Hong Kong


Hong Kong has belonged to China since ancient times. Their first settlements appeared more than two thousand years ago. In the middle of 19th century as a result of opium wars Great Britain made China concede Hong Kong and its adjacent territories for 99 years. In a short period of time Hong Kong became one of the most successful colonies of the UK and under its control developed into the largest financial center in Asia. On 1st of July, 1997 after long negotiations in accordance with China-UK joint declaration the People’s Republic of China restored its sovereignty over Hong Kong. According to this declaration and Basic Law of Hong Kong, the territory can have a different political system form mainland China till 2047, e.g. for 50 years after China regained sovereignty. Under the principle of "one country, two systems" and “Hong Kong is governed by Hong Kong people themselves in conditions of high degree of autonomy” Central Government of PRC governs only foreign relations and military defense of HK, while Hong Kong governs its legislations system, police, monetary system, duties and immigration, as well as keeps its membership in international organizations.

Service packages

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Service item Express Standard Optimum
Company registration
Legal address per year
Secretarial services for the first year
Fees and duties for the first year
Apostilled bound set of incorporation documents
Compliance fee
Nominee service per year
Bank Account Pre-approval
Price

2 500 USD

6 350 USD

6 850 USD

I want to order «»

Contact method: and / or

Core Services

2 500 USD

— Incorporation

including incorporation tax, state registry fee, including Compliance fee

Included

— Annual government fees

Stamp Duty and Companies House incorporation fee

1 740 USD

— Corporate legal services

including registered address and registered agent, NOT including Compliance fee

125 USD

—Delivery of documents by courier mail

DHL or TNT, at cost of a Courier Service

от 675 USD

— Apostilled set of Statutory documents

Optional services

435 USD

Nominee Shareholder

Paid-up “nominee shareholder” set includes the following documents

Related services

340 USD

Certificate of Continuing Registration

310 USD

Certificate of Incumbency

Compliance fee

Compliance fee is payable in the cases of: renewal of a company, liquidation of a company, transfer out of a company, issue of a power of attorney to a new attorney, change of director / shareholder / BO (except the change to a nominee director / shareholder)

250 USD

Basic

simple company structure with only 1 physical person

50 USD

For legal entity in structure under GSL administration

additional compliance fee for legal entity in structure under GSL administration (per 1 entity)

100 USD

For legal entity in structure not under GSL administration

additional compliance fee for legal entity in structure NOT under GSL administration (per 1 entity)

350 USD

For client with high risk Status

Cost of incorporation, including first year servicing 2500
Cost of nominee director services per year, including an apostilled set of documents 3850
Cost of annual service, starting from the second year 1740
Open account in 26855
Incorporation timescale for a turnkey company 7 days
Country 26736

General information shortly

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Total area Population Capital Unemployment Corruption perceptions index rank
1.104 sq.km 7.182.724 (2013) No 3.2% (2012) 14 (2012)
Location Eastern Asia
National currency Hong Kong dollar
Conditional reduction of currency HKD
Against USD 7.75
Climate, average max and min t° Subtropical monsoon; cool and humid in winter, hot and rainy from spring through summer, warm and sunny in fall; avg. maximum temperature (July) +35°; avg. minimum temperature (January) +15°
Time difference from Moscow + 4 hours
Dialing code +852
State language Chinese, English
Ethnic groups Chinese 95%, Filipino 1.6%, Indonesian 1.3%, other 2.1%
Literacy rate 93.5%
Credit rating AAA
Government type limited democracy
Executive branch Executive Council headed by Chief Executive of HK
Legislative branch unicameral Legislative Council (60 members), elected for 4 years
Judicial branch High Court of Appeal, High Court (includes the Court of Appeal and the Court of First Instance), the District Court (includes the Family Court) and special courts
GDP per capita rank 26 (2012)

Corporate info

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Shelf companies permitted Legal system Incorporation timescale for a turnkey company Cyrillic alphabet permitted in company name Local registered office
No based on English Common Law 7 days No Yes
Types of entity private company limited by shares; public company limited by shares; public unlimited company with a share capital; private unlimited company with a share capital; company limited by guarantee without a share capital; partnership; limited partnership; sole proprietorship; branch; representative office; trust
Incorporation timescale for a new company 4 days
Company suffix Limited
Sensitive words Department, Government, Commission, Bureau, Federation, Council, Authority; Bank, Stock Exchange, Unified Exchange; Assurance, Insurance, Re-insurance; Certified Public Accountant (C.P.A.), Public Accountant (P.A.); Building Society, Chamber of Commerce, Cooperative, Kaifong, Mass Transit, Municipal, Savings, Tourist Association, Trust, Trustee, Underground Railway; words, usage of which is considered crime or contradicts social inetersts in any way
Local registered agent No
Information to be kept at the registered office registration certificate; register of directors and secretaries; register of members; books containing the minutes of proceedings of any general meeting, any meeting of directors or any meeting of managers; register of holders of debentures; a copy of every instrument creating any charge requiring registration; register of charges, etc.
Seal required, type of seal a metallic seal with its name engraved in legible characters
Redomiciliation (to, from) permitted not permitted

