Hong Kong’s operates a territoriality basis for the taxation of business activities there. For all activities it is necessary to consider whether income is subject to profit tax or not. Income is consider to be “Onshore” or “Offshore”:
- Onshore: corporate tax will apply on the profit raised from the commercial operations.
- Offshore: 0% tax but this implies that the real substance is not in HK
In Hong Kong it is not possible to consider to re-domicile foreign entities to Hong Kong, however the change of tax residence of a foreign entity to Hong Kong is possible.
Moving the tax residency from one jurisdiction to another is also an option, but needs to take into account the changes being implemented as a result of the OECD BEPs project. Consideration will need to be given to any relevant Double-Taxation Agreements.
As an example see below a table reviewing the options for a BVI company that may be considering operating economically from Hong Kong:
|Options||Comments||Costs to consider|
|1- BVI company to become HK tax resident : Registration in HK of a Non-HK company||In Summary:
Principle: A non-Hong Kong company that establishes a place of business in Hong Kong is required to be registered within one month of establishing that place of business as a non-Hong Kong company under Part 16 of the Companies Ordinance
|Registration: same as for a HK Ltd company + cost of certification BVI docs
Cost of registration and administration of the company in BVI;
|2- Re-domiciliation of BVI company to Hong Kong
||Not possible in HK.|
|3- Establishment of a new HK company and transfer of assets under new HK company||Under this option, new HK Limited company can be established, and the assets that currently belong to BVI company can be transferred under the new HK company.||Relevant costs regarding incorporation and maintenance of a HK limited.|
For more background information on the global move towards requirements for businesses to have Economic Substance where they are based please read our new article here.