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Top 3 tips of having a holding company in Hong Kong for China business

 

 

By FastLane Team, August 10, 2021 (5 mins)

To strengthen the corporate structure, companies will try to register a company in other territories. Singapore, the Neverlands, and Hong Kong have always been business’ popular choices. Because of Hong Kong’s unique characteristics and advantages, Chinese businesses are always considering building a holding company in Hong Kong. This article will look into the benefits of having a Hong Kong company as your Special Purpose Vehicle (SPV) or holding company. 

1. Benefits of Running a Business in Hong Kong and Mainland China

Tax Benefits

Hong Kong is renowned for its low tax rate which is favorable for business operations. Due to the double tax agreement between Hong Kong and China, companies can enjoy a withholding tax rate on dividends distributed to Hong Kong tax residents reduced to 5% (after fulfilling some specific conditions). This prevents double taxation and promotes the establishment of new businesses in both regions. 

Another significant tax benefit is the territorial tax system being practiced is in Hong Kong. After 1 April 2018, a two-tier profit tax regime is applied. The first $2 million income will be charged on 8.25% while the remaining 16.5%. One important thing to note is that no general sales tax, capital gain tax, and tax on shareholder dividends will be charged in Hong Kong tax. Those benefits attract people around the globe to register their business in Hong Kong. 

 

Flexibility in Investment Structuring

Hong Kong offers great flexibility for business owners to structure their investments. For example, you can issue shares in Hong Kong without any approval from authorities while this is not the case in China. It takes more procedures and longer to proceed in China. 

Exiting your investment is generally easier in Hong Kong. Hong Kong companies are not required to obtain approval for the transfer of shares. The shares transfer process can be executed within a day if handled by a professional corporate service provider.

On the contrary, In China, equity transfer requires approval from the authorities, which can take a significant amount of time. Aspects of the equity transfer such as the price, condition, and timeline of the payment can be challenged.

 

Location advantages

Before Hong Kong became a financial hub, it was famous for its entrepot role. Connecting different Asia countries just requires several hours of flight from Hong Kong. Combined with Hong Kong’s free-market policies, Companies in China do not need to worry about anti-competitive practices. They can freely expand business markets effectively. 

From 24 August 2018, Hong Kong-Zhuhai-Macao Bridge started operating and it gives a huge advantage to businesses in the Great Bay Area. Having strong infrastructures allows more collaborations between companies in Hong Kong and China, it creates opportunities for businesses to come into the China market or expand to the Asia market.

 

 

 

2. Why is Hong Kong good for business?

Apart from the advantages stated above, having a company in Hong Kong has its advantages. 

 

Community supports: There are several accelerator programs championed by different organizations to support SMEs. Some examples are InvestHK and Cyberport Accelerator programs. The aim is to boost innovation in Hong Kong and launch expansion to other neighboring territories.

 

Funding support: There are different fundings in Hong Kong specific for all sorts of sectors or business types, such as the HKSTP Incubation program for technology firms and SIE funds for social enterprises. If you want to know more about what kind of support suits you the most, feel free to check it out here!

 

Great Living Environment: As a financial hub, Hong Kong’s infrastructure is greatly built. You do not need to worry about security issues, transportations, or even the public health system. Those benefits allow business owners to focus on their operations without having too many concerns about living conditions. 

 

Ease to Do Business: According to the World Bank, Hong Kong is one of the easiest places to have a business because of its efficient process and freedom in business formation. Combining pro-business policies, Hong Kong attracts businesses from all over the world. 

 

Even if you are convinced that Hong Kong is your best choice for setting up a company, you may wonder what exactly you need to go through to set up a company in Hong Kong. Here below will be the process: 

Process of registering a company in Hong Kong: 

First of all, a company name must be selected. Furthermore, a company structure needs to be identified before a business registration. Upon deciding on a company structure and meet minimum requirements, the completed Hong Kong company registration application documents should be submitted to the Hong Kong Companies Registry.

 

Please visit our blog here for further details about the Hong Kong company registration process.

 

 

3. How Can FastLane Help?

The FastLane Group can be your one-stop solution for the company formation process in Hong Kong. We offer guidance in company setup and registration, company secretary, audit, tax computation, profit tax return filing, and a registered address for your company registration matter. 

 

Furthermore, FastLane’s experience in helping entrepreneurs and SMEs puts them in a unique position to understand the challenges that businesses face. To help their clients streamline their global payments and cut back on expenses, FastLane has partnered with Airwallex to do just that. 

 

Contact us to learn more!

 

Those who sign up for an Airwallex account through this link will be able to enjoy the benefits only available through Fastlane’s partnership now! For the details and promotion code, please refer to the partner directory.

 



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