The Practical Aspects of Setting Up a Business in Hong Kong. John Ashwood Managing Director Vistra (Hong Kong)

Transcription

1 The Practical Aspects of Setting Up a Business in Hong Kong John Ashwood Managing Director Vistra (Hong Kong) Breda May, 2012

2 Options for setting-up a business in HK: Limited company Branch of a foreign parent company Representative office (non-profit generating activities only) Main applicable laws (and Government authorities): Companies Ordinance (Companies Registry) Inland Revenue Ordinance (Inland Revenue Department) Every person engaged in business in or from Hong Kong must have a valid Business Registration Certificate (BRC) 2

3 Structuring a Hong Kong Limited company: Company name For private company, must end with Limited Statutory officer and shareholder requirements HK resident secretary HK registered office address Minimum 1 director Minimum 1 shareholder All shareholder and officer information is publicly available 3

4 Share capital structure considerations: Authorised versus paid-up (issued) capital Minimum paid-up capital = 1 share/hk$1 What paid-up capital should my company have? No debt to equity rules No thin capitalization rules Perception/substance issues? Special licencing issues? Immigration/visa issues?

5 Director appointment considerations: Management and control issues? Substance issues? 5

6 Set-up and activation of a Hong Kong Limited company: File application with Companies Registry Apply for BRC Time to arrange = 1 day Prepare post-incorporation documentation (e.g. officer appointments, share allotments and registers) Time to arrange = 1 to 4 days (depending on urgency) Legally capable of commencing business, entering contracts

7 Opening bank accounts: What are the options? Hundreds of banks in HK BUT, realistically only a handful really accessible and practical Typical commercial account types: Savings accounts Current accounts Bills accounts Currency options: All major currencies, and including RMB ( CNH )

8 RMB ( CNH ) account options: Individuals or companies can now open RMB bank accounts in HK ( CNH accounts) Limitation on individuals on how much they can buy and sell per day (RMB 20,000) No limitation on companies (subject to market liquidity) RMB can be bought for trade or non-trade purposes (exchange rates favour trade) To transfer RMB to trade supplier in China, recipient must have registered with China bank and Govt. authorities otherwise funds will be rejected Currently tendency is still to settle in USD Future will see more settlements in RMB 8

9 Bank account opening requirements: Regulated by HKMA Minimum KYC compliance requirements UBO details, incl. background Certified copy of passport Certified copy of residential address proof (less than 3 months old) Nature of business and source of funds Face-to face interview with bank by UBO* (* exception where Vistra has approved intermediary status with certain banks) Time to arrange = 2 to 4 weeks (typically) 9

10 Bank account operation: usual modes Cash Cheque TT, letter or fax instruction Internet/on-line banking LC Bank cards

11 Bank credit facilities and collateral requirements: For new companies, loans must usually be secured by either; - Standby Letter of Credit (SBLC) - Cash on deposit (will lend 99% based on same currency) Same for issuing LC Credit card facilities secured by cash deposit (2 to 3 times credit limit) Debit cards are available without collateral (incl. UnionPay linked cards) 11

12 Employing and terminating staff: Applicable laws are Employment Ordinance and Minimum Wage Ordinance IRD requirements Mandatory Provident Fund (MPF) requirements Worker s compensation insurance (compulsory) Medical insurance (usual) Annual and sick leave Long service leave Termination

13 Outsourcing administrative and/or financial functions: An effective and cost efficient alternative (or addition) to hiring own staff Separate core operational and ancillary administrative and/or financial functions Add security and confidentiality Typical outsourced services incl.; Statutory company administration (incl. company secretarial) Accounting Payroll Trade and treasury 13

14 Foreigners working in Hong Kong (immigration): Must have a valid working visa issued by Immigration Department Applicant must submit various documentation incl.; Application form Sponsoring employer business plan (or track record if in existence for several years) Financial forecasts or copy of financial accounts (usually 3 years) Benefits of hiring the applicant (versus a local ) Benefits to HK economy (e.g. local employees etc.) Time to arrange = 8 weeks (can be less in practice) Permanent Residence or PR status maybe attained after 7 years continuous residence

15 Business premises options: Short term office lease (e.g. serviced offices) minimum 6 months Long term office lease (e.g. separate leased offices ) minimum 2 years Buy Commercial retail and warehouse facilities Technically cannot conduct business from residential premises

16 Statutory annual compliance obligations: Hold Annual General Meeting File Annual Return Prepare audited financial statements File profits tax return 16

17 Taking profits out of Hong Kong companies: No restrictions on payment of dividends, other than usual (from available profits) Interim and final dividends may be paid No currency or exchange controls in HK No Withholding Tax (WHT) on dividends paid to foreign shareholders 17

18 Voluntary closing down of a Hong Kong company: Options available; - Deregistration - Formal liquidation Time to arrange = 6 months (deregistration) to 12 months (liquidation) 18

19 Important tax planning considerations, including: Home jurisdiction tax issues; - shifting of business profits - Management and control - Receipt of dividends, or other forms of remuneration Double Tax Agreement (application) issues; - Substance and beneficial ownership requirements Transfer pricing and other related company transactions Important to obtain professional tax advice 19