Hong Kong is, of course, well known as a major international center. It is the most important gateway to mainland China, an increasingly affluent market of 1.3 billion people. The city’s unique makeup in politics, economic and cultural background makes for an important window for foreign investors.
The World Investment Report 2008 ranked Hong Kong first globally in its Inward Foreign Direct Investment Performance Index, signifying that Hong Kong is the world’s best performing economy. Under the CEPA, all products of Hong Kong origin, except for a few prohibited articles, can be imported tariff free to the mainland. The latest development of the Close Economic Partnership Arrangement (CEPA) in August 2008 further open the mainland market to Hong Kong, especially in the fields of tertiary sector, trade and investment, and mutual recognition of professional certification. A number of businesses set their eyes on Hong Kong because of their intentions of China market entry. We are delighted to see that Hong Kong is maintaining its status as Asia’s leading business hub, despite the world economic turmoil.
Unrivalled Location
Hong Kong became part of China on 1 July 1997. It is a Special Administration Region (SAR) within the People's Republic of China with its own legislature and courts. For more than a century and a half, Hong Kong has served as the gateway to Mainland China. There is nowhere better than Hong Kong to obtain the expertise, information and facilities needed to tap into the immense Mainland Chinese market.
Corporate executives can travel back and forth to Beijing, Shanghai and other major Chinese cities in a single day while making their home in Hong Kong. For instance, the booming manufacturing region of southern Guangdong province is only an hour or two away by car, train or high-speed ferry. The air flight to Shanghai takes less than two hours and Beijing is takes about three hours. Moreover, taking a flight from the Hong Kong International Airport, one can reach most countries in Asia within five hours.
People and Culture in Hong Kong
The population was estimated at 6.92 million by 2007 and is one of the most densely populated areas in the world. Cantonese is the official Chinese language spoken by most of the population. English, also an official language, is widely understood and it is the lingua franca of the business and legal community. It is spoken by more than one-third of the population. Every major religion is practiced freely in Hong Kong. In addition, Hong Kong's workforce is computer-literate, resilient, flexible and entrepreneurial. The culture here is one of industriousness underlined by a hunger among individuals to better themselves.
Economy
The official currency is the Hong Kong dollar (HK$) which is pegged to the United States dollar (US$) at approximately HK$7.8 to US$1
Hong Kong is a separate and active member of the World Trade Organization (WTO), Organization of Economic Cooperation and Development (OECD), Pacific-Economic Cooperation Council (PECC) and the Asia Pacific Economic Cooperation (APEC) forum, where it is an articulate and effective champion of free markets and the reduction of trade barriers. Major industries include tourism, financial services, professional services, trade and logistics and other producer services.
Tax System Lauded
The definition of offshoring includes organizations that build dedicated captive centers of their own in remote, lower-cost locations. As profits are usually subject to local taxes, several offshore countries offer low or limited taxations, which in effect lure companies to relocate their business there. In such a low tax environment, companies are able to maximize their profits without fearing a lofty tax requirement at the end of the year while enjoying the benefits of Hong Kong tax relief. That’s the main reasons that make companies relocate away from their home.
Hong Kong, as a “World’s Freest Economy ”, tax in the city is significantly low. There is no sales taxes, no capital gain taxes, no annual net worth taxes and no VAT. Corporate tax on profit directly generated in Hong Kong is only 16.5%, dividends are exempt from taxation and there are no withholding taxes.
Tax is levied on income known as Salaries tax and employees and the self-employed are required to make social insurance payments. Furthermore, taxes are levied on business profits derived from a trade, profession or business carried out in Hong Kong, which differs from most jurisdictions which levy corporate tax on all worldwide income. The source of the income must be generated or derived in Hong Kong and tax is charged at the rate of 16.5%.
If a company does no business in Hong Kong, there is generally no requirement to file financial statements and no audit is required. It is only necessary to file a Declaration of "No business activity in HK." Contact our Tax Manager
Excellent Banking system
The stature of Hong Kong as a key financial centre of East Asia is built on its high standard of market transparency, disclosure and prudently supervised financial institutions. It has one of the highest concentrations of banking institutions in the world. The banking sector contributes to Hong Kong's status as the world's sixth largest foreign exchange centre.
There are no exchange controls and money can be deposited and withdrawn without the payment of taxes. Around 70 of the largest 100 banks in the world have an operation in Hong Kong. At end-April 2008, there were 143 licensed banks, 31 restricted-licence banks and 29 deposit-taking companies in business, giving a total of 203 authorised institutions in Hong Kong. Furthermore, there are 76 local representative offices of overseas banks in Hong Kong. Since early 2004, Banks in Hong Kong have been allowed to conduct Renminbi (RMB) business.
Visas – Employment
As a general rule, any person other than those having the right of abode or right to land in Hong Kong, must obtain a visa before coming to Hong Kong for the purpose of education, taking up employment, training, investment or residence. PKF – Hong Kong will be very pleased to answer your inquiries and work with you for the smooth transfer of your valuable staff to our lovely Hong Kong land.
Conclusion
Because of these reasons, Hong Kong is really one of the best choices for companies with plans of setting up an offshore company. It offers an unusually stable and efficient business environment with the modern infrastructure and telecommunications that could be expected of the world's 12th largest trader in 2007 .
There are other advantages setting up an offshore company in Hong Kong. Some of these include stable political environment and free-flow of information etc, it seems to be the hub of business operating in Asia and other parts of the world.
If you would like to set up your business in Hong Kong and Mainland so that we can assist you through these tough economic times, please contact us. PKF – Hong Kong is a firm that has been helping small business owners just like you for the past 40 years, our knowledge in terms of both technical experience and human network is more than comprehensive. Please feel free to get in touch with us today to get more information and we can help you gauge your current situation in the recent market events.