Director and secretary

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Minimum number of directors Residency requirements for directors Corporate directors permitted Disclosure to local agent Disclosure to public
1 No Yes Yes Yes
Directors’ meetings/frequency/location No requirements
Company secretary required Yes
Residency requirements for a secretary Yes
Qualified secretary required No
Corporate secretary permitted Yes

Shareholder and beneficiary

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Minimum number of shareholders Residency requirements for shareholders Corporate shareholder permitted Disclosure to local agent Disclosure to public
1 No Yes Yes Yes
Meetings/frequency/location Yes / annually / no requirements
Beneficiary info disclosure to No

Shares and share capital

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Minimum authorized share capital Minimum issued share capital Minimum paid share capital Authorized capital payment deadlines Bearer shares permitted
No requirements 1 1 No requirements No
Issued capital payment deadlines Immediately upon issue or within time specified in the relevant resolution
Standard currency Hong Kong Dollar
Standard authorized share capital 10000
Standard par value of shares 1
Shares with no par value permitted No

Taxes

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Min. rate for corporate tax Capital gains tax VAT Withholding tax Exchange control
0%/16,5% No No 0%/0%/30% No
Personal tax 2-17%
Other taxes Capital duty, Real property tax, Social security contribution
Government fee No
Stamp duty Yes

Accounts

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Requirement to file accounts Publicly accessible accounts Audit required Requirement to file Annual Return Publicly accessible Annual Return
Yes No Yes Yes Yes
Requirement to prepare accounts Yes
Double tax treaties network 45
Tax Exchange Information Agreement network 7
OECD member No
Offshore/onshore status according to the RF laws No

GENERAL INFORMATION

General info

Hong Kong or Xianggang is Special Administrative Region of the People's Republic of China, one of Asia’s and world’s leading financial centers.
With a land mass of 1,104 sq.km and a population of seven million people, Hong Kong is one of the most densely populated areas in the world. Hong Kong's population is 95% ethnic Chinese, most of which are Cantonese, Hakka and Chaozhou. The rest 5% are Indian, Pakistani, Nepalese, Filipino, Vietnamese, European American, Australian, Canadian, Japanese and Korean.
Official languages of Hong Kong are Chinese and English.
Official currency is Hong Kong dollar (HKD). One US dollar is equal to 7.75 HKD.
Climate of Hong Kong is subtropical monsoon. Cool and dry winter lasts from December to March. Spring and summer are hot, humid and rainy. Autumn is warm, sunny and dry. Tropical typhoons are typical of summer and early autumn. Average temperature in January is 16,1°C, and average temperature in July is 28,7°C.
Time difference with Moscow is + 4 hours.
Literacy rate is 93.5%.
Calling code is +852.

History

Hong Kong has belonged to China since ancient times. Their first settlements appeared more than two thousand years ago. In the middle of 19th century as a result of opium wars Great Britain made China concede Hong Kong and its adjacent territories for 99 years. In a short period of time Hong Kong became one of the most successful colonies of the UK and under its control developed into the largest financial center in Asia. On 1st of July, 1997 after long negotiations in accordance with China-UK joint declaration the People’s Republic of China restored its sovereignty over Hong Kong. According to this declaration and Basic Law of Hong Kong, the territory can have a different political system form mainland China till 2047, e.g. for 50 years after China regained sovereignty. Under the principle of "one country, two systems" and “Hong Kong is governed by Hong Kong people themselves in conditions of high degree of autonomy” Central Government of PRC governs only foreign relations and military defense of HK, while Hong Kong governs its legislations system, police, monetary system, duties and immigration, as well as keeps its membership in international organizations.

Government Type

According to Basic Law of HK playing a role of Constitution of HK, local authorities continue to enjoy a high degree of autonomy in all fields except from defense and foreign policy.
The legislative branch is represented by Legislative Council – a unicameral body, elected for 4 years and consisting of 60 members. The entire council is headed by the President of the Legislative Council who serves as the speaker.
The executive branch is represented by the Executive Council and Chief Executive of Hong Kong who heads the Council. Chief Executive is elected by the Election Committee, which consists of 800 people and the appointed by the Central People’s Government. Other civil servants of executive and legislative branch are appointed by the Chief Executive (directly or indirectly) or elected by electors.
The judicial branch is represented by High Court of Appeal, High Court (which includes the Court of Appeal and the Court of First Instance), the District Court (which includes the Family Court) and special courts.

