A Case Study: Using Hong Kong as a Gateway to Doing Business in China

Transcription

1 A Case Study: Using Hong Kong as a Gateway to Doing Business in China HKCBA at Markham October 3, 2012 Elizabeth L. Thomson Chairwoman B.A. (Hons), L.L.B, B.C.L., TEP Lawyer Ontario, Canada, United Kingdom, Hong Kong & Australia

2 INTRODUCTION ELIZABETH L. THOMSON CHAIRWOMAN American Chamber of Commerce Women of Influence Awards Entrepreneur of the Year for 2008/9 Founded ICS TRUST in 1980 LL.B. in Common Law and B.C.L in Civil Law from McGill Law School, Canada Member of the Law Societies of Ontario, Canada, England & Wales, Hong Kong and Australia Governor of the American Chamber, Hong Kong Governor of the Canadian Chamber, Hong Kong 2

3 COMPANY BACKGROUND Company Profile: Markham Limited Background Family company owned by a father and his two sons 35 year old company Small appliance importer Sales CAD$250 Million Dealt with same agent in Guangzhou for 35 years New blood Sons armed with MBA s: Why are we paying a commission to an Agent? Do it ourselves! 3

4 SITUATION ANALYSIS Situation Analysis Immediate goals Improve product quality and production time Tax efficient structure Exit considerations Future goals Manufacture in the PRC? Retail sales in the PRC? Expertise Product/manufacturing/sourcing Sales re Canada/US No expertise Doing business in China Corporate structures for doing business in China Banking in Asia Tax in Hong Kong/PRC Regulations in the PRC and compliance Action Consult with own lawyers/accountants Consult with members of HKCBA with expertise in Hong Kong, the PRC, and Asia Consult with Orangefield ICS (ICS TRUST) 4

5 SOLUTION-OVERVIEW Solution Stage 1 Spend Money Phase Company incorporation Bank account opening PRC structure Stage 2 Money Making Phase Product sourcing Order taking 5

6 SOLUTION-STAGE 1 Stage 1 Spend Money Phase Markham Limited Form a Hong Kong company (subsidiary of Ontario company) Commence registration of: a) Representative Office - 2 years post incorporation of a Hong Kong company b) WFOE can be started immediately Hong Kong Limited HSBC operating accounts Open bank accounts with HSBC USD, HKD, RMB, Trade Bank Account Representative Office (RO) Wholly Foreign Owned Enterprise (WFOE) Bank Account Open bank accounts for RO/WFOE in PRC 6

7 SOLUTION-STAGE 1 Stage 1 Spend Money Phase: Hong Kong Company Hong Kong company Hong Kong Limited Handles all finances for new Guangzhou office Signs the lease Hires employees and arranges FESCO participation Pays employees Parent subsidiary relationship between HK company and PRC WFOE RO Markham Limited Hong Kong Limited WFOE Time lapse between Hong Kong incorporation of Hong Kong Limited and registration of the WFOE is 6 months! 7

8 SOLUTION-STAGE 2 Stage 2 Make Money Phase Orders from Canadian/US customers Cc Purchase Order Markham Limited Sourcing / QC team in place in Guangzhou office Customers List of customers: Sears The Bay Canadian Tire Home Hardware Lowe s Walmart, etc. 1a Purchase Order Payment Hong Kong Limited 1b Shipment direct to customers Purchase Order Payment Payment Guangzhou Factory (PRC) Factories ready Purchase Order 8

9 SOLUTION-TRADE SERVICES Document Management-Trade Services Handled by Hong Kong virtual office of Canada (Orangefield ICS) via HSBC Hong Kong (with Orangefield ICS signing on Hong Kong s bank account) Hong Kong liaises with Guangzhou and Canada and Freight forwarders and Sears (Customers) Terms of sale FOB any Asian port (goods do not transit Hong Kong) 9

10 SOLUTION-REVENUE & PROFIT Revenue & Profit Sears (customer) pays Hong Kong Limited CAD$1,500,000 Hong Kong pays Guangzhou - $500,000 Gross Profit CAD$1,000,000 Hong Kong Tax Offshore 0% Onshore 16.5% Considerations Pay Canada a commission for marketing work/agency? Pay Guangzhou a commission for managing factories? 10

11 SOLUTION-TRADEMARK Trademark Registration Registration in Hong Kong and PRC Owner of Trademarks Hong Kong Limited Hong Kong Common Law System PRC First to File Trademark squatting 11

12 PROFIT REPATRIATION Profit Repatriation: PRC-Hong Kong-Canada Markham Limited No Hong Kong tax on dividends received $ Hong Kong Limited $ No dividend withholding tax Dividends subject to withholding tax of 5% for Hong Kong (10% + for other countries) Profits Tax at 25% Wholly Foreign Owned Enterprise $ Goods Chinese Customers VAT on domestic sales

13 PROFIT REPATRIATION Profit Repatriation: PRC-Hong Kong-Canada Wholly Foreign Owned Enterprise $ Use DTA Hong Kong/PRC to reduce withholding tax Approval of State Administration of Foreign Exchange (SAFE) Hong Kong Limited $ No withholding tax Hong Kong-Canada Markham Limited Possible new treaty Hong Kong-Canada

14 ORANGEFIELD S FOOTPRINT The Orangefield Group has a strong global presence, with a total of 14 offices in the following locations: Amsterdam, The Netherlands Rotterdam, The Netherlands Luxembourg London, United Kingdom Frankfurt, Germany Barcelona, Spain Limassol, Cyprus Malta Hong Kong Singapore Mauritius Aruba Curacao British Virgin Islands Group headquarters is located in Amsterdam 14

15 Q & A

16 CONTACT Contact Elizabeth L. Thomson Chairwoman THANK YOU!! Margaret Grice Canadian Representative Orangefield ICS Limited 6 th Floor St. John s Building,33 Garden Rd. Central, Hong Kong