Country code - HK
Legal basis – Common law
Company law - Companies Ordinance
Company form – Company limited by guarantee (Non-Profit Organisation)
Liability - The liability of members is limited by the articles of association to the amount that the members respectively undertake to contribute to the assets of the company in the event of its being wound up.
Capital – There is no share capital and the members are not required to make monetary contribution to the company at the time of incorporation. They are only required to give an undertaking to pay a certain amount to the company if the company is in liquidation.
Members – At least two members, who may be an individual or a legal entity of any nationality and domicile. For private companies limited by guarantee, the number of members within the company cannot be exceeded 50.
Directors – At least two directors, who may be natural or legal person of any nationality. A company limited by guarantee may be managed either by its members or by third parties. Details of directors are publicly disclosed.
Secretary – At least one secretary, who may be an individual or a legal entity of any nationality, but must be a Hong Kong resident. The same person can act as the role of member, director and company secretary at the same time.
Registered Address – The address of the registered office must be in Hong Kong.
General Meeting - A guarantee company must hold an annual general meeting within 9 months after the end of its financial year. A guarantee company may not be required to hold AGM, if it is done by a written resolution or all members pass a written resolution or a resolution at a general meeting to dispense with the holding of AGMs in respect of a particular financial year or for subsequent financial years.
Members may appoint proxies to attend and vote in the AGM.
Electronic Signature – Permitted.
Re-domiciliation – Not permitted.
Compliance – Companies limited by guarantee should file accounts duly audited in their annual return to the Companies Registry and pay the annual registration fee. The Business Registration Certificate may be renewed annually or every three years. Resident entities must file annually their tax return to the Inland Revenue Department.
A small guarantee companies will be qualified for simplified reporting if its annual revenue/aggregate total annual revenue not more than HK$25 million.
- Corporate founder permitted
- Corporate council members permitted
- Protector/Guardian required
- Local regulated person required
- Founder not disclosed in a public registry
- Council members not disclosed in a public registry
- Protector/Guardian not disclosed in a public registry
- Beneficiaries not disclosed in a public registry
- Beneficiaries have right to information
- Merge permitted
- Redomiciliation permitted
- Charitable purposes permitted
- Registered agent required
Tax Residence – A legal entity is deemed to be tax resident in Hong Kong, if it is incorporated and/or managed and controlled in Hong Kong.
Basis - Corporate income tax is levied on profits derived from Hong-Kong, foreign-source profits may be exempt from taxation, whether remitted or not.
Tax rate - Companies incorporated in Hong Kong are subject to profits tax at a 16.5%. A company limited by guarantee for charitable non-profit purposes may apply for Section 88 of the Inland Revenue Ordinance Cap 112 tax exemption status to the Inland Revenue Department.
Capital gains - Capital gains are usually not subject to taxation.
Dividends - Dividends received from resident entities are tax-exempt, whereas dividends received from non-resident entities are usually considered foreign-source income and exempt from taxation.
Interests - Interest income derived from Hong Kong is subject to profits tax, except interest derived from any deposit in a financial institution.
Foreign-source income - Foreign-source profits are usually exempt from taxation. The profits source is usually determined by the place where the purchases and sales contracts are effected or the place where the key activities to generate the profits are carried out.
Withholding taxes - Payments to non-residents on interests are exempt from taxation. Royalties are subject to a withholding effective tax rate of 4.95%, if are paid to a resident of a jurisdiction where the royalty payments are deductible for profits tax purposes. If royalties are derived from the use of intangibles that previously were owned by a person carrying business in Hong Kong, they may be subject to an effective withholding tax rate of 16.5%.
Losses – Losses arising from taxable income may be carried forward indefinitely. Losses may not be carried back.
Inventory - Inventory may be declared at its cost or market value, whichever is lower, and must be valued through the First in first out (FIFO) method.
Anti-avoidance rules – There is no specific transfer pricing legislation in Hong Kong, but there are a few existing provisions in the Inland Revenue Ordinance (IRO) to tackle non-arm’s-length transactions with non-residents. There are no thin capitalization regulations, nor controlled foreign company rules.
Labor taxes – Employers are required to make contributions to the Mandatory Provident Fund (MPF) at 5% of employees’ monthly income, capped at HKD 1,500. Employees whose salary is over HKD 7,500 contribute other 5 %, also capped at HKD 1,5000.
