STRUCTURE OFFSHORE FOR CHINA OPPORTUNITIES
HONG KONG FORUM 2007
Hong Kong Institute of Certified Public Accountants
Committee Member of Small and Medium Practitioners Committee,
SPEAKER : SIMON CHEUNG
P.1
•
Hong Kong together with London, New York and Tokyo is
acknowledged to be one of the highest respected financial centres
in the world.
•
It has been recognized as one of the world’s leading trading
platform which including major exhibition and events, excelle at
port facilities, infrastructure, banking system, human capital base
and not least, its relatively simple and friendly tax system.
•
Please see
http://www.forbes.com/2007/05/03/forbes-misery-data-oped-cx_ja_0503data.html
for global tax burden.
•
Hong Kong is not normally regarded as an offshore country as it is
famous for being a major financial centre, however, it is one of the
few countries in the world that tax on a territorial basis
P.2
•
The incorporation can be done with complete privacy
through nominee shareholders. There is no legal
requirement that ultimate beneficiary owners be disclosed.
•
Hong Kong income tax is taken from income that has its
source in Hong Kong rather than a tax based on
residence. Hong Kong dose not therefore impose tax on
non Hong Kong source income even when remitted to
Hong Kong .
•
Consequently if a Hong Kong company’s trading or business
activities are based outside Hong Kong, no tax will be levied.
P.3
USE OF OFFSHORE COMPANIES
(Hong Kong Company)
• International Trading Company
~Purchase of goods in the place of origin and selling them to distributors in end market where the actual trading operation may take place from Hong Kong.
• Servicing and Commissioning Company
~ Many individual engaged in providing service in agencing, construction, engineering, consulting, computer, finance and entertainment can achieve considerable tax saving via an offshore-based Hong Kong company.
• Investment Holding Company
~ Both individuals and large companies regularly use offshore companies as vehicles to hold investment portfolio.
• Property Holding Company
~ Using a company to hold property and property rights to avoid capital gain tax.
• Finance Company
~ The interest paid can be a deductible charge for tax purposes, thus interest income in an offshore finance company provide a tax saving.
P.4
PLAN 1 – INCORPORATION OF HOLDING
COMPANY IN H.K. FOR CHINA INVESTMENT
1. A H.K. company is established for investment in WFOE or EJV. 2. The WFOE or EJV is entitled to various tax benefits including tax
holiday, reinvestment tax refund.
3. Raise the return to shareholder through no dividend tax. 4. Increase the cost efficiency and tax efficiency in disposal of
investment.
5. Individual tax planning include separate employment contract and non resident income rule.
INTERNATIONAL TAX PLANNING FOR
FOREIGN CORPORATION
P. 5
INTERNATIONAL TAX PLANNING FOR
FOREIGN CORPORATION
PLAN 2 – INCORPORATION OF H.K.
INTERMEDAIRY TRADING COMPANY
1. A HK company is established which is not direct contact with overseas customers and supplier, and which only ‘books’ profits under instruction from overseas
principals or associates.
2. The HK company is entitled to offshore tax exemption and is allowed to perform the following in HK (a) issuing or accepting invoice (not order) to or from
overseas, (b) opening bank account, (c) making and receiving payment, (d) keeping accounting records & (e) arranging letter of credit
3. Where HK company effects all (say negotiations, conclusions and executions) its sale and purchase contacts outside HK, the tax liability could, potentially, be
reduced from full 17.5% to 0%
4. The HK company would also purchasing from anywhere and selling to anywhere while financial settling in Hong Kong.
PLAN 3 – INCORPORATION OF HK INTERMEDIARIES
TRADING COMPANY WITH A PRC
REPRESENTATIVE OFFICE
1. A PRC representative office is be established in PRC by a HK
company. Representative office allow to not engage in direct business (profit making by issuing invoice and receiving income). It allows to conduct business liaison, product introduction, market research, some technology exchange and administration work on behalf of a HK foreign company
.
2. The PRC representative office would wholly effective contact with suppliers and customers on behalf of HK Trading company.
P.6
INTERNATIONAL TAX PLANNING FOR
FOREIGN CORPORATION
PLAN 3 – INCORPORATION OF HK INTERMEDIARIES TRADING
COMPANY WITH A PRC
REPRESENTATIVE OFFICE
3. HK Trading company accepting and issuing the invoice instructed by the representative office or principal
4. The original VAT and corporate income tax in PRC would be eliminated because no invoice issued or no income received
by the representative office. The corporate income tax will be further reduce because the shifting of income to HK Trading company.
5. No profits tax liability will arise if HK company activities are only limited to issuing or accepting invoices or making and receiving payments.
P.7
INTERNATONAL TAX PLANNING FOR
FOREIGN CORPORATION
In Hong Kong, there are no capital investment tax, turnover tax and dividend income tax. Profits Tax rate and Salaries Tax rate are
relatively low.
Hong Kong has long been recognized as one of the world’s leading trading, financing and investing centres. Hong Kong’s tax system is generally based on the territorial concept of taxation, say, if Hong Kong company’s profits arising away from Hong Kong, the income is not subject to Hong Kong tax.
it is possible for foreigners to structure their cross-border operations in such a way that their Hong Kong tax liabilities could be reduced.
~ Park the Profits in HK for tax free ~
P.8
TAX ARRANGEMENT UNDER ONE
COUNTRY TWO SYSTEMS
THANK YOU !
CK CHEUNG (CPA) CO., LIMITED
SHOP UNIT 9, EXPO GALLERIA, HONG KONG CONVENTION AND EXHIBITION CENTRE, 1 EXPO DRIVE, WANCHAI, HONG KONG, CHINA
ROOM 2202, SUMMIT CENTRE, NO. 1088 YAN AU ROAD (W), SHANGHAI, P.R.C.
ROOM 2103, SUPERSTRATUM BUILDING, NO. 365 TIAN HE ROAD, GUANGZHOU, P.R.C. (8620) 3880 0116 (852) 2868 9888 (8621) 3203 3677 www.cpachina.com.hk www.integra-international.net
