Hong Kong Company Registration Service
Hotline: 86-755-82143422 Email: anitayao@citilinkia.com
Hong Kong Investment Benefits can be described in different ways. Chinese official statistics on foreign investment in China have indicated that Hong Kong has been the biggest source of inbound foreign investment in the mainland China. In addition to the common advantages of having an offshore structure, namely, easier transfer of equity interests in the Chinese entity, better financing access and higher appraisal of Chinese assets, the decisive factor for considering Hong Kong over other offshore hotspot like Cayman and BVI is the income tax favorable treatment made available to HK by the mainland China, a unique advantage enjoyed only by Hong Kong.
Invest in Hong Kong-Tax benefits
Hong Kong also has the lowest corporate income tax rate in China at 16.5 per cent. In comparison, the PRC has a standard corporate income tax rate of 25 percent. By using transfer-pricing techniques, a PRC foreign-owned factory can sell its products to its Hong Kong holding company at a low price, which in turn can sell the products to third-party foreign customers at a higher price. By this means, a larger portion of the profits can be realized in Hong Kong and will therefore be taxed at the lower Hong Kong rate. In terms of the repatriation of profits from the foreign company’s perspective, the repatriation of profits from China to the foreign jurisdiction is generally the same whether the profits flow directly from the PRC entity or through a Hong Kong intermediary. The foreign parent company with a Hong Kong holding company, therefore, has the option of keeping the profits in Hong Kong; such funds can be reinvested for other offshore purposes by the Hong Kong Company. Another benefit is that HK company is not required to report taxation to HK government for its dividends made from China company.
Invest in Hong Kong-Legal system benefit
A JV or WOFE established in China, will, of course, be subject to PRC law. If a Hong Kong holding company is used, agreements with third parties can be signed by the Hong Kong holding company which will be governed by Hong Kong law. Companies may find that new customers may also take comfort in the fact that agreements are signed in Hong Kong as opposed to China, as Hong Kong is seen as a lower risk jurisdiction. Hong Kong’s legal system remains based on the rule of law. Its courts are independent of the government and are open to the public. Another unique opportunity may soon arise as Hong Kong; the mainland authorities are currently negotiating a reciprocal enforcement of judgments agreement that, when adopted, will be an additional advantage to executing contracts in Hong Kong. The result will be that Hong Kong judgments, unlike those of any other jurisdiction, will be recognized and immediately enforceable in the PRC.
Invest in Hong Kong-Restructuring benefits
Using a Hong Kong holding company also affords greater flexibility in the case of restructuring the mainland entity. Transfers of ownership of Hong Kong companies do not require much approval and can be done immediately. While Transfers of ownership of other foreign company will be time consuming and vetting of transfer agreement would be required. Another benefit is that transfer tax must be paid for the transfer of an interest in a PRC entity, whereas Hong Kong only levies a 0.02per cent (on net asset value) ‘stamp duty’ on the transfer of shares. The result is that a foreign company that wishes to sell or restructure its holdings in a PRC entity can do so much more easily and quickly if it has the option of carrying out such sale or restructuring at the Hong Kong holding company rather than at the PRC company level.
Invest in Hong Kong-Liability issues
Inserting a holding company between the parent and the WFOE also affords the parent company some protection from liability. On the mainland, the corporate veil is lifted much more easily than in western jurisdictions. By using a holding company between the foreign parent company and its PRC WFOE or JV, the foreign company can insulate itself to some degree if problems arise at the WFOE or JV level. In this situation, the Hong Kong holding company will be held responsible rather than the foreign parent company.
Invest in Hong Kong-Ease of registration
One other simple advantage of using a Hong Kong company is that Chinese authorities are very familiar with Hong Kong companies and Hong Kong corporate documents (not to mention the fact that Hong Kong companies can be established with both Chinese and English articles of association). Both upon the set up and at certain other times, the WFOE or JV will be required to submit the corporate documents of its parent company to the PRC authorities. If the parent company is a Hong Kong company, the local PRC authorities will recognize the documents and will have an easier time processing them than would be the case for jurisdictions they have less exposure to. This makes the incorporation process (and to a more limited extent the ongoing operation) of the PRC entity more efficient.
Invest in Hong Kong-Benefits granted by PRC government
In the last number of years there has been a concerted effort by the PRC government to integrate the economy of Hong Kong into China (particularly with the so-called ‘Pearl River Delta’13). The Chinese government has actively looked at ways to make it easier for Hong Kong companies to do business in China. The most obvious example of this is the so-called ‘Closer Economic Partnership Agreement’ (CEPA) that was signed between Hong Kong and the mainland on29 June 2003.
Invest in Hong Kong-Free Foreign Currency Circulation
Some foreign countries will have strict foreign currency restriction when they use the foreign company to do the investment in China, while in HK, it is very easy and convenient to solve this problem if you keep a company there and open a corporate bank account, since HK does not have no much limitation to foreign currency transfer, the invest capital can be transferred from HK to China very quickly without any approval steps.
The above-mentioned advantages attract many foreigners to invest in Mainland China through Hong Kong Company. However, the foreigners may choose the way to extend their business according to the purpose of investment. ATAHK specializes in China investment, such as China WFOE, JV registration, providing the foreigners the best solution to invest.
Contact Us
For further queries, please do not hesitate to contact ATAHK at anytime, anywhere by simply calling China hotline at 86-755-82143422, 86-755-82143512, or emailing to anitayao@citilinkia.com