Entrepreneurs may wish to form an offshore company for a variety of reasons including reducing the company’s tax burden or enjoying simpler regulations. Hong Kong is an attractive place for international entrepreneurs for a variety of reason, offshore company formation being one of them. Among the reasons why Hong Kong is an attractive place to form an offshore company is that profits earned outside of Hong Kong are not taxed. Under the territorial taxation system, only profits earned within Hong Kong are subject to 16.5% corporate taxation.
Understanding the Benefits of Offshore Company Formation in Hong Kong
Hong Kong’s simple tax code and relatively low taxation makes it one of the most business-friendly environments in the world. Foreign-sourced profits are exempt. There is no capital gains tax on overseas assets, no withholding tax on overseas income, and an extensive network of double taxation treaties.
Hong Kong is consistently regarded as one of the world’s most business-friendly jurisdictions. The benefits of doing business in Hong Kong extend far beyond low taxation. The business registration process is free of red-tape and slow bureaucracy. Compliance requirements are consistent and clear. Hong Kong has an incredibly extensive business ecosystem including a very sophisticated financial system that can meet the most complex needs in securities trading, currency accounts, and digital finance.
Because the system is transparent and clear with very simple but strict requirements, Hong Kong maintains an image as a center for legitimate global business, rather than as a location for money laundering and tax evasion. Though it is known for low taxation and business-friendly rules, it maintains a stable and respectable reputation among overseas tax and regulatory authorities. Hong Kong requires companies to publicly disclose the names of shareholders and directors, which distinguishes it from notorious tax havens and makes oversight and regulation appropriately extensive.
Public Policy Stability
Hong Kong’s clear and simple business rules are the keystone of their economy. As such, it is likely that they will be preserved and remain stable over the long term. This stands in contrasts to other jurisdictions, such as on the Chinese Mainland, for example, where there are relatively frequent adjustments to rules and ongoing reforms. This helps to keep accounting and legal fees low and minimizes regulatory and policy risk..
Offshore Company : Registration Process and Requirements
There must be at least one shareholder and as many as 50 are permitted. A company may be nominated as a shareholder. Limited liability companies can be fully foreign-owned.
At least one director is required. A director need not be a human being as a company can be appointed director. There is no maximum number of directors permitted. There are no nationality or residency requirements. The director must be over 18 years of age and may not have been convicted of malpractices or have filed for bankruptcy. According to the Company Ordinance, directors have a fiduciary responsibility to act in good faith for the benefit of the company. Directors are ultimately responsible for maintenance of the company’s compliance with all Hong Kong laws.
The role of the company secretary is to maintain company records and books and ensure compliance with statutory requirements. The secretary may be an individual or corporation and must be located in Hong Kong. When there is only one shareholder or director, the company secretary must be a different person.
Public Disclosure of Company Information
Basic company information (including shareholders, directors, secretary, and company address) will be registered and filed with the Company Registry. The Company Registry makes this information public. If a business wishes to make company information confidential, it can do so by appointing nominees as the shareholder and director, at which point it will be the nominees’ information that is made public rather than the de facto shareholders and directors. This can be accomplished with the help of a third party service provider or appropriate accounting firm.
A company must have a physical Hong Kong address according to section 92 of the Hong Kong Companies Ordinance. The Companies Registry will reject a PO box in place of the company address. If you do not wish to rent an office space because you are operating your business from overseas, a professional services company can provide you with a registered address for your business. Additionally, purchasing a shelf company (see below) eliminates the need to find a physical address for the company, as the shelf company will already have its own registered address.
Offshore Company : Ongoing Administrative Requirements
Annual General Meeting
An Annual General Meeting must be held every calendar year including the directors, shareholders, and secretary. It can be held anywhere in the world, however, records of the meeting must be submitted to the company registry. The meeting must include a director’s report and the announcement of a summary of the company’s financial accounts. The interval between meetings may not exceed 15 months.
Company accounts must be annually audited by a Hong Kong CPA.
Tax returns must be filed annually with the Inland Revenue Department
Purchasing a Shelf Company
A shelf company is an option for setting up an offshore company in Hong Kong that is simpler and faster than otherwise (not to be confused with a so-called shell company) and is provided by a third party professional service provider. The third party has already established and maintained the company but has not used it. Setting up an offshore company by purchasing a shelf company is a very quick process. As the company has already been formed, there is no waiting for approval or communicating with the company registrar needed. Buying a shelf company can take less than 24 hours whereas forming a limited company takes closer to one week (still very prompt by international standards).