Stepping into a new decade, are you ready to 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 current overwhelming situation across the globe, there’s one question we heard from clients and friends 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 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 2020-21 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. Zero Registration Fees for Company Annual Returns

Local private companies must file an annual return, which contains the particulars (address, shareholders, directors, etc.) of the company for registration and the fee is normally HK$105 (late delivery can be charged from HK$870 to HK$3,480). From this year to next, the annual registration fee is waived, too.    

 

3. Reduced Profits Tax and Salaries Tax

Nothing matters more than profits tax and salaries 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 2019-20, the Government has reduced profits tax, salaries tax and tax under personal assessment by 100%, subject to an HK$20,000 ceiling per case to leverage the burden of SMEs and taxpayers throughout tax season. 

 

4. Concessionary Low-Interest Loan

If your business lacks capital solution or you’re a novice entrepreneur who needs more funding, you can consider applying for the concessionary low-interest loan with 100% Government guarantee for enterprises, which will be open for application for 6 months. Enterprises can lend a maximum loan of HK$2 million with a repayment period of up to 3 years. 

 

5. 0% of Offshore Profits Claim

Unlike many places in the world, the business-friendly 852 adopts a territorial source principle of taxation, only profits that are sourced in Hong Kong (through trade, profession or business) are taxable. In a nutshell, if you own a business here but derives profits from other places, no tax is required. You may refer to the tips of the Inland Revenue Department here and understand more.

 

Along with this unprecedented package, now is the greatest time to join the entrepreneur party. If you are thinking about bank account opening, worry not. Living in the technology-driven era, all incorporation procedures, including bank opening, of Bridges can be done remotely. No matter where you are, your business dream can become a reality in a few hours. You can even use fintech alternatives like Currenxie and Neat to replace traditional banking! Not only are these platforms efficient and cost-effective, but they can also make your banking life easier. Regardless of your location and time zone, everything is under control within your fingertips. Learn more about these cutting edge platforms here.

Despite uncertainties are spreading through the global economy, every challenge creates invaluable opportunities. Quit waiting and seize them, let our team 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!

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With the turmoil of the European and American economy, it’s not big news that many global businessmen have planned to explore further in Asian countries. Among the different choices, Hong Kong is always the one winning the independent entrepreneurs’ heart. Wanna know the reasons behind?!

In this blog I will illustrate the facts why my start-up clients have picked HK as their preferable place to set foot in it, and the easy steps of finishing the whole incorporation process that might be useful in your pre-startup research stage - you will know not only it’s not complicated at all, but also very advantageous to you on your further business expansion.
 

 

Easy Procedures

Forming a HK limited company is very straightforward and it’s nothing like a rocket science.  Yet, if you didn’t get a reliable service provider, hassles may come like being shocked by the hidden costs. We have been in this field for a decade and serving countless start-ups and SMEs in setting up their company inbound and outbound with our all-in-one package (no hidden costs at all). Let me 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’ passport / HKID

> Copy of all Directors & Shareholders’ address 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’ passport

> 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. Please check out some Hot FAQs here for more details.

 

STEP 2: Pay to go !

Once your incorporation payment is confirmed, we will get on preparing the Government paperwork for you to sign. Since we have been cooperating with several leading banks or credit card institutions like American Express, China UnionPay, Bank of China, Shanghai Commercial Bank, etc. in providing HK$500 company setup discount for their cardholders, it’d be a cool way for you to settle payment by credit card easily and enjoy the privilege at the same time! 

 

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.  Yes, it does sound easy and simple because our team would get it all done for you, like approaching different Government departments to file the required paperwork. Just to give you a brief idea of the time frame, 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 :

Some clients may ask: ‘Can I finish all company setup procedures and bank appointments in one trip?’ My answer is: ‘Definitely! (with our attentive arrangement)’. As long as you have planned ahead with our consultant’s well thought-out preparation, you can even meet up with the banker on the same day of picking up the company kit, meaning you don’t need to fly to HK twice. But please be reminded that currently most banks in HK require the businesses to make their account opening appointments 1 month in advance because of the banks’ full schedule, thus it is suggested you can finish incorporating the company first for us to help make appointments with the banks right away, and when all the details are confirmed, you can book the flight ticket to match with your bank appointment and company kit pickup date.

Another option is that you can consider some current bank account alternatives like StatrysNeat or Currenxie that do not require the applicant to be physically present in HK, details please refer to this hot blog "
Traditional Bank Account Alternatives to Run Business": bit.ly/2NOjJAe.

 

What to Prepare for Opening a Bank Account?

We understand the assessment criteria of international banking are getting higher, including HK’s banking and financial system. Under this global trend, a well and thoughtful preparation before the bank appointment always helps. As stated above, we will manage all steps to help you make appointment with the bankers in advance so you don’t need to run around the city and queue up at bank branches to get their opening bank account services. What’s more, sets of 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 minimized. 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. Currently 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.

 

Tax System Is Favourable in HK?

Some expats might be worry about not being familiar with the local tax system, yet HK is famous in the world for having a rather simple and low tax regime. There are two main taxes: Corporate Profits Tax (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 thanks to their good reputation. However, one main difference is that 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 much flexibility in the company structure.

 

How HK Serves as a Stepping Stone into China?

The China market is definitely a stage that the world has put their eyes on it. Of course, setting up a China limited company could be the most straightforward way. Hence, for expats, they will 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 people to love HK’s banking network and 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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Everyone has a dream, but the only difference between an entrepreneur and a normal employee is the former has a belief in mind that they can realize their dreams by reaching a different level of greatness and achievement, which is what I see in my clients’ eyes who have set up their companies with us. HK is like an optimum foothold for entrepreneurs to start their venture, especially with HK Government’s awesome support like reducing the BR fee time by time, or making a 75% profits tax rebate and 75% salaries tax rebate in continuous years (just announced in the latest Budget too). We always know ideas, innovations and technology are the keys to improve everyone’s living standards on this planet, and I do think entrepreneur should grab such opportunity to share with the world like what my clients did to achieve their dreams. So what are you waiting for?

If you have any further questions on setting up your own company, please feel free to email me, Alex from the Start-up Advisor Team, at info@bridges.hk to know more of our practical advice. Or, simply drop me a private message to chat with me, I will be very glad to provide my instant help to you so as to smoothen your ride in HK.

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Hong Kong remains one of the hottest start-up cities (for more details, read article here), 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 (full list here) up to August 2018.

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 to obtain 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 vary on a case-by-case basis.

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?

In principle, 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 seems 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 the 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 anytime for in-depth advice or appointment making with our tax strategist.

Or, simply drop us a private message to start chatting with our advisors who will swiftly answer your queries. Let’s work together to conceive your sagacious cross-border tax planning before another year-end!

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