Economy

Hong Kong boasts one of the purest capitalist economic systems in the world. Its economy is based on free market, low taxation and government policy of non-interventionism. Hong Kong is an important international financial and trade center with one of the greatest concentrations of corporate headquarters in the Asia-Pacific region and is known as one of the Four Asian Tigers for its high growth rates and rapid development from the 1960s to the 1990s. According to its GDP Hong King is the richest city in PRC.
Continuing the police of British government, Hong Kong government places a priority on free market and private sector in the economy. Since 1980 government played a mostly passive role in the framework of the official policy of "positive non-interventionism”. Since introduction of the Index of Economic Freedom Hong Kong has ranked the freest in the world for 13 years.
The territory has little arable land and few natural resources, so it imports most of its food and raw materials. Hong Kong is the world's eleventh largest trading entity, with the total value of imports and exports exceeding its gross domestic product. Hong Kong's largest export markets are mainland China, the United States, and Japan.

CORPORATE INFORMATION

Legal system

Hong Kong's legal system is completely independent from the legal system of mainland China. In contrast to mainland China's civil law system, Hong Kong continues to follow the English Common Law tradition established under British rule. On the top of law hierarchy is Basic Law of Hong Kong (Constitution of HK), adopted in 1990. Hong Kong has its own administrative governance, legislation, independent court procedure and supreme judicial authority.
The major corporate law is Companies Ordinance.

Types of entity

The principal forms of business organization in Hong Kong are:
  • private company limited by shares;
  • public company limited by shares;
  • public unlimited company with a share capital;
  • private unlimited company with a share capital;
  • company limited by guarantee without a share capital;
  • partnership;
  • limited partnership;
  • sole proprietorship;
  • branch;
  • representative office;
  • trust.

The most common and suitable type for foreign businessmen to incorporate their business is a private company limited by shares.

REGISTRATION

Company name

Generally, any company can be registered if it is not identical with already registered and specified names in the Registrar of Companies. You can check a name for availability at Companies Registry’s Cyber Search Centre free of charge.
Company name can be registered in Chinese, English or both. but a combination of English words/letters and Chinese characters in a name is not allowed. However, it is not allowed to use Chinese and English symbols in the name. Chinese company names shall be registered in full characters, used in Hong Kong. Names in Cyrillic alphabet are not permitted.
The suffix to denote limited liability in company names is ‘Limited’, its short form ‘Ltd’ is not allowed as Companies Ordinance requires that the English company name must end with ‘Limited’.
The company name will not be registered if it is identical or similar to that of an existing company, if its use would constitute a criminal offence, or is offensive or otherwise contrary to the public interests. The following names and their derivatives require approval or a license: words which are likely to give the impression that the company is connected in any way with the Central People’s Government or the Government of Hong Kong or any department of either government: Department, Government, Commission, Bureau, Federation, Council, Authority; words and expressions that are covered by other legislation: Bank, Stock Exchange, Unified Exchange; Assurance, Insurance, Re-insurance; Certified Public Accountant (C.P.A.), Public Accountant (P.A.); other words: Building Society, Chamber of Commerce, Cooperative, Kaifong, Mass Transit, Municipal, Savings, Tourist Association, Trust, Trustee, Underground Railway.

Company Registration

To register a private company limited by shares, you need to go through the following procedure:
1. choose a name for your company;
2. register incorporation and business;
Any application for company incorporation includes a simultaneous application for business registration. If an application is accepted, Registration Office will issue Incorporation Certificate and Business Registration Certificate. You may simply submit the following documents online at the CR’s e-Registry with the correct fee:
  • Application;
  • A copy each of the company’s Memorandum of Association and Articles of Association;
  • A Notice to Business Registration Office.

3. obtain certificates and licenses.
Business Registration Certificate is issued for one or three years. If a type of business activity changes, a company should notify Inland Revenue Department in writing within a month. Only specific types of activities (e.g. restaurants, banks, tour agencies) need additional licenses.
Business registration certificate is issued in both hard and electronic copy (for online procedure). Both copies are equally valid..
As a rule, it takes four working days to issue an incorporation certificate and business registration certificate. When the documents are ready, the applier is notified by e-mail and has to arrive at Registration Office to get it. Electronic version may be ready within 24 hours.

Restriction of the activities and banking account

There are a number of restrictions on the activities of a private company. It cannot undertake the business of banking or insurance or solicit funds from or sell its shares to public, unless a special permission is granted.
Hong Kong companies have a right to open banking accounts in Hong Kong and abroad. Banks in Hong Kong normally require a minimum deposit. This is typically around HK$2,000. Banks may request identity and residence information for all beneficial owners of the company before they will open an account.

Local registered office

Hong Kong companies must maintain a registered office in Hong Kong at which the following information and documents would normally be kept: registration certificate; register of directors and secretaries; register of members; books containing the minutes of proceedings of any general meeting, any meeting of directors or any meeting of managers; register of holders of debentures; a copy of every instrument creating any charge requiring registration; register of charges, and other. The companies may also choose a place other than registered office, but within Hong Kong, to keep these documents at, with notice of such place to be given to the Registrar.