Tax credits and incentives – A tax credit may be available for foreign tax paid on income taxable, provided that is derived from a jurisdiction where Hong Kong has concluded a tax treaty with. Tax credit is usually limited to the amount of tax payable in Hong Kong on the same income.
Offshore investments funds may be exempt from taxation. Concessionary tax rates (up to 50% of the standard tax rate) may be available for certain treasury corporate centers, offshore business of reinsurance and authorized captive insurances.
Compliance – The tax year in Hong Kong starts in 1st April and ends on 31st March. On average, a Limited Company may require 3 payments and 74 hours per year to prepare, file and pay income and labor taxes.
Personal income tax – Individuals who ordinarily reside in Hong Kong or stay in the country for more than 180 days per year or more than 300 days in two consecutive years may be considered Hong Kong tax residents. Although, tax residency rules may vary according to a tax treaty.
In Hong Kong income tax is levied on a territorial basis. This means that both residents and non-residents are subject to income tax on their income accrued in Hong Kong, being foreign-source income exempt from taxation.
Personal income tax on salaries is levied at a progressive rate from 2% to 17% on income exceeding HKD 120,000. Income from business is taxed under profits tax (16.5%). Dividend and interest income are exempt from taxation. Capital gains are usually tax-exempt, although those derived from certain trading assets may be subject to profits tax.
Rental income is taxed under property tax, at a 15% on the net assessable value of land or buildings. Property tax does not apply on residential properties occupied by the owner for self-use. Note that while it is possible to buy condominium units, land is owned by the government and its tenure is on a renewable leasehold basis.
Other taxes – There are no sales taxes, nor customs duties on general imports, some commodities such as tobacco, alcohol and hydrocarbons may be subject to excise taxes.
Hong Kong levies property tax on land and buildings owners at a 15% rate.
There is a stamp duty on contracts of sale and purchase of Hong Kong registered stocks (0.2%) and the transfer of immovable property, up to 8.5%. There is a special stamp duty on the resale of properties held less than 36 months from 10% to 20%.
There are no capital duties, net wealth, inheritance and taxes.
- Offshore Income Tax Exemption
- Offshore capital gains tax exemption
- Offshore dividends tax exemption
- CFC Rules
- Thin Capitalisation Rules
- Patent Box
- Tax Incentives & Credits
- Property Tax
- Wealth tax
- Estate inheritance tax
- Transfer tax
- Capital duties
- 0% Offshore Income Tax Rate
- 16.5% Corporate Tax Rate
- 0% Capital Gains Tax Rate
- 0% Dividends Received
- 0% Dividends Withholding Tax Rate
- 0% Interests Withholding Tax Rate
- 4.95% Royalties Withholding Tax Rate
- 0 Losses carryback (years)
- Indefinitely Losses carryforward (years)
- FIFO Inventory methods permitted
- 72 Tax time (hours)
- 3 Tax payments per year
- 5.00% Social Security Employee
- 5.00% Social Security Employer
- 17% Personal Income Tax Rate
- 0% VAT Rate
- 35 Tax Treaties
Hong Kong is a Special Administrative Region of the People’s Republic of China (Hong Kong SAR). Its official languages are English and Cantonese.
Although it is part of the People’s Republic of China, the region maintains an independent economic, administrative and judicial system, and even its own currency, system of customs and external borders. Its official legal tender currency is the Hong Kong Dollar (HKD), pegged to the USD, which is the ninth most traded currency worldwide.
The legislative council is the Hong Kong Parliament, which is formed by 60-members, half elected by universal suffrage in geographical circumscriptions, while the other 30 are elected by groups of representatives from different economic and social sectors.
Its public finances are characterized by its sustainability, with no public net debt, continuous government surplus and ample foreign exchange reserves, all supported by rigorous anti-corruption measures.
Hong Kong’s economy is mainly based on financial services, tourism, wholesale and retail trade, and international trade, especially trade between China and the rest of the world. Hong Kong is one of the world’s major financial hub, ranking eleventh worldwide in volume of banking operations and the Hong Kong Stock Exchange being the second largest capital market in Asia, after the Tokyo Stock Exchange.
Tax treaties Map
Please, contact us to request a free, no obligation consultation.