Viewpoints

The principal forms of business organization are the limited-liability company (both public and private), branch, partnership and sole proprietorship. Most foreign investors form limited-liability companies, but in some cases, they opt to form branches. All of these entities are subject to profits tax. A private limited-liability company is one that restricts that right to transfer its shares, limits and number of shareholders to 50 and prohibits any offers to the public of its shares or debentures. Companies that do not have these restrictions are public companies. Limited Liability Company (Limited by Shares) (Unless otherwise stated, Hong Kong company in this website refers to private company limited by shares) A company can be incorporated with limited or unlimited liability, by registration with the Companies Registry under the Companies Ordinance. Most are limited companies. A limited company generally has a share capital, and the shares carry a bundle of rights and obligations […]

Introduction In general, the responsibilities and liabilities of directors derive from various sources, including the constitution of the company, case law and statute law. If a person does not comply with his duties as a director, he may be liable to civil or criminal proceedings and may be disqualified from acting as a director. Although case law sets out and elaborates on most of these significant principles, it tends to be complex and inaccessible. The objective of these guidelines is to outline the general principles for a director in the performance of his functions and exercise of his powers. All directors should read these guidelines which are also readily accessible on the websites of the Companies Registry, the Hong Kong Stock Exchange, the Securities and Futures Commission, the Official Receiver’s Office and the Hong Kong Monetary Authority. Hard copies are also available at their offices. Companies should give a copy […]

1. Maintenance – annual requirements Annual filing obligations Subject to it being exempted from the obligation to do so, every year the foreign company must file the following documents with the Registrar: (1) a return confirming that there has been no alteration, other than those of which the Registrar has already been notified, in the documents and particulars which were filed with the Registrar at the time of registration of the branch (2) certified copies of each of the following documents or certified translations if the original is not in English or Chinese: (a) balance sheet as at the end of the company’s last financial year (b) profit and loss account for the company’s last financial year (c) group accounts, if any, in respect of the company’s last financial year (d) directors report, if any, in respect of the company’s last financial year (e) auditor’s report, if any, on the […]

1. Process and cost of establishing a branch office The procedures for registration of a branch (Non-Hong Kong Company) could be summarized into a two-step process: Step 1 – Submit the undernoted to the Registrar of Companies:  A certified copy of the instrument defining a company’s constitution.  A completed Form F1 which includes particulars of the company’s directors, secretary and company’s authorized representative in Hong Kong, the principal place of business in Hong Kong and in the place of incorporation.  A certified copy of the company’s certificate of incorporation (or its equivalent).  A certified copy of the latest accounts of the company. It the company is substantially a private company and is not required to publish or disclose its accounts to the public, it may apply for exemption form filing the latest accounts by submitting a lawyer’s/auditor’s certificate.  The prescribed fee of HK$1,720 and a […]

Advantages of Non-Hong Kong Company (formerly known as Overseas Company, Branch Offices) Over Local Hong Kong Company Any foreign incorporated company may be registered in Hong Kong (as Non-Hong Kong companies, also known as branch offices) but for those clients who simply wish to create a new Hong Kong entity then our recommendation would be to register a company in one of the offshore jurisdiction, such as British Virgin Islands. The procedure whereby a foreign company is registered in Hong Kong may result in considerable advantages over the equivalent procedure of incorporating a new Hong Kong company. Those advantages may be summarized as follows: – Stamp Duty Advantage Any transfer of shares in a Hong Kong incorporated company is subject to the normal level of Hong Kong stamp duty but most of the offshore jurisdictions do not impose stamp duty on share transfers. Any share transfer which takes place in […]

Nature of Non-Hong Kong Company   Where a company incorporated outside Hong Kong establishes a place of business or branch office in Hong Kong as an extension of the investing company, it is referred to as a “Non-Hong Kong Company” (formerly known as “oversea company”) or “Branch Office”. Unlike a subsidiary, a branch can leverage off the credit rating and more of the overseas owner. The key differences between a branch and a representative office are the operating scope and tax treatment.   A foreign company which has a presence in Hong Kong but does not create legal obligations (i.e. a representative office) is not considered as having established a place of business in Hong Kong for the purpose of registration with the Registrar. Advice should therefore be sought as to whether, based on the nature of the business, in a particular case it is necessary to register a “representative […]

China and Hong Kong signed an agreement on new Double Tax Arrangements (‘DTA’) to replace the old DTA signed 8 years ago. The new DTA is taking effect since January 1, 2007 in the Mainland and from April 1, 2007 in Hong Kong. The new Arrangement covers both Active/Direct Income and Passive Income. ACTIVE/ DIRECT INCOME Business Profit For business profits generated via a foreign-invested enterprise (“FIE””) in the Mainland, there is no significant change. However, transfer pricing rules are expected to be issued soon and may come into effect after the March 2007 session of the National Party Congress. Employment Income For employment income the period of presence in China for Hong Kong employees changes from a “calendar” year to any rolling 12-month period. The limit for not having to declare income is still 183 days. PASSIVE INCOME For FIEs, the most significant difference is in the withholding tax […]

Introduction The Hong Kong Companies Ordinance (Chapter 622 of Hong Kong laws, hereafter “the new CO is set to commence operation 3 March 2014. The new CO will replace the current Hong Kong Companies Ordinance (Cap. 32) (“Cap 32”) The new CO aims to enhance corporate governance, ensure better regulations, facilitate business and modernize the law. New Articles of Association The New Ordinance will bring about significant changes to the Articles of Association (Articles) of a Hong Kong company. In accordance with the New Ordinance, new companies are not required to file Memorandum of Association at the time of incorporation. The New Companies Ordinance provides for new sets of Model Articles for adoption in whole or in part by companies incorporated after 3 March 2014. These Model Articles differ significantly in form from Table A and Table C of the Existing Companies Ordinance on which the current Articles of most […]

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 […]