Hong Kong Companies – Studying Tax Laws

The number of local new Hong Kong companies registered in 2011 hit a record high of almost 150,000, whilst non Hong Kong companies that have a newly established place of business in Hong Kong reached almost 800 in 2011. It is interesting to note, there are blurred lines of vision between local and non local companies, as it is often difficult to get to the bottom of where ownership resides. One thing is certain; Hong Kong is a very important financial centre in the world.

Hong Kong is sometimes seen as a pure tax haven, but with other tax advantages. What does that mean? It means that, because it has Double Tax Treaties with a number of companies, there can be tax benefits far exceeding those of a company located in a pure Tax haven that lacks these Double Tax Treaties.
Hong Kong has Double Tax Treaties with Austria (January 1, 2011), Belgium (July 7, 2004), Brunei (December 19, 2010), Hungary (February 23, 2011), Ireland (February 10, 2011), Japan (August 14, 2011), Liechtenstein (July 8, 2011), Luxembourg (January 20, 2009), China (April 10, 1998), Thailand (December 7, 2005), Vietnam (August 12, 2009) and UK (December 20, 2010). Such tax advantages have seen an increasing growth in the formation of Hong Kong companies.

Hong Kong is not party to the EU Savings Directive. This means that an EU-resident individual’s bank account in Hong Kong is not subject to EU savings tax if not managed from within the savings territory. However, if the bank account is managed by an entity or legal arrangement within the EU savings tax territory, it is subject to the EU Savings Directive.

So what is the EU Savings Directive? It was agreed on June 3, 2003 and aims to counter cross-border tax evasion by collecting and exchanging information about foreign resident individuals receiving savings income outside their resident state. In effect, through banks, registrars, custodians and other financial institutions that make interest payments, there is a mechanism in place to exchange information about EU residents holding bank accounts (and being cheque signatories on them) in territories that have signed up to the Directive.

Christian Aid and the campaign group, Tax Justice Network, lists Hong Kong as the fourth most secretive tax haven in the world.  The index uses 15 indicators to calculate a jurisdictions’ secrecy score, which are broken down into four sub-groups, entitled knowledge of beneficial ownership, key aspects of corporate transparency regulation, efficiency of tax and financial regulation and international standards of cooperation.

Hong Kong has recently narrowly escaped being black listed by the OECD and interestingly does not even appear on the grey list, despite being committed to, but failing to adopt global tax standards. Offshore Formations 247 can offer full assistance for those considering setting up a Hong Kong Company Formation. We currently offer Offshore incorporation across 24 Popular offshore jurisdictions. We are, however, equipped to form companies in most jurisdictions throughout the world. For more information on each jurisdiction contact one of company formation agents on 208 492 6388.