Hong Kong

Circulation No.: KNC/2018/150 Date: February 2018 Introduction The Hong Kong Legislative Council passed the Anti-Money Laundering and Counter-Terrorist Financing (Financial Institutions) (Amendment) Bill 2017 and Companies (Amendment Bill) 2017 on 24 January 2018 and the Bills will come into operation on 1 March 2018. These amendments bring Hong Kong’s anti-money laundering and counter-terrorism financing regulation in line with the international standards set by the Financial Action Task Force (“FATF”, which reviews the effectiveness of such regulations as implemented by participating member countries. The Amendment (‘Companies (Amendment) Ordinance 2018? requires certain companies incorporated in Hong Kong to identity persons who have significant control over the companies (“Significant Controller? thereafter “SC”), to provide for related matters of the Significant Controller and to keep a Significant Controller register (“SCR” to be accessible by law enforcement officer. The Amendment (‘Companies (Amendment) Ordinance 2018′ also requires a company to designate at least one person as […]

In the light of various court decisions, the IRD’s (Inland Revenue Department, the taxation authority in Hong Kong) views on the locality of profits from trading transactions carried out by a Hong Kong business can be summarized as follows: Where both the contract of purchase and contract of sale are affected in Hong Kong, the profits are fully taxable; Where both the contract of purchase and contract of sale are affected outside Hong Kong, no part of the profits are taxable; Where either the contract of purchase or contract of sale is affected in Hong Kong, the initial presumption will be that the profits will be fully taxable; Where the sale is made to a Hong Kong customer, the sale contract will usually be taken as having been affected in Hong Kong; Where the commodities or goods are purchased from either a Hong Kong supplier or manufacturer, the purchase contract […]

Regulated activities as defined by the Securities and Futures Ordinance are as follows: License Regulated activity Examples Type 1 Dealing in securities Trading /broking stock options for clients Trading bonds for clients Buying / selling mutual funds and unit trusts for clients Placing and underwriting of securities Type 2 Dealing in futures contracts Trading / broking index or commodities futures for clients Buying / selling futures contracts for clients Type 3 Leveraged foreign exchange trading Buying / selling foreign exchange for clients on a margin basis Type 4 Advising on securities Giving investment advice to clients relating to the sale / purchase of securities Issuing research reports / analyses on securities Type 5 Advising on futures contracts Giving investment advice to clients relating to the sale / purchase of futures contracts Issuing research reports on futures contracts Type 6 Advising on corporate finance Acting as sponsor for listing applicant in […]

General Salaries tax (Individual Income Tax) is charged on income arising in or derived from Hong Kong from:  any office of employment or profit  any pension. Income that Subject to Salary Tax in Hong Kong The income, which is subject to salaries tax includes wages, salary, leave pay, fees, commission, bonus, gratuity, perquisites and allowance. Examples of payments which are not subject to salaries tax include severance payments and long service payments and employers¡¦ mandatory provident fund contributions up to 15% of the employee’s annual emoluments. Source of Income The rules which have been established for determining whether income derived from employment arises in or is derived from Hong Kong can be summarized as follows: 1. Employees with Hong Kong employment are subject to salaries tax on all their income, irrespective of where they work, except in respect of any income earned for services rendered in another territory […]

General Where a person joins with other people to conduct business for getting profits, this is a partnership business. The Hong Kong Partnership Ordinance defines partnership as the relation which subsists between persons carrying on a business in common with a view of profit. The law looks at the intention of the parties. When a person receives a share of the profits of a business, this is apparent evidence that he is a partner in the business. A partnership can have partners up to a maximum of 20. Partners’ Rights and Obligations The rights and obligations of the partners in a partnership business, including their relations to outsiders, are governed by their partnership agreement, which can be verbal or written, and the Partnership Ordinance. If the partners do not have an express term in their agreement to govern a particular matter, relevant provisions in the Partnership Ordinance will be implied […]

Hong Kong is an international metropolis in Asia and an important port for international trade. Hong Kong has an excellent legal foundation, a strict rule of law, and a strict judicial justice that is trusted by the world. In addition to the above-mentioned main reasons, Hong Kong’s sea, land and air transportation facilities are perfect, the international information circulation network is developed, and the financial and banking services are diversified and excellent. All these reasons made Hong Kong become an international commercial, trade and financial hub. Besides, the cost of operating a business and setting up a company in Hong Kong is low, and the procedures are simple and convenient. People from all over the world (including natural persons and corporate legal persons) can register in Hong Kong to develop and operate international businesses in Hong Kong. 1. Hong Kong’s Tax System Hong Kong’s tax system is simple, and the […]

Who Requires an Entry Visa? Every person who wishes to enter Hong Kong for employment, investment, education, training or residence is required to obtain an entry visa before coming to Hong Kong unless he or she: is a Hong Kong permanent resident with a Hong Kong Permanent Identity Card; has the right of abode in Hong Kong; or has the right of unconditional stay in Hong Kong. Categories of Entry Visas The categories of entry visa are: an employment visa permits employment in Hong Kong with a Hong Kong incorporated company, the Hong Kong branch of a foreign company, an individual or a partnership; an investment visa permits investment in a Hong Kong incorporated company, the Hong Kong branch of a foreign company, a sole proprietorship or a partnership; an education visa permits study in Hong Kong at an institution approved by the Hong Kong Immigration Department; a training visa […]

The Field Audit and Investigation Unit of Inland Revenue Department (IRD is responsible for conducting tax field audits and investigations on businesses and individuals with a view to fight against possible tax evasion and avoidance. In field audit, the IRD officers visit taxpayer’s business premises and examine the accounting records kept by the taxpayer in order to see if the reported profits are correct. Tax investigation is an in-depth examination where tax evasion is suspected. It usually covers 6 years of assessment prior to the year of assessment in which the investigation commences. In the case of fraud or willful evasion, the investigation can be extended to cover 10 years of assessment. Besides cases being selected on a random basis, the IRD has indicated that the field audit and investigation works are largely targeted at areas where non-compliance is apparent. Field audit or investigation is normally initiated where there are […]

Where there is a tax assessment raised by the Inland Revenue Department, the taxpayer, who disagreed with the assessment raised against him, must object to the assessments within the statutory one-month period as stipulated by section 64 of the IRO. Otherwise, the tax assessment will become final and conclusive in terms of section 70 of the IRO. In the case where the appellant has made an objection to an assessment, the assessment does not become final and conclusive until the determination of the objection (and if the determination is appealed against, until after the determination of the appeal). When the tax assessment became final and conclusive, there is no right for the taxpayer to ask for re-open the assessment. (Though in certain cases, the Commissioner is still of the rights to raise additional assessments where circumstances are warranted.) Despite an assessment had become final and conclusive, a taxpayer may invoke […]

Hong Kong offers good opportunity for offshore arrangements. The territorial concept of its taxation system renders only those profits which arise in or are derived from Hong Kong are subject to tax. The residence or citizenship of a taxpayer is not relevant at all. The tax law states clearly that only profits arising in or derived from Hong Kong are chargeable to profits tax. It is well established law that the following three conditions must be satisfied before a profits tax liability arises in Hong Kong: The person must carry on a trade, profession or business in Hong Kong; The profits to be charged must be from such trade, profession or business carried on by the person in Hong Kong; and The profits must be profits arising in or derived from Hong Kong. In most cases involving offshore arrangements, conditions (a) and (b) are easily satisfied. For condition (c), the […]