Tax and Accounting Regulations
Tax and Accounting Regulations in Hong Kong
Although Hong Kong is considered by many to be an ‘offshore’ jurisdiction this is not the how the government classifies it. It is instead a low tax area with a territorial tax system. The tax laws are relatively simple therefore Hong Kong can be summarised as having an advantageous low tax rate coupled with a territorial tax system.
Corporation tax: The corporation tax rate is currently 16.5%.
Income tax: Hong Kong operates territorial taxation principle so any income earned outside of Hong Kong is not a subject to Hong Kong income tax. Taxpayers are taxed not on a residence status but on territorial principle i.e.: where profit was earned.
Foreign source income is exempt from income tax in Hong Kong. Income is not considered to be derived from Hong Kong if:
- A contract is concluded and signed outside of Hong Kong.
- Services are rendered outside of Hong Kong.
- Capital is employed outside of Hong Kong.
- Title of goods is passed outside of Hong Kong.
- Payment of expenses incurred in provision of services or delivery of goods is done outside of Hong Kong.
- The location where goods are stored and maintained is outside of Hong Kong.
- Hong Kong income and deemed Hong Kong source income is subject to income tax.
If any of the above activities are performed in Hong Kong then the revenue generated will be classified as Hong Kong income and therefore subject to income tax.
It is worth noting that the purchase or sales of commodities manufactured in Hong Kong is treated as a Hong Kong based income. Trade in commodities is considered as wholly offshore or onshore for a tax assessment purpose so even a small amount of trading activity in Hong Kong leads to the whole profit classified as originating onshore and therefore subject to Hong Kong income tax. With regards to the issue of agency agreements, the source of income is where duties are performed.
Capital gain tax (CGT): There is no capital gains tax in Hong Kong.
Withholding tax: Royalty income received from Hong Kong source is subject to income tax however generally there is no withholding tax on interest paid to non-residents.
Dividends: Dividend income is excluded from income tax and is no withholding tax on outgoing dividends.
Capital duties: Capital duty on increase of share capital is 0.01%.
International aspects of Hong Kong taxation:
- Anti-avoidance regulation: Hong Kong tax code replicates the Australian Income tax model for anti-avoidance rules.
- Transfer pricing: There is specific transfer pricing legislation in Hong Kong which is based on 1918 UK tax regulation.
Double taxation treaties:
Until June 2001 Hong Kong had no comprehensive double taxation treaties in place. This was due to the territorial tax system that operates whereby only income / profit sourced in Hong Kong is subject is subject to tax. Income derived from outside Hong Kong is not taxed in Hong Kong. This principle therefore negates the need for double taxation treaties.
The Hong Kong Special Administrative Region Government however does recognise that there are merits in concluding double taxation agreements as it will provide advantages such as a greater certainty to investors on taxing rights, help investors to assess potential tax liabilities on certain economic activities and provide an incentive for overseas companies to do business in Hong Kong. In April 2010 the Commissioner of Inland Revenue of Hong Kong stated that the territory had entered into a new phase and would be actively be pursuing agreeing double taxation agreements with a number of countries. Under Article 151 of the Basic Law the territory can negotiate its own double taxation treaties independently from China as Hong Kong has the right to maintain an independent taxation system free from interference from the mainland until 2047.
Double taxation agreements are currently in force between Hong Kong and the following countries:
|Jurisdiction||Entry into force date|
In March 2010 Hong Kong signed treaties with Brunei, the Netherlands and Indonesia.
Double taxation agreements between Hong Kong and the following countries await ratification: Austria, Hungary, Ireland, Kuwait and the UK.
If you would like additional information on Hong Kong double taxation agreements please contact us.
Annual reporting requirements:
- All Hong Kong companies are required to keep accounts.
- Accounts are required to be audited on an annual basis.
Opening a bank account in Hong Kong:
Eltoma Coporate Services work with the following Hong Kong banks:
To find information about bank account opening fees, please follow the link.
Cyprus Regulatory Update: Shell Company Definition & Exceptions
The Central Bank of Cyprus has released new guidance for all credit institutions on the island, refining the definition for shell companies and subsidiary entities; coming into effect from November 2018, which are detailed as follows:
Singapore Variable Capital Company VCC: New Features & Benefits
The introduction of the VCC is a significant positive for the Singapore funds industry. Its aim is to retain Singapore as an attractive business destination and to keep investors wishing to domicile locally.
Consolidated Accounts for Hong Kong Companies: Subsidiary Requirements
As per Hong Kong company’s ordinance subdivision 3 section 379 subsection 1, a Company Director will have to prepare year-end financial accounts that comply with sections 380 and 383.
Challenges of Our Time: Cryptocurrencies & Their Regulation
The very concept of cryptocurrencies derives from technologies and the creation of alternatives to existing payment systems, which for the most part is caused by the negative consequences of financial crises and the injustice within the sphere of financial and legal regulation. Many people are convinced that the cryptocurrency is likely to become an alternative to the established global financial system and open new opportunities to those segments of the population and citizens of those countries that are deprived of the opportunity to work with the banking financial system.
The Tax System in Poland: Benefits & Overview
The tax system in Poland is one of the most loyal for both large and small businesses in the country. There are two levels in the system that relate not only to residents of Poland, but also to foreigners. The Polish tax system consists of administrative taxes (duties are paid directly to state bodies) and local taxes (the process is similar to the previous type). Therefore, Poland is one of the European countries with a stable economic position, whose attractive system attracts citizens from neighbouring countries to conduct business within the country. It is the Polish taxation system that is advantageous for businessmen willing to enter the international market.
The reasons of abolition of the Company Secretary in UK Private Companies
The role of Corporate Secretary can be a position in a private sector company or within the public sector organisation. In large, publicly-listed corporations, a Company Secretary is typically named a Corporate Secretary or just a Secretary. The Company Secretary is responsible for the efficient administration of a company, particularly with regards to ensuring compliance with statutory and regulatory requirements and also for ensuring that decisions of the board of directors are implemented.
The Dematerialisation of Shares in the UK: Current Update & Assessment
Business is an area that is continuously developing. An integral part of both business and economics are companies. It is possible to say that companies dictate the conditions of the market to a certain extent. Any public or private company has its own shares; a share is a security that provides a portion of ownership of the company and gives the holder the right to a part of the profits.
Current Information on the Payment of Cyprus Taxes for Pensions & Rental Income
Cyprus employees who are considered to have tax resident status, pay tax on their global income. Employees not considered to be tax resident are only charged for specific types of income that are originating from Cyprus-based sources.