A lot of companies are heading to Hong Kong to take advantage of the stable political and financial systems. However, the primary goal is enjoying the attractive tax regimes. Hong Kong has worked extra hard in ensuring that more business can join and help to contribute its business based economy. As you purpose to take your enterprise to Hong Kong, what are the main tax benefits to expect? Here is an account of what to anticipate.
A very straightforward tax regime
Most investors coming to Hong Kong are interested in understanding their tax obligations even before commencing operations. This is very important for planning purposes. The administration has made the work of entrepreneurs easier by outlining all that businesses should pay after starting operations in the jurisdiction.
Once the process of company incorporation Hong Kong is over, your enterprise will be required to pay profit tax, stamp duty tax, and property tax. In addition, the Internal Revenue Department insists that every business has to maintain the tax-related records for up to about seven years. This makes it easy for the department to come and inspect the records if the need arises.
Hong Kong makes it easy to write off a lot of expenses against the company
Many people living in the western countries appreciate that tax laws back at home rarely allow them to write off expenses against their enterprises. They hold the view that transport costs and others such as rent should be considered business expenses. This means that the business should capture the expenses as part of its expenses. However, Hong Kong is different. Hong Kong allows the companies to write off these expenses and credits them to the company balance sheet.
Operations done outside Hong Kong can qualify for 0% tax
The tax model in Hong Kong only focuses on the transactions carried in the jurisdiction. This means that if all the transactions are done outside Hong Kong, there is a possibility of qualifying for 0% tax. This implies that you can run the enterprise without getting worried about double taxation. This is very important especially for companies that are in import-export niches where most of the transactions are completed outside Hong Kong. Remember that it is advisable to seek assistance from tax experts to take advantage of 0% status.
Enjoying special treatment through DTAs
Because Hong Kong is a business-driven economy, it never tires of working with neighbors both in Asia and beyond. The cooperation is mainly done through trade agreements that target helping traders enjoy special treatment when trading in respective countries.
To enjoy these DTAs, your enterprise only needs to demonstrate tax substance. This means that the Hong Kong authorities are convinced you have a positive impact on the economy. The DTAs could be the needed lever to help your enterprise increase sales and profitability. For example, the DTAs signed between Hong Kong and China indicates that when a Chinese company pays dividends to Hong Kong-based investor, the tax should not be more than 7% of the total amount by any of the two administrations. You will also enjoy other tax benefits on royalties, investments, and interests.