HONG KONG HOLDING COMPANIES FORMATION. INCORPORATE HOLDING COMPANY IN HONG KONG
Holding Company is a company that usually confines its activities to owning stock in and supervising management of other companies. A holding company usually owns a controlling interest in the companies whose stock it holds. In order for a corporation to gain the benefits of tax consolidation, including tax free dividends and the ability to share operating losses, the holding company must own 80% or more of the voting stock of the company. A company may own one or more other companies which are its subsidiaries. The relationship between parent and subsidiary depends on majority control of the voting rights of shares or the ability to appoint the majority of directors.
Incorporating a company in Hong Kong is a relatively straightforward process requiring around ten working days for tailormade incorporations. Shelf companies are available upon receipt of funds if time is critical. Each Hong Kong company is required to have a minimum of one shareholder and one director. Shareholders and directors are not required to be resident in Hong Kong however details of the identities of shareholders and directors must be filed with the Government and are public record. Please note, under certain conditions, we are able to provide nominee services to clients requiring non disclosure of their identities. Each Hong Kong company must maintain a registered address in Hong Kong and must engage a qualified Company Secretary who must be a Hong Kong resident. Most clients would engage ourselves in order to comply with these formalities. We incorporate Hong Kong private limited companies, and our services include the preparation of memorandum and articles of association, share certificates, common seals, business registration certificate, statutory books, filing appropriate returns to the Companies Registry on time, and producing minutes of board meetings and general meetings. For clients of Coddan we provide a full range of business and office services, including shared or dedicated telephone and fax lines, voicemail, meeting facilities, and special secretarial and business support services.
If you want to become familiar with the description and the contents of online Hong Kong companies formation packages, offered by Coddan and to find above, what kind of service is included in this or that H.K. company incorporation package, to get an idea about the price of annual fees, please, select the package you need from the list, situated below the banner. The information in the banner will be renewed according to the package you’ve chosen. All of our Memorandum and Articles of Associations and Partnership Agreements were reviewed and approved by a volunteer lawyer. Our products start from just £660.00 for our Economy service. Our Economy company formation service not only have a Certificate of Incorporation on the required legal paper, but also has the provision of having your company registered office at our prestigious Hong Kong address. As all literature and documents must display the company’s registered office, having your registered office at our address can enhance your company’s profile in the eyes of both customers and suppliers.
THE ADVANTAGES OF USING HONG KONG HOLDING COMPANY IN CORPORATE DEVELOPMENT
Hong Kong is a unique and sensible choice for those international groups wishing to establish a regional base in Asia, taking advantage of its financial infrastructure and strategic location – being in the heart of Asia and doorstep of China. The advantages of using Hong Kong as a jurisdiction for holding companies are as follows.
Taxation System. Hong Kong adopts one of the most pro-commerce tax systems in the world. Corporations are required to pay only 17.5% profits tax on their profits. There is no restriction on the loss being carried forward. There is no value added tax, capital gains tax or sales tax. In addition, there is no withholding tax on dividend and interest. Hong Kong adopts a taxation system based on the territorial principle. Only profits which arise in or derived from Hong Kong are subject to tax in Hong Kong. Income from outside Hong Kong is not subject to any form of taxation. There is no restriction from capital inflow into or outflow from Hong Kong. Except for the double taxation “arrangement” signed with China, there is no other double taxation agreement signed. Hence the concepts of “resident” and “domicile”, although not alien, are only applicable and considered in very limited circumstances. Dividends from overseas subsidiaries are not taxed in Hong Kong since they are not sourced in Hong Kong. Dividends from Hong Kong subsidiaries are exempted from taxation in Hong Kong under the Inland Revenue Ordinance. Since Hong Kong does not have any Double Taxation Agreement with any country, dividends from other countries may be subject to withholding tax at full rate at the country where the subsidiaries are situated.
By using Hong Kong as the regional holding company, the major income of this Hong Kong Company, dividend and interest are tax-free if arranged properly. Distributions to shareholders are tax-free, which is a favorable factor in raising capital.
A properly structured group can avoid the withholding tax by using an intermediary holding company between Hong Kong and the subsidiaries. The Intermediary holding company should be located in a low tax jurisdiction with extensive network of tax treaties with other countries; one of the best choices is Mauritius (Global Business Company Category I). In Asia, we may also use Singapore or Malaysia Companies. In Europe or America, we may use United Kingdom Companies.
Disposal of Subsidiary. There is no capital gains tax on disposal of overseas subsidiaries. Disposal of a Hong Kong subsidiary is subject to 0.01% stamp duty on the value of the shares transferred.
Trading Structures. Hong Kong Company is frequently used in trading structures as trading company or agency company to minimize cross-border tax, in particular investments into China. Taxes will be reduced by 50% or totally tax-free, if properly structured.
Finance Company. Taking the advantage of the first class banking industry and infra-structure of Hong Kong, Hong Kong Company is frequently used as regional financial company facilitating transactions in trade financing, fund raising, leasing and intra-group loans.
Enhancement of Corporate Image. Hong Kong is a well-developed commercial and financial centre. Using Hong Kong Company as regional holding company can create a better corporate image, improving the confidence of your customers and investors towards your group.
Other Advantages of Using Hong Kong Company as Holding Company. Although Hong Kong is still on of the most expensive-to-live cities in the world, rental and salary have been greatly reduced since 1997. From a cost-benefit point of view, the total cost of operations in Hong Kong has been reduced to a reasonable level. Other than the reduction of tax burden, there are other additional advantages: –
Ease of setting up and maintenance : Only 7-10 days are required to set up a Hong Kong Company. Shelf companies are available. Capital can be denominated in any currency. The costs of setting up and maintenance of a Hong Kong Company are relatively lower than most of the frequently used vehicles in other offshore jurisdictions. The cost of setting up a simple agency structure, including the drafting of agency agreement and the first year annual fee and government charges is around £660.00. The annual maintenance cost is about £500.00, including audit fee and government charges.
Hong Kong’s currency has been pegged with USD at HKD7.8 to USD1 for around 20 years. It also allows the free flow of capital.
Hong Kong’s legal system is based on the English Common Law system. Foreigners appointed as judges before 1997 of common law origin are still sitting in the courts of Hong Kong. Hong Kong Government is pro-commence and relatively efficient. Company procedures are based on the U.K. system and are very simple. Hong Kong has a stable government and definite government policies.
Professional services and image: Hong Kong is a renowned international financial center. Professional supporting services, legal services, banking services and other shipping related services can be arranged efficiently and economically. Besides, Hong Kong is not listed as a tax haven or un-cooperative financial center by the OECD andFATF. In fact, Hong Kong was the Chairman of FATF for the year 2002.
China Connection: Hong Kong is used by international groups as a hub for trading with China or as a stepping stone into China.
THE ADVANTAGES OF USING HONG KONG HOLDING COMPANY IN CAPITAL RAISING
From the viewpoint of investors, the risk in investing in a Hong Kong Company is relatively low. This is because (1) The political risk factor of Hong Kong is low (2) Hong Kong has a high market transparency (3) The structuring of shares and investors relationship in a Hong Kong is highly flexible. The liquidity of shares of listed company is high. Traditional and strategic investors can acquire, dispose and adjust their portfolio in a swift way. Therefore, they are prepared to accept a lower rate of return, thus reducing the cost of capital for the company.
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