Viewpoints

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 […]

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 […]