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1、AN INTRODUCTION TODoing Business in Hong Kong2023This Investing Doing Business in Hong Kong guide was produced by a team of professionals at Dezan Shira&Associates,with Zhou Qian as technical editor,and Gigi Wong,Katrina Huang,and Sandy Zhang,and Jennifer Lu as contributors.Creative design of the gu

2、ide was provided by Aparajita Zadoo.2023 Dezan Shira&Associates DisclaimerThe contents of this guide are for general information only.For advice on your specific business,please contact a qualified professional advisor.Copyright 2023,Asia Briefing Ltd.No reproduction,copying or translation of materi

3、als without prior permission of the publisher is permitted.VISIT US ON FACEBOOKFOLLOW US ON TWITTERDezanShiraChinaBriefingVISIT US ON LINKEDINTHE DOING BUSINESS IN ASIA GUIDES SERIESAvailable to Download Now:ASEAN Guide China Guide India Guide Indonesia Guide Hong Kong Guide Singapore Guide Vietnam

4、Guide China Super City Clusters(Upcoming)Dubai Guide Doing Business in China Portal-LAUNCHED NOW!Our latest online Doing Business in China Portal consists of 100+guides,videos,publications,and tools that are practical and easy to navigate,covering:Why China,Regions to Invest,Sector Insights,How to S

5、etup,Tax,Audit and Accounting,HR,Recruitment,PEO,and Payroll,News,Events,and more.3AN INTRODUCTION TO DOING BUSINESS IN HONG KONG 2023About Dezan Shira&AssociatesDezan Shira&Associates is a pan-Asia,multi-disciplinary professional services firm,providing legal,tax and operational advisory to interna

6、tional corporate investors.Operational throughout China,India,and ASEAN,our mission is to guide foreign companies through Asias complex regulatory environment and assist them with all aspects of establishing,maintaining,and growing their business operations in the region.With more than two decades o

7、f on-the-ground experience and a large team of lawyers,tax experts,and auditors,in addition to researchers and business analysts,we are your partner for growth in Asia.4AN INTRODUCTION TO DOING BUSINESS IN HONG KONG 2023The Peoples Republic of China regained sovereignty over Hong Kong from Britain i

8、n 1997,from which point it has been a Special Administrative Region(SAR)of the country.However,the way in which the city is governed is still fundamentally different from the Chinese Mainland a fact that is reflected in its slogan of“One Country,Two Systems”.Hong Kong is largely autonomous from Chin

9、a,and foreign companies will quickly discover that the rules of doing business in the Mainland simply do not apply in Hong Kong,and vice versa.For this reason,Hong Kong has long served as a dominant“gateway”to the Chinese Mainland.Its geographical proximity to the Chinese mainland,low taxes,business

10、-friendly environment,free flow of capital,rule of law,independent judiciary,and robust intellectual property protection have made it an ideal place for foreign investment.Despite the hardships of the pandemic,Hong Kong remains strong as ever and will continue to function as a free global financial

11、hub,strengthened by the development of the Guangdong-Hong Kong-Macao Greater Bay Area(GBA).This publication,designed to introduce the fundamentals of doing business in Hong Kong,was created in April 2023 using the most up-to-date information at the time.It was compiled by Dezan Shira&Associates,a sp

12、ecialist foreign direct investment practice that provides corporate establishment,business advisory,tax advisory and compliance,accounting,payroll,due diligence,and financial review services to multinationals investing in emerging Asia.Since its establishment in 1992,Dezan Shira&Associates has grown

13、 into one of Asias most versatile full-service consultancies with operational offices across China,Hong Kong,India,Singapore and Vietnam,as well as liaison offices in Italy,Germany and the United States,and partner firms across the ASEAN region.Dezan Shira&Associates experienced business professiona

14、ls are committed to improving the understanding and transparency of investing in emerging Asia.PrefaceALBERTO VETTORETTIManaging PartnerDezan Shira&AssociatesCONTACTDezan Shira&Associates H5AN INTRODUCTION TO DOING BUSINESS IN HONG KONG 2023Doing Business in Hong Kong 2023 introduces the fundamental

15、s of investing in Hong Kong.Compiled by professionals at Dezan Shira&Associates in April 2023,this comprehensive guide is ideal for businesses looking to enter the Hong Kong market as well as companies who already have a presence there and want to stay updated with the most recent and relevant polic

16、y changes.To be more specific,the below topics have been updated:Why Hong Kