[ESTABLISHING A BUSINESS ENTITY IN HONG KONG]
241
the sale of capital assets) arising in or derived from Hong Kong from such trade, profession or business. No distinction is made between residents and non-residents. Whether a business is carried on in Hong Kong and whether profits have a Hong Kong source are largely questions of fact. While the principle itself seems clear, its application in particular cases can at times be contentious. It is therefore crucial to obtain tax advice before establishing any business in Hong Kong in order to produce a tax-efficient structure. Hong Kong has implemented a two-tiered tax rates regime for years of assessment commencing on or after 1 April 2018. The profits tax rate for the first $2 million of assessable profits has been lowered to 8.25% (half of the rate specified in the Inland Revenue Ordinance) for corporations and 7.5% (half of the standard rate) for unincorporated businesses (mostly partnerships and sole proprietorships). Assessable profits above $2 million will continue to be subject to the rate of 16.5% for corporations and the standard rate of 15% for unincorporated businesses. All entities with profits chargeable to profits tax in Hong Kong would qualify for the two- tiered profits tax rates, except those with a connected entity which is nominated to be chargeable at the two-tiered rates. Hong Kong has also entered into Comprehensive Double Taxation Agreements / Arrangements (DTAs), also referred to as tax treaties, with over 50 jurisdictions, including Mainland China, United Kingdom, Japan, Canada, New Zealand, and Switzerland, just to name a few. Generally, the DTAs operate to reduce or eliminate double taxation caused by overlapping tax jurisdictions, provide a level
of security about the tax rules that will apply to particular international transactions, and facilitate investment, trade, movement of technology, and movement of personnel by reducing rates of foreign withholding tax. Stamp Duty on Transfer of Hong Kong Stock A transfer in Hong Kong stock is chargeable with ad valorem stamp duty, subject to certain exemptions or stamp duty relief. The current stamp duty rate is 0.2% of (i) the consideration or (ii) the market value of the shares transferred (whichever is higher). 5. Visa A visitor is prohibited from taking any employment (whether paid or unpaid) or establishing or joining in any business during his stay in Hong Kong, but he may generally engage in the following business- related activities: (a) concluding contracts or submitting tenders; (b) examining or supervising the installation/packaging of goods or equipment; (c) participating in exhibitions or trade fairs (except selling goods or supplying services direct to the general public, or constructing exhibition booths); (d) settling compensation or other civil proceedings; (e) participating in product orientation; and (f) attending short-term seminars or other business meetings. Persons who wish to enter or stay in Hong Kong to establish or join in business in Hong Kong will need to apply to the Immigration
ILN Corporate Group – Establishing a Business Entity Series
Made with FlippingBook Ebook Creator