Seal

Every Hong Kong company must have as its common seal a metallic seal with its name engraved in legible characters on it. A company whose objects require or comprise the transaction of business outside Hong Kong, may have for use in any territory, district, or place not situated in Hong Kong, an official seal, which shall be a replica of the common seal of the company, with the addition of the name of every place where it is to be used.

Renewal

Renewal of Hong Kong companies is held annually and normally includes the following fees:
  • fees for services of nominal directors and shareholders (if needed), services of secretary, and registered address;
  • duty for Business Registration certificate (250 HKD till March 2014);
  • duty for submission of Annual return to Registrar, which contain all details on shareholders, directors, registered address, share capital and it changes.

Redomicile

The redomiciliation of companies either to or from Hong Kong is not permitted.

COMPANY STRUCTURE

Directors

A Hong Kong company is required to have a minimum of one director who can be a natural person or a body corporate (corporate directors are allowed for companies that are not subsidiaries of public listed companies), a resident or non-resident. Director’s details are disclosed to the local agent and appear on the public file. In the meantime, at least one director should be a natural person. The board meetings may take place in Hong Kong or anywhere in the world.

Secretary

All Hong Kong companies must appoint a company secretary who may be a natural person or a body corporate, but must be resident in Hong Kong. There are no special requirements for qualifications of the secretary. The law prohibits that the sole director of a private company be appointed as secretary. Besides, no private company having only one director may have as secretary a body corporate, director of which is a sole director of the private company.

Shareholders

Hong Kong companies may have one or more shareholders, individuals or corporations of any nationality or residence. Sole shareholder can be director of the company. Shareholders’ details are disclosed to the local agent and appear on the public file. General meetings are to be held either in Hong Kong or abroad annually, with the first annual general meeting to take place within eighteen months of the company’s incorporation, and the following meetings to be held in 9 months after the end of financial year. At a general meeting director are to report about profit and losses, as well as balance sheet for the previous financial year.

Beneficiary

The identity of the beneficial owner of a Hong Kong company is disclosed to the local agent and the auditor, and can only be disclosed by them in the cases stipulated by law and following statutory procedure. Besides, a bank may request information on beneficiary before opening an account.

Shares and share capital

The share capital of a private limited company can be nominated in any currency. There is no minimum authorized share capital as the law simply provides for a minimum of one share to be issued and paid immediately upon issue or within time specified in the relevant resolution. No payments deadlines are set for the authorised capital. Usually the share capital is HKD 10,000 which is divided into shares of HKD 1.00 each. Bearer shares or shares with no par value are not permitted.

DISSOLUTION AND RESTORATION

Dissolution

A Hong Kong company limited by shares can be dissolved in the following two ways:

1. Liquidation/Winding Up
The winding up of a company may be either:
Winging-up by the court
A company can be ordered winding-up by the Court. The common reason for this type of winding-up is its inability to pay its debits. The company is deemed unable to pay its debts if has a debt exceeding HKD 10,000 and fails to pay it or make arrangement with creditor(s) which is accepted by them within three weeks of receiving their written demand.
Voluntary winding-up
Voluntary winding up of a Hong Kong company can be initiated either by members (shareholders) or creditors. The voluntary winding up of a company begins by a special resolution being passed for the company to be voluntarily wound up and publishing this information in the Gazette within 14 days. The winding up is said to begin on the date on which the resolution is passed.
• Members’ voluntary winding-up
A members’ voluntary winding up of a company can be carried out if the directors believe that the company will be able to pay its debts, in full, within 12 months after the commencement of the winding up.
To initiate such a winding up, a directors’ meeting must first be convened where majority of the directors must make a statutory Declaration of Solvency. The Declaration of Solvency must also contain the statement of assets and liabilities, based on the most recent financial statements of the company. The Declaration must be delivered to the Companies Registry within seven days of its making.
The directors then appoint a provisional liquidator, who is generally a solicitor or professional accountant. The notice of the appointment of the provisional liquidator and notice of the commencement of the winding up by virtue of delivery of the Declaration to the Companies Registry must be published in the Gazette within 14 days of the appointment of the provisional liquidator.
Within 28 days of delivering the Declaration of Solvency to the Companies Registry, the directors must convene an Extraordinary General Meeting for passing a Special Resolution to wind up the company, and an Ordinary Resolution appointing the liquidators. The company should, within 14 days of passing the special resolution for voluntary winding up, give notice of the resolution by advertising in the Gazette. The voluntary winding up is deemed to have commenced with the passing of the special resolution at the Extraordinary General Meeting. The liquidator will proceed to wind up the affairs of the company and file the necessary notifications required under the Companies Ordinance.
Once the company’s affairs are fully wound up, the liquidator must prepare a final account of the winding up, showing how the property of the company has been disposed of and how the winding up has been conducted. The account must be presented at a final general meeting. A copy of the account, along with a return stating that the meeting was held, must be sent to the Companies Registry within one week after the meeting. The company will be dissolved three months after the Registry receives the documents or at a later date as set by a court order.
• Creditors’ voluntary winding-up
When directors of the company do not believe that it will be able to pay off the debt, a creditors’ voluntary winding up will have to be executed. Soon after the meeting at which the resolution for a voluntary winding up is made, a creditors’ meeting should be convened. The company must advertise notice of this meeting in the Gazette and two local newspapers (one English language paper and one Chinese). The directors must present a complete picture of the company's affairs, along with a list of creditors of the company and the estimated amount of their claims. The creditors will then proceed to appoint a liquidator and may also appoint a committee of inspection whose role is to act in concert with the liquidator. The liquidation process is similar to that of a members’ voluntary winding up, as mentioned above.
Winding-up will take about one year and the company cannot be re-opened after dissolution.

2. Deregistration
If a private company, which is defunct and solvent, wants to cease its business, it must officially apply to the Companies Registry to deregister it from the register of companies. In order to do so, it must meet certain requirements:
  • All the members of the company agree to the deregistration;
  • The company has never commenced business or operation, or has ceased to carry on business or ceased operation for more than 3 months immediately before the application;
  • The company has no outstanding liabilities, which include Profits Tax, Property Tax, Stamp Duty, Business Registration fee, fines and penalties in connection thereof and court fees;
  • It has obtained a written notice of no objection from the Commissioner of Inland Revenue (this notice will only be issued in the case that the company owes no money to the Hong Kong Government and no outstanding tax returns);
  • All the annual returns have been filed.

Deregistration is a relatively simple, inexpensive and quick procedure for dissolving defunct private companies. An application for deregistration can be made to the Registrar of Companies in the specified form. However, there is no statutory provision for making an application to the Registrar of Companies for striking off. This is a statutory power conferred on the Registrar of Companies to strike the name of a company off the register where he has reasonable cause to believe that the company is defunct and the company shall be dissolved when its name is struck off the register of companies.

Restoration

Reinstatement of a struck-off company should be fulfilled with application at court within twenty years from publication in the Gazette of the notice of strike off. Provided that the court is satisfied that the conditions in the law are fulfilled, it will issue an order of reinstatement which will be filed with the Registrar. The company is then considered as never struck off (as if always have continued in existence). And the court may by the order give such directions and make such provisions as seem just for placing the company and all other persons in the same position as nearly as may be as if the name of the company had not been struck off. So the court order has a pretty strong effect for the protection of a member of the company, a creditor or the company itself. It is also useful to know that the strike off does not mean the liability for the directors or a member is eliminated during the strike-off.
The conditions for reinstatement checked by the court are: if the company was at the time of the striking off carrying on business or in operation, or otherwise if the court deems just to reinstate it. So the conditions are not demanding or strict, they are rather loose and discretionary on the court (‘deems just’).

TAXES

Personal tax

Individuals pay:
  • Personal income tax (salaries tax) on salaries and pensions
  • Income tax related to commercial activities
  • Property tax in relation to rental income.

Personal income is taxed at progressive rates ranging from 2% to 17%.
The maximum tax in 2020/21 is capped at 15% of net taxable income.

Corporate tax

Hong Kong has a territorial tax system, which means that both Hong Kong and foreign companies must pay Hong Kong tax on profits that are considered profits arising in Hong Kong or income from sources in Hong Kong.
The profits tax rate in Hong Kong is 16.5%.
The income up to HKD 2 million (approx. USD 250,000) is taxed at 8.25%.
The rates for individual entrepreneurs are 15% and 7.5%, respectively.

Capital gains tax

Capital gains are not taxable. However, the proceeds from disposal of assets may be subject to profits tax if the transactions are not capital in nature but are made in the ordinary course of business/trading.

VAT

Hong Kong does not levy VAT.

Withholding tax

There is no withholding tax on dividend distribution or interest payments from a Hong Kong company. Royalty payments are taxable in Hong Kong if made or accrued to non-residents for the use of, or the right to use, intellectual property in or outside Hong Kong where the royalty payments are deductible by the payer for Hong Kong profits tax purposes. If the payment is made to an unaffiliated party, then 30% of royalties are subject to tax, otherwise – 100%. The regular profits tax rate applies.

Real property tax

Property tax is paid annually by owners of land or buildings in Hong Kong at the standard rate of 15% on the net taxable value of those properties.
The net taxable value of a property is defined as the consideration paid to the owner for the right to use the land or building less 20% of the value and certain fees.
Rent payments are subject to profits tax.
Property tax can be credited against profits tax, or one can apply for a property tax exemption for the property rented out.

Mandatory provident fund (MPF)

Employers pay a mandatory contribution to this fund at the rate of 5% of the employee's remuneration.
The maximum monthly remuneration for this purpose is set at HKD 30,000.
Employees are also obligated to pay a contribution in the same amount (which is withheld by the employer).

Stamp Duty

Stamp duty is levied on purchase/sale of Hong Kong shares at a rate of 0.2% of the consideration paid for, or of the market value of, the shares, if the latter is higher.
Stamp duty applies to real estate sales and purchases. It ranges from HKD 100 to 15%, depending on whether the property is residential or not and on the amount of consideration (market value, if higher).
Also, stamp duty is paid on leases of real estate at rates ranging from 0.25% to 1% of the annual lease value, depending on the lease term.
A special stamp duty is levied additionally in the case of resale of residential properties within 36 months of their purchase. The duty is calculated on the transaction amount or the market value of the property, if higher, at rates of 20%, 15% or 10%. The longer the holding period, the lower the rate.
In addition to stamp duty and special stamp duty, stamp duty is levied on the purchaser who is anyone but an individual resident in Hong Kong. The rate is 15%, the tax base is the transaction amount or the market value of residential property, if higher.

Double Tax Agreements

HK has entered a whole range of double tax and tax information exchange mechanisms:
  • 45 DTCs: Austria, Belarus, Belgium, Brunei, United Kingdom, Hungary, Vietnam, Guernsey, Georgia, Jersey, India, Indonesia, Ireland, Spain, Italy, Cambodia, Canada, Qatar, China, Kuwait, Latvia, Liechtenstein, Luxembourg, Macau, Malaysia, Malta, Mexico, Netherlands
  • 7 TIEAs: Greenland, Denmark, Iceland, USA, Norway, Faroe Islands, Sweden.

Foreign exchange control

There is no foreign exchange control in Hong Kong.

ACCOUNTS

Annual Return

As Russian law does not have an equivalent of the Annual Return, we think it appropriate to explain this concept. The Annual Return is a summary of the company’s current structure prepared annually by the company secretary.
In the case of Hong Kong private companies, the Annual Return filed with the Registrar must contain information about all shareholders, directors, registered office, and share capital of the company and related changes, if any. This information is available to the public.
In the case of non-compliance, the Registrar may strike the company off the register.
Private companies with a share capital are required to submit the Annual Return signed by a director or secretary within 42 days of the most recent anniversary of the date of incorporation of the company in Hong Kong.
The obligation to file the Annual Return lies with the company secretary, who is always a resident of Hong Kong.

Financial statements

Every Hong Kong company must annually submit to the Inland Revenue Department (IRD) a profits tax return accompanied by the audited financial statements for the relevant period (financial statements will not be publicly available). The auditor must be a member of the Hong Kong Institute of Certified Public Accountants and hold a practicing certificate. Also, the Companies Ordinance requires all Hong Kong companies that have subsidiaries to prepare and submit consolidated financial statements.
If during the tax year a Hong Kong company did not conduct business and did not perform any transactions that should be reflected in its accounting records, such company is considered “dormant”. In this case, only a “nil” tax return should be filed with the Hong Kong tax authorities, without submitting audited financials. The “nil” tax return does not need to be certified by an auditor and can only be signed by the director or secretary of the company. If later the company is found to have been operating during the "nil" tax return periods, it will be necessary to audit the financial statements for all the periods when the company was active.
The first financial period of the company starts on the day of incorporation and can last from 12 to 18 months. As a rule, the end-date of the first financial period is the last day of the month in which the company was incorporated (i.e. if the incorporation date is 05 December 2019, the first financial period ends on 31 December 2020). But the company is free to individually set the end-date of the first financial period. Subsequent financial periods last 12 months.
The accounting records of the company’s operations must be kept in the English or Chinese language, either in paper format or electronically.
All accounting records must be kept for 7 years from the end of the financial year: it is necessary to keep all documents that reflect the company's activities (bank statements, invoices, cheques, contracts, etc.). It is a serious violation if a company does not keep accounting records.

Tax reporting

Tax reporting of Hong Kong companies consists of:
  • a completed profits tax return;
  • a tax computation;
  • a set of the signed audited financial statements.

The tax year in Hong Kong runs from 1 April to 31 March of the following year.
After the end of every tax year – 31 March – the Hong Kong Inland Revenue Department (IRD) issues a profits tax return, which companies must complete and file with the IRD together with a tax computation and audited financial statements within one month of the date of issue. The company receives its first tax return after 12-18 months from the incorporation date. The filing deadline for the first tax return is three months from the date of its issue.
The basis for calculating profits tax is the accounting profit, as adjusted, received in the financial year ending in the tax year.
Profits tax is payable by deadlines determined by the tax office after the filing of tax returns. If, for example, the company's financial year ends on 31 December, the final tax payment is usually due in November of the following year, with interim tax payments in November of the current year and in January of the following year.

SPECIAL PURPOSE ENTITIES

TRUSTS

Both fixed and discretionary trusts may be settled in Hong Kong. Documents do not have to be registered and there are no statutory requirements in Hong Kong for a trust to make annual returns, submit audited financial statements, etc., unless it is carrying on business in Hong Kong.
Unlike most offshore jurisdictions, Hong Kong has not modified its trust laws to make it a more attractive jurisdiction in which to create a settlement. The only instrument that may be of interest is a private trust company that can be formed and used as a trust company for private (as a rule family) purposes.
A Hong Kong private trust company must comply with all requirements of a company limited by shares, cannot use the word “trust” or “trustee” in its name, and is disallowed to provide trust or trustee services to the public.
So the principal objective of a private trust company is to act as trustee for an individual family or group of related trusts. Depending on a family’s particular situation and objectives, it can offer many benefits: allowing settlors to plan for the future ownership of family business interests, retain control in the management of underlying investments, and ensure privacy in their financial affairs. Unlike traditional trust structures where the settlor generally relinquishes control over a trust’s assets, a private trust company allows the settlor and their family to remain involved in the management, investment and disposition of trust assets, and in protecting the best interests of the trust’s beneficiaries.

COMMENCEMENT DAY OF NEW COMPANIES ORDINANCE OF HONG KONG

Commencement Day

New Companies Ordinance of Hong Kong is coming into force on 3 March, 2013, while the Companies Bill was adopted as early as on 12 July, 2012. According to Hong Kong lawmakers, Such a long time gap between adoption of the bill and coming into force of the ordinance itself is necessary to prepare above 10 by-laws which will become a base for an introduction of a new law.
The Ordinance introduced significant changes into structure and operating procedures of Hong Kong companies. The main changes are the following:

Abolition of Par Value of Shares

According to the New Ordinance it is permitted to issue only shares with no par value for all companies with share capital. After the law comes into force all the shares with par value issued before will be considered shares with no par value, and the capital will be considered issued capital.

Removing the power of companies to issue share warrants to bearers

If according to the old Ordinance Hong Kong companies could issue bearer shares, now it is forbidden. Such shares issued before will be bound to be returned, and the information about their bearers has to be delivered to the Registrar.

Restricting the appointment of corporate director

Every local company is required to give at least one director who is a natural person. According to the old Ordinance it was possible to use only corporate directors. From 3 March, 2014 the companies registered in compliance with the old Ordinance will be given 6 months to fulfill the new requirement. It is required to deliver the information on appointment of new directors to the Registrar within 15 days.
Violation of the requirement means a fine: a company and each responsible person will have to pay HK$100 thousand for each violator and HK$2 thousand for each day during which the offence continues.
The new requirement does not relate to the braches and representative offices of non-Hong Kong companies registered in Hong Kong.

Clarifying directors duties

The new Ordinance clarifies general director’s duties. It sets out a mixed objective and subjective test for the standard in carrying out the duties. Directors are required to be reasonably diligent people having:
1) the general knowledge, skill and experience that may reasonably be expected of a person carrying out the functions carried out by the director in relation to the company (objective test);
2) the general knowledge, skill and experience that the director has (subjective test).
The same requirements apply to a shadow director. According to the Hong Kong corporate law, shadow director is a person in accordance with whose directions or instructions (excluding advice given in a professional capacity) the directors, or a majority of the directors, of the body corporate are accustomed to act.

Introducing rules to deal with directors’ conflicts of interests

New effective rules are introduced to avoid director’s conflicts of interests including prohibition of loans and similar transactions; the requirement for seeking disinterested shareholders’ ratification of directors’ actions, etc.

Requiring a company to deliver to the Registry a return, including a change to its capital structure

To ensure that the public register contains up-to-date information on a company’s share capital structure, it is required to deliver to the Registry a return, including information on a change to its capital structure.

Introduction of new definition of “responsible person”

In the new Ordinance “an official who is in default” is replaced by “responsible person” to lower the threshold for prosecuting a breach or contravention in case of reckless acts or omissions relating company officers. Responsible person is an officer or shadow director of the company or non-Hong Kong company who authorizes or permits, or participates in, the contravention or failure. This means, that it is not only the matter of new definition but the whole idea is extended – “responsible person” includes an officer and a shadow director of the company who will be responsible in case of failure.

Facilitating Simplified Reporting

Hong Kong companies should file financial statement and directors’ report annually. Private and public companies from now on will have to meet extended requirements, and for small private companies the reporting is simplified.
The following types of companies can be qualified for simplified reporting:
- small private company (with the exception of a bank/deposit-taking company, an insurance company or a stockbroker).
A private company is regarded as small if it satisfies any two of the following conditions:
(a) total annual revenue of no more than HK$100 million;
(b) total assets of no more than HK$100 million;
(c) no more than 100 employees.
- the holding company of a group of companies that qualifies as a “group of small private companies;
- private company or group of small companies which have an approval of shareholders, holding 75% of the voting rights, and other shareholders do not oppose simplified reporting, and which meets any of the two following requirements:
1) total annual revenue of no more than HK$200 million;
2) total assets of no more than HK$200 million;
3) no more than 100 employees.
- a small guarantee company, or a group of small guarantee companies, if its total annual revenue does not exceed HK$25 million.
Simplified reporting for the above mentioned types of companies means removal of the following requirements:
- indicate compensation of auditor’s services;
- indicate auditor’s “truthful and fair opinion”;
- indicate subsidiaries in the cumulated financial statements.
Simplified directors’ report mean that it is not required to attach a business review.
All the companies which are not qualified for simplified reporting are bound to prepare detailed director’s reports, which include financial statements for previous year and business reviews analyzing current state of business and giving prognosis on risks and difficulties which company may face in the future. Specific indicators to be included into the review are not mentioned. Directors are most likely to decide which indicator to include.

Strengthening Auditors’ Rights

An auditor is empowered to require a wider range of persons, including the officers of a company’s Hong Kong subsidiary undertakings and any person holding or accountable for the company or its subsidiary undertakings’ accounting records, to provide information or explanation reasonably required for the performance of the auditor’s duties.
The offence for failure to provide the information or explanation is extended to cover officers of the company and the wider range of persons. In case of such violation an offender is bound to pay a fine of HK$25 thousand and HK$700 for each day during which the offence is continued.

Introducing a new offence in relation to inaccurate auditor's reports

A new offence is introduced in relation to inaccurate auditor's reports to provide reliability and completeness auditor’s report.
If an auditor considers that financial statements of the company do not coincide with the accounting books in some aspect, or an auditor failed to obtain all the information or explanation necessary for audit, and auditor should indicate this fact in the report. In the old Ordinance there was the same requirement but there were any sanctions in case of offence. According to the new Ordinance, the offence would be committed if the auditors in question knowingly or recklessly did not indicate the fact of non-coincidence of the statements with the accounting records or failed to get the necessary information. In this case the fine of HK$150 thousand is imposed.

Making the use of a common seal optional

To make business operations easier companies are allowed not to have a company seal. The document will be considered issued by the company, if it is simply signed by its director or if the company has two or more directors, by two directors or director and secretary. The requirements for the seal itself are the same: it has to be metallic with clearly engraved company name/

International law relations

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Party to the Hague Convention (Apostille) Legal system Double tax treaties network OECD member Offshore/onshore status according to the RF laws
Yes based on English Common Law 45 No No

Public authorities and legal acts

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List of laws and regulations
Act name Scope of law
Banking Ordinance Cap 155 банковская деятельность
Bankruptcy Ordinance Cap 6 процедура банкротства
Business Registration Ordinance Cap 310 регистрация коммерческих предприятий
Companies Ordinance Cap 32 регистрация, функционирование и ликвидация компаний
New Companies Ordinance of Hong Kong регистрация, функционирование и ликвидация компаний
Co-operative Societies Ordinance Cap 33 кооперативные общества
Inland Revenue Ordinance 112 налогообложение
Insurance Companies Ordinance Cap 41 страховая деятельность
Limited Partnerships Ordinance Cap 37 товарищества с ограниченной ответственностью
Merchant Shipping Ordinance Cap 281 торговое судоходство
Merchant Shipping (Registration) Ordinance Cap 415 торговое судоходство (вопросы регистрации)
Partnership Ordinance Cap 38 партнерства
Recognition of Trusts Ordinance Cap 76 признание трастов
Societies Ordinance Cap 151 общества
Stamp Duty Ordinance Cap 117 гербовый сбор (stamp duty)
Trustee Ordinance Cap 29 деятельность трастовых управляющих
Tax treaties entered Austria, Belarus, Belgium, Brunei, United Kingdom, Hungary, Vietnam, Guernsey, Georgia, Jersey, India, Indonesia, Ireland, Spain, Italy, Cambodia, Canada, Qatar, China, Kuwait, Latvia, Liechtenstein, Luxembourg, Macau, Malaysia, Malta, Mexico, Netherlands
Tax Exchange Information Agreement (TEIA) Greenland, Denmark, Iceland, USA, Norway, Faroe Islands, Sweden
List of state regulatory authorities
Hong Kong Government http://www.gov.hk/en/residents/
Hong Kong Tourism Commision http://www.tourism.gov.hk/english/welcome/welcome.html
Hong Kong Government Gazette http://www.gld.gov.hk/egazette/english/whatsnew/whatsnew.html
Hong Kong Judiciary – Courts and Apostille service http://www.judiciary.gov.hk/en/index/index.htm
Hong Kong Monetary Authority http://www.hkma.gov.hk/eng/index.shtml
Companies Registry http://www.cr.gov.hk/en/home/index.htm
Inland Revenue Department http://www.ird.gov.hk/eng/welcome.htm
Marine Department http://www.mardep.gov.hk/en/home.html
Hong Kong Bar Association http://www.hkba.org/
Hong Kong Association of Banks http://www.hkab.org.hk/index.jsp
Hong Kong Investment Funds Association http://www.hkifa.org.hk/eng/index.aspx
Joint Financial Intelligence Unit http://www.jfiu.gov.hk/en/index.html
Hong Kong Branch of the Society of Trust and Estate Practitioners (STEP) http://www.step.org/hong-kong

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