Stepping into 2021, are you ready to weather the challenges and make your mark? If you’re an aspiring entrepreneur who’s looking for a place to pursue your business ambition, look no further! Because Hong Kong – one of the most renowned start-up-friendly places in the world is undoubtedly the spot.

In light of the internal and external turmoil brought by COVID-19, there’s one question we heard from clients nearly daily – “is it a good time to develop my business in Hong Kong now”. Our answer is always the same: “YES”! Here we’ve put together a few points that show the city’s advantages backed with the latest governmental supports, to explain why the 852 remains a get-go for entrepreneurs and what these measures mean for your business. Hopefully, they’ll clear your doubts and inspire you to carry on your dream.

1. Zero Business Registration Fees

This year is absolutely the greatest timing for you to nail down your business plan. Per the 2021-22 Budget announced by the HK Government, business registration fees are waived, meaning you don’t need to pay a single penny for obtaining a Business Registration Certificate for your own company. 

2. Reduced Profits Tax 

Nothing matters more than profits tax to business owners. Luckily, entrepreneurs in Hong Kong can enjoy favourable tax benefits thanks to the amazingly low two-tiered tax regime. The first HK$2 million of profits earned by a company will only be taxed at half of the 16.5% tax rate (i.e., 8.25%). For the year 2020-21, the Government has reduced profits tax by 100%, subject to a HK$10,000 ceiling per case to leverage the burden of SME owners. If you are not sure whether you can enjoy this benefit or have no clue of how to utilise it, contact our on-site tax professionals or read our "8 Tips for Proper Tax Filing & Reporting in HK" for detailed information.

3. Concessionary Low-Interest Loan

If your business lacks capital solution or you’re a novice entrepreneur who needs more funding, you can apply for the concessionary low-interest loan with 100% Government guarantee for enterprises, whose application is extended to the end of 2021. Enterprises can lend a maximum loan of HK$6 million (ceiling notably raised from HK$2 million in 2020).

There are many more Governmental supports which will be rolled out to support enterprises. For more details, please click here.

Despite uncertainties are spreading through the global economy, every challenge creates invaluable opportunities. Chat our team now and let us navigate you the right path of success in the business world. Drop us an email or hop on a phone call today with our on-site company incorporation experts, who can always offer the best solution for you to get set and go. The world is your oyster, enjoy the pearls of life today!

With the pandemic turmoil of the European and American economy, many global businessmen have pivoted to explore further in Asian countries. Among the different choices, Hong Kong is always the one winning entrepreneurs’ hearts. Wanna know the reasons behind?!
 

Easy Procedure

Forming a HK limited company is very straightforward, especially if you're doing it with a professional service provider. BRIDGES team has served countless start-ups and SMEs in setting up their company with our all-in-one package (no hidden costs at all) for many years. Let us share a few tips and you will find establishing your own company has never been easier.

STEP 1: Collecting the required documents (please refer to the list below) for registration at the HK Companies Registry :

There are 2 types of Required Documents:

Type I. If the Director / Shareholder is an individual:

> Copy of all Directors & Shareholders’ passports / HKID

> Copy of all Directors & Shareholders’ addresses proof

* The Director & Shareholder can be the same person, which means it only takes 1 person to complete the process.

Type II. If the Director / Shareholder is a corporation:

> Copy of Business Registration (BR) Certificate

> Copy of all Directors’ passports

> Copy of  registered office’s address proof

> Articles of Association

> Meeting minutes of agreeing to appoint Directors / Shareholders for this Company

* If the Director is a corporation, it is required to appoint at least one individual Director to comply with the new Companies Ordinance. 

STEP 2: Pay and go!

Once your incorporation payment is confirmed, we will get on preparing the Government paperwork for you to sign.

STEP 3: Submitting your signed documents to Government :

Even if you are aboard, we will help submit all signed application documentations to the Government for swift processing. In fact, by the time you reach this step, you are already halfway through setting up your own company.  Our team would get it all done for you, like approaching different Government departments to file the required paperwork. For a ready-made (shelf) company, it takes around 2 working days to process; for an all-new company, it would take around 1 week or less to process.

STEP 4: Opening bank account :

You may ask: ‘How can I finish all company setup and bank account opening procedures if I cannot fly to HK?’ The good news is BRIDGES is now able to provide remote incorporation. From business consultation to business set-up, everything can be settled via the Internet. For bank account opening, indeed many traditional banks require physical presence and it usually takes a one-month appointment in advance. However, now with the pandemic, you might consider utilising fintech platforms to facilitate your business transaction especially if you are trading in multiple currencies.

The three reliable bank account alternatives in HK (BRIDGES' business partners) - Airwallex, Statrys and Currenxie - do not require the physical presence of applicants and offer more than 10 different currencies. For more details, please refer to "Traditional Bank Account Alternatives to Run Business".

Bank Account Opening Preparation

The assessment criteria of international banking are getting stricter, including HK’s banking and financial system. Therefore, a thorough preparation before the bank appointment always helps. If you managed to fly to HK, we will help arrange an appointment with bankers in advance on your behalf. What’s more, sets of the certified true copy are included in our package already for presenting to the bankers. Before the appointment, our experienced specialists will advise you of the documents needed to prepare (e.g. passport copy, residential address proof, business plan, business proofs, etc.), so that the whole process could be sped up and the situation of missed documents is minimised. Some banks can even offer our clients pre-screening to let you know whether your provided documents are sufficient for the bank appointment. In general, the assessment time will be around 2 - 4 weeks provided that all required supporting documents are submitted to the bank for review. We work closely with HSBC, Hang Seng Bank, DBS, OCBC Wing Hang Bank, China Citic Bank, etc. and we will guide you through to smooth out the whole process.

Favourable Taxation in HK

HK is famous for having a rather simple and low tax regime. There are two main taxes: Corporate Profits Tax (8.25% to 16.5%) and Personal Salaries Tax (15%), and there is no dividend tax in HK. Generally after 18 months of your limited company incorporated, you will receive the 1st Profits Tax Return. When your company is in good hands like us where there is an in-house Accounting Team able to assist your business with all accounting work, audit arrangement and getting prepared for local tax compliance, you can rest assured that all these essential functions will be handled properly and timely in a legitimate way.

HK Incorporation vs. Singapore Incorporation

Both HK and Singapore are popular jurisdictions in Asia for international businessmen. However, forming a Singapore company requires foreign entrepreneurs to partner up with a local Singapore citizen, while there is no limit on the nationality of the director(s) in setting up a HK company.  It means no matter what your nationality is, you can freely form your own company in HK without the need to include a HK citizen as your company’s stakeholder, giving you more flexibility in the company structure.

How HK Serves as a Stepping Stone into China?

For expats who want to set foot in China, they have to set up a special type of entity named Wholly Foreign Owned Enterprise (WFOE) according to the China policy. From our experience, if you own a Hong Kong limited company as a shareholding company, it would be way more beneficial to use it informing your WFOE due to the close economic partnership between HK and Mainland China i.e. under The Closer Economic Partnership Arrangement (CEPA). Not to mention financing in HK is much more accessible than in China, and all major international banks are located in HK, leading to a high standard system in terms of technology and security. In contrary to China, there are no restrictions or approvals needed to receive or transfer funds / foreign currencies in HK as you might know.

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If you have any further questions on setting up your own company, please feel free to email our company incorporation team, at info@bridges.hk to know more about our practical advice. 

Hong Kong remains one of the hottest start-up cities, and one pivotal reason is that HK continues to expand its network of income tax treaties rapidly - HK has entered into Comprehensive Double Taxation Agreements / Arrangement (DTAs) with 40 jurisdictions to date.

In order to claim tax benefits available under DTAs, some overseas entrepreneurs or investors owning HK companies applied for HK tax residency certificates (“Certificates”) from the Inland Revenue Department (“IRD”), and they may recall that the application process requires a well-thought-out interpretation to prove the applicant can qualify as a resident for the purpose of the relevant DTA, which is a prerequisite for enjoying DTA benefits. Provided that there is no abuse of the DTAs in question and as a responsible treaty partner internationally, the IRD is willing to facilitate the reduction of foreign (withholding) taxes in the source countries by issuing tax residency certificates acknowledging that the HK company or person is a HK tax resident.

In this article, we’ve included a few examples illustrating how some of our clients have enjoyed the DTA benefits step by step.
 

HK tax residency certificate application needs a convincing interpretation nowadays to prevent rejection by the IRD.

What’re the Possible Tax Advantages?

For those who are not sure or still considering whether it’s worth obtaining a Certificate, the envisaged tax benefits that a person or corporation is potentially eligible for might help you make the decision.

Yes, you heard it right. There are multiple ways how the applicant may benefit from getting a Certificate. For example, you may avoid or lower the withholding taxes on dividends, interest and / or royalties / license fees in the jurisdiction from where the payments are made; you can potentially avoid capital gains tax in the country where shares are disposed of, etc. (The possible outcome and advantages varied)

Although this Certificate is not a ‘must-have’ item for every taxpayer in HK, if the country where you (are considering to) carry on business or invest has a DTA with HK, obtaining such a tax residency certificate could provide obvious tax benefits. In particular, it is noted that HK has the most favorable DTA with Indonesia (compared with any other DTAs that Indonesia has concluded so far).

Who Can Apply for a Certificate of Resident Status?

Any individual who ordinarily resides in HK, any company incorporated in HK, and any foreign (e.g. Seychelles, BVI, Cayman Islands) company which is controlled and managed in HK can apply for a Certificate from the IRD. To avoid abuse of DTAs, however, the IRD would ask for the (corporate) applicant to have an appropriate degree of ‘business substance’ in HK though (simply said, ‘shell companies’ that actually have no substance in HK would not be entertained by the IRD).

Let’s take a look at the case studies below:-

CASE 1: “I have companies in both Mainland China and HK, it’s almost the end of the current quarter, so I’d like to pay dividends from our Mainland Chinese company’s retained earnings to its shareholder in HK to myself. But the high withholding tax and foreign exchange controls seem to make the profit repatriation complicated?”

ANSWER: The proposed transaction could be like the Mainland Chinese company paying dividends to the HK company, and the HK company pays dividends to its shareholder(s). By doing so, the originally high withholding tax % will be decreased from 10% to 5% if the DTA applies, and the dividend income of the HK company will become non-taxable in HK. In such case, the Mainland Chinese tax bureau would request the Mainland Chinese company to submit a Certificate from the IRD in HK, confirming that the recipient of the dividends, i.e. the HK company, is a resident of HK for the purpose of the HK / China DTA. Once the dividend income is received by the HK company, it can be further distributed to the shareholder / yourself without any withholding tax leakage since HK does not impose withholding tax on dividends paid to non-residents. The Certificate also forms part of the supporting evidence in case the Mainland Chinese foreign exchange authorities request documentation for the cross-border payment of the (net amount of) dividends.

CASE 2: “I’d like to open a new or additional bank account for my business, yet I left my home country behind as I travel here & there all year around. However, when I tried to open a corporate bank account, it requires me to declare the residence of my company so I got stuck there...”

ANSWER: This is where our consultant will help review your business activities and the jurisdictions involved, in order to guide you with the preparation and application for a Certificate in case the bank asks for proof of residency in view of opening or maintaining your company’s bank account(s).

There are various elements that can affect the possible outcome. To enjoy the most out of the benefits available under DTAs, the best approach is to obtain professional advice from our experienced specialists to get well prepared before making an application. You may also check out our Certificate of Resident Status Package here.

Feel free to shoot us an email at info@bridges.hk or call +852 2159 9666 anytime for in-depth advice or appointment making with our tax strategist.  Let’s work together to conceive your sagacious cross-border tax planning before another year-end!