Formation

Looking to establish a business in a global powerhouse? Hong Kong stands out as the perfect jurisdiction for company formation, offering unmatched advantages for entrepreneurs and corporations worldwide. Here’s why setting up a company in Hong Kong is a strategic move for success:

1

Business-Friendly Tax System

Hong Kong’s low-tax regime is a magnet for businesses. With a corporate tax rate of 16.5% on assessable profits and no taxes on capital gains, dividends, or offshore income, companies can maximize profitability. The two-tier tax system further reduces the rate to 8.25% for the first HKD 2 million of profits, making it ideal for startups and SMEs.

2

Strategic Global Location

Located at the heart of Asia, Hong Kong serves as a gateway to mainland China and other Asian markets. Its world-class infrastructure, including one of the busiest ports and airports, ensures seamless connectivity for international trade and logistics.

3

Simple and Fast Company Setup

Incorporating a company in Hong Kong is quick and straightforward, often taking just 1–3 days. The process is fully online, with minimal bureaucracy, and requires only one director and shareholder, who can be non-residents. Plus, there’s no need for a physical office, reducing setup costs.

4

Robust Legal and Financial Framework

Hong Kong’s transparent legal system, based on British common law, inspires confidence among global investors. Its world-leading financial sector offers access to top-tier banking, fintech solutions, and fundraising opportunities, including the Hong Kong Stock Exchange.

5

No Foreign Ownership Restrictions

Hong Kong welcomes 100% foreign ownership, allowing international entrepreneurs full control without needing local partners. This flexibility, combined with no currency controls, makes it easy to manage global transactions.

6

Global Reputation and Trust

Known for its pro-business policies and absence of corruption, Hong Kong enjoys a stellar reputation as a reliable jurisdiction. Companies registered here benefit from enhanced credibility when dealing with international clients and partners.

7

Access to Talent and Innovation

Hong Kong’s diverse, multilingual workforce and thriving startup ecosystem make it a hub for innovation and talent. Businesses can tap into skilled professionals and government-backed incentives for technology and R&D.

Start Your Business in Hong Kong Today

From its tax advantages and strategic location to its ease of setup and global reputation, Hong Kong ticks all the boxes for company formation. Whether you’re launching a startup or expanding a multinational, Hong Kong offers the tools and environment to thrive in today’s competitive market.

Ready to incorporate in Hong Kong? Contact us to kickstart your business journey in this dynamic jurisdiction!

Hong Kong Profits Tax System: A Guide for Your Hong Kong Company

Hong Kong’s low and simple tax system makes it a magnet for global entrepreneurs launching an offshore company or Hong Kong company. With a business-friendly environment, competitive tax rates, and exemptions for offshore income, it’s an ideal hub for international business. Below, we explore the Hong Kong profits tax system, key income types taxed, and why it suits your Hong Kong company or offshore bank account strategy.

Why Choose a Hong Kong Company for Tax Benefits?

The Hong Kong profits tax system is territorial, taxing only income sourced within Hong Kong. This allows offshore companies and Hong Kong companies to enjoy significant tax savings, especially on foreign-earned income. With no capital gains tax, dividends tax, sales tax, or services tax, Hong Kong is a top destination for tax-efficient business operations.

Types of Income Taxed in Hong Kong

Profits Tax for Your Hong Kong Company

Rate: Businesses, whether resident or non-resident, pay a Hong Kong profits tax of 16.5% on profits earned within Hong Kong.
Offshore Income Exemption: A Hong Kong company generating profits overseas can apply for an offshore claim to exempt those earnings from tax. Factors like having clients, offices, or employees in Hong Kong determine eligibility.
Who It Applies To: Any Hong Kong company or offshore company conducting business locally is subject to this tax, making strategic planning essential for tax optimization.

Salaries Tax

Rate: Employees under contract with a Hong Kong company face a salaries tax capped at 15%.
Offshore Income Rule: Local residents earning income abroad are exempt from Hong Kong taxes. However, non-residents working for a Hong Kong company may be liable for income tax.
Who It Applies To: This tax targets employees of a Hong Kong company, ensuring fair taxation for local operations.

Tax Advantages for Hong Kong Companies

No Tax on Offshore Income: Profits sourced outside Hong Kong are typically exempt, benefiting offshore companies and Hong Kong companies with global operations.
No Additional Taxes: Hong Kong eliminates capital gains, dividends, sales, and services taxes, reducing the tax burden for your Hong Kong company.
Offshore Bank Account Integration: Pairing your Hong Kong company with an offshore bank account enhances financial privacy and supports tax-efficient management of international profits.

Offshore Claim Process for Hong Kong Companies: A Guide to Tax Exemptions

For a Hong Kong company seeking to exempt offshore income from the Hong Kong profits tax, the offshore claim process is a critical step. This process allows Hong Kong companies and offshore companies to avoid taxation on profits earned outside Hong Kong, leveraging the city’s territorial tax system. Below, we outline the offshore claim process:

What is an Offshore Claim for a Hong Kong Company?

The Hong Kong profits tax (16.5% for corporations) applies only to profits sourced within Hong Kong. A Hong Kong company earning income from overseas activities can apply for an offshore claim to exempt those profits from taxation. This is particularly advantageous for offshore companies or Hong Kong companies with global operations, as it minimizes tax liabilities and complements strategies involving offshore bank accounts.
Steps in the Offshore Claim Process
- Assess Eligibility for the Offshore Claim
  - The Inland Revenue Department (IRD) evaluates whether your Hong Kong company’s profits are genuinely sourced outside Hong Kong. Key factors include:
    - Location of Operations: Where the profit-generating activities (e.g., sales, services, or contracts) occur.
    - Clients: Whether your Hong Kong company serves clients based in Hong Kong.
    - Physical Presence: Presence of offices, employees, or agents in Hong Kong.
    - Decision-Making: Where business decisions are made (e.g., outside Hong Kong for offshore claims).
  - For example, a Hong Kong company selling goods to international clients with no local operations may qualify for an offshore claim.

File the Profits Tax Return

Submit your Hong Kong company’s Profits Tax Return (Form BIR51 for corporations) to the IRD, typically within one month of issuance or as specified.
Include a clear statement in the tax return indicating that you are claiming the profits as offshore-sourced. Attach supporting documents to justify the claim.

Provide Supporting Documentation

To substantiate the offshore claim, your Hong Kong company must provide evidence that profits were earned outside Hong Kong. Common documents include:
- Contracts or agreements showing services or sales conducted abroad.
- Invoices and payment records linked to an offshore bank account.
- Correspondence with overseas clients.
- Proof of overseas operations (e.g., foreign office leases or employee contracts).
- Financial statements showing the source of income.
An offshore bank account can help demonstrate that funds were received and managed outside Hong Kong.

Respond to IRD Inquiries

- The IRD may request additional information or clarification to verify the offshore claim. Common inquiries focus on:
  - The nature and location of profit-generating activities.
  - Whether the Hong Kong company has a permanent establishment abroad.
  - The role of Hong Kong-based staff or offices, if any.
- Prompt and detailed responses strengthen your Hong Kong company’s case for exemption.

Receive IRD Assessment

The IRD will review your Hong Kong company’s claim and issue a tax assessment. If approved, offshore profits are exempted from the Hong Kong profits tax. If denied, the IRD may tax the profits at 16.5%, and you can appeal the decision within one month.

Key Considerations for a Successful Offshore Claim

Substance Matters: The IRD closely examines whether your Hong Kong company has significant operations outside Hong Kong. Minimal local presence (e.g., no Hong Kong office or employees) supports the claim.
Record-Keeping: Maintain detailed records of all transactions, especially those linked to an offshore bank account, to prove the offshore nature of profits.
Professional Assistance: Engage tax advisors or corporate service providers specializing in Hong Kong company setups to navigate complex cases and ensure compliance.
Anti-Avoidance Rules: The IRD may challenge claims if they suspect tax avoidance (e.g., artificially routing profits through an offshore company). Ensure your business has genuine offshore operations.

The offshore claim process is a cornerstone of tax planning for Hong Kong companies and offshore companies. By securing exemptions on foreign-sourced profits, businesses can reinvest savings into growth, supported by offshore bank accounts for seamless financial management. Hong Kong’s territorial tax system and global financial hub status make it a prime choice for such strategies.

Navigating the offshore claim process can unlock significant tax savings for your Hong Kong company. Partner with experts to streamline your application, ensure compliance, and optimize your offshore company or offshore bank account setup. Contact us today to start your Hong Kong company and claim your offshore tax benefits!

Start Your Hong Kong Company Today

With its low Hong Kong profits tax, exemption for offshore income, and absence of multiple taxes, Hong Kong is a prime choice for launching an offshore company or Hong Kong company. If you’re setting up a business, Hong Kong’s tax system offers unmatched flexibility and savings.

Order our Hong Kong company formation services today to unlock these tax benefits and grow your global business!