25 October 2022
Hong Kong is strategically located at the heart of Asia. The business-friendly environment, low taxes, rule of law, free economy and modern infrastructure make Hong Kong an ideal place to invest or to do business.
Why Hong Kong
- Simple taxation system
- No estate tax
- No capital gains tax (China: 25%)
- No Tax on dividends (China: 10%)
- No sales tax or VAT (Singapore: 7%; China: 6%-13%)
- No bank interest income tax (China: 25%)
- No property tax on owner-occupier property (Singapore: up to 16% of estimated gross annual rent of the property if it were to be rented out)
- No annual net worth taxes and no accumulated earnings taxes on companies which retain earnings rather than distribute them
- Low tax rates
Only three direct taxes are imposed:
- Profits tax
Tax is charged based on territorial concept, i.e. if the source of profits is derived from business activities carried out outside Hong Kong, no tax is payable.
Hong Kong’s tax rates are amongst the lowest in the region (Singapore: 17%; China: 25%).
| Corporations | Unincorporated Businesses | |
| 2018/19 onwards | 8.25% on the first HK$2M; and16.5% on the excess of the first HK$2M | 7.5% on the first HK$2M; and15% on the excess of the first HK$2M |
Profits tax exemption is provided to all funds, regardless of their structure, their central management and control location, their size or the purpose that they serve subject to meeting certain conditions. Also carried interest distributed by eligible private equity funds operating in Hong Kong would be charged at profits tax rate of 0%.
- Salaries tax
Charged at progressive rates from 2% to 17% or standard rate of 15% whichever is lower, which is also among the lowest in the region (Singapore: up to 22%; China up to 45%).
100% of eligible carried interest would be excluded from employment income for the calculation of salaries tax.
- Property tax on rental income: 15% (Singapore: up to 20%; China: up to 20% )
- Full ownership of business
A foreigner is eligible for 100% ownership rights of a company incorporated and based in Hong Kong and the law does not impose local residency requirements. This allows a foreigner to be the sole director and shareholder. A physical address is unnecessary to operate within the jurisdiction, means you can run the business from anywhere in the world.
- No foreign exchange control
Hong Kong is free from any foreign exchange controls, there are no restrictions on capital flows in and out of the city.
- International financial centre and sound banking system
Hong Kong is one of the leading international financial centers. Hong Kong has ranked as the world’s #1 IPO venue in seven of the last twelve years. This success in attracting global issuers and investors is testament to the opportunities available in Asia’s most dynamic and vibrant capital markets. The total IPO funds raised in Hong Kong predicted to reach HK$350-400 billion in 2022 which further strengthens Hong Kong’s position as an international financial centre.
The banking system in Hong Kong is recognised as one of the best in the world. Over 70 of the largest 100 banks in the world having a presence and over 29 multinational banks having their regional headquarters in Hong Kong.
- World Leading Logistics and trading centre
Hong Kong has long been one of the world’s leading sea and air cargo hubs. Advanced port and air cargo facilities has ensured Hong Kong’s place as one of the largest trading entities in the world whilst also servicing a large portion of cargo in and out of Mainland China.
- Gateway to China
China is now the world’s second largest economy and international investment in China is still rising. Hong Kong’s proximity to, and close and unique relationship with, mainland China, has made it the dominant gateway to mainland China for business. It is the best place to capture China opportunities.
- Connectivity
Hong Kong’s long‑standing and important role as a “bridge” and “window” linking mainland China with rest of the world. Situated at the heart of the Asia Pacific region, Hong Kong is able to both capitalise on the strengths of the mainland China and engage with the rest of the world. Its prime location has made it an international financial, shipping and trade centre and an aviation hub, linking up mainland China and the global marketplace. The city plays a significant role in China’s dealings with the outside world in many spheres, including trade, logistics and transportation and capital flow.
- Largest global offshore renminbi business hub
As the world’s largest offshore RMB business hub, Hong Kong’s banks handle about 75% of global offshore RMB payments. China’s economy will continue to expand and develop, as such, the demand for offshore using, holding and investing of RMB by mainland or foreign enterprises, financial or other institutions is expected to substantially increase. This further strengthens the status of Hong Kong as an important offshore RMB and international financial centre.
- Multicultural talent pool
Hong Kong is home to a diverse talent pool, equipped with the skills and knowledge to drive business in Hong Kong and beyond. The workforce in Hong Kong is among the most qualified and productive in Asia. Highly skilled and educated workforce represents one of the strongest advantages the city has for foreign investments.
With liberal immigration policies, a vibrant cosmopolitan lifestyle and abundant opportunities for career advancement, Hong Kong offers attractive prospects for professionals and experts from around the world. Various talent admission schemes are in place to attract talent and drive Hong Kong’s development as a high value-added and diversified economy.
Currently Hong Kong’s quarantine policy on airport arrivals from overseas is ‘0+3’ arrangement. Arrivals are allowed to go home or go to the hotel of their choice for a three-day medical surveillance period right after they have completed a nucleic acid test at the airport. They can go out during the medical surveillance period except entering premises which proactively check the vaccine pass, such as restaurants and bars.
Nevertheless, it is believed that Hong Kong will adopt the “0+0” quarantine arrangement in the near future. The Hong Kong economy is expected to resume substantial growth and now it is the right timing for entrepreneur to plan ahead in order to seize the opportunity of economic recovery.
For more information, please contact Ms. Amie Cheung at amie.cheung@lccpa.com.hk