David Kerr, EMEA commercial director at TMF Group, explains why establishing an entity in Hong Kong can provide an attractive entry point to the Chinese market
The Registrar of Companies in Hong Kong normally takes four working days to issue a Certificate of Incorporation (COI) upon receipt of a completed set of hard copies of incorporation documents. For e-registration, the Registrar would issue a COI within 24 hours upon receipt of the specified incorporation documents and fees.
A total of 77,991 new local companies were registered in Hong Kong during the first half of 2011. Last year was a record high, with 139,530 local companies newly registered.
The jurisdiction offers a well-developed, open financial and trade infrastructure, as well as potential tax exemption on trade income due to its territorial tax system, and there is no withholding tax on dividend or interest. Hong Kong’s common law legal system provides a sound and effective regulatory regime, promoting good corporate governance and protecting investor rights.
“ Approximate incorporation time for foreign investment: 1-4 working days ”
Hong Kong’s unique relationship with China allows trade to be conducted in Chinese Renminbi (RMB). However, there remain some challenges for investors – for example, opening a company bank account is slightly more time-consuming due to the high reputational compliance standard Hong Kong has.
Suzanne Callister, head of corporate Asia-Pacific, explains: “At present, we are seeing a lot of US and European businesses globalizing their footprint and entering Asia via Hong Kong."
“We are seeing particular interest from businesses within the luxury goods, fashion and retail sectors looking to establish in Asia. Hong Kong is often used as the first step. We attribute this to its good infrastructure, excellent banking system and strong legal system for potential dispute resolution.”
“ Hong Kong VAT rate: no VAT regime ”
Under ‘one country, two systems’, Hong Kong is a special administrative region of China, enjoying the best withholding tax treaty rates with China. These include dividend (5%), interest (7%) and royalty (7%).
Further, the Closer Economic Partnership Arrangement (CEPA) is a free trade agreement signed between Hong Kong and Mainland China offering favourable conditions on qualifying trade and investments to Hong Kong-based companies interested in exporting goods or expanding their business into Mainland China.
If the business of a Hong Kong-based company satisfies certain CEPA criteria, it will qualify for duty-free export status to China.
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