Hong Kong (香港 “Fragrant Harbour”) was a former British colony until 30 June 1997. Since 1 July 1997 it was declared as a Special Administrative Region of the People’s Republic of China and enjoys a high degree of autonomy. It is one of the densely populated cities in the world with a population of around 7.3 million people of various nationalities.
Hong Kong has an independent legal system and continues to follow the English common law systems established under the British rule. It is a global financial centre and historically has been a leading trading hub with China. The currency is the Hong Kong Dollar, which is pegged to the US Dollar (US$1:HK$7.75-7.85).
Hong Kong private limited companies require a minimum of one director, one shareholder, a resident company secretary and must maintain a registered office in Hong Kong. Corporate directors and shareholders are allowed but at least one director must be an individual who can be non-residents of Hong Kong.
With effect from 1 March 2018 all Hong Kong companies formed and registered under the Hong Kong Companies Ordinance are required to maintain a significant controllers register (“SCR”) to be accessible by Hong Kong law enforcement officers upon demand. The company must keep its SCR at the company’s registered office or a prescribed place in Hong Kong. A significant controller of a company includes a registrable legal entity and a registrable person. The company is also required to appoint a Designated Representative to maintain the SCR.
Hong Kong has a territorial tax system and the current profits tax rate for corporations is 16.5% on profits derived or sourced in Hong Kong. There is no withholding tax on dividends and interest and there is no exchange control. Hong Kong has no estate duty, which was abolished in the year 2006. In March 2018, the Hong Kong Legislative Council passed The Inland Revenue (Amendment) (No. 7) Bill 2017 (the “Bill”) which introduced the two-tiered profits tax rates regime. Under the two-tiered profits tax rates regime, the first HK$2 Million of profits of qualifying companies will be taxed at 8.25%, and profits above HK$2 Million will be taxed at 16.5%.
A Hong Kong company must keep accounting records and it must be kept at its registered office or any other place that the directors think fit. The company must preserve the records, or the accounts and returns, for 7 years after the end of the financial year to which the last entry made. The financial statements are required to be audited, which have to be filed with the company’s Profits tax return.
A Hong Kong private company must in respect of every year (except the year of its incorporation) deliver to the Registrar of Companies for registration an annual return within 42 days from the company’s anniversary date.
Hong Kong has also entered into Double Taxation Agreements (DTA’s) with many countries. It has so far concluded DTA’s with over 30 countries including China, Japan, Indonesia, France, Italy, Luxembourg, Switzerland, Thailand and United Kingdom. DTA’s provide certainty to investors on the taxing rights of the contracting parties, helps investors in assessing their potential tax liabilities and provides incentive for overseas companies to do business in Hong Kong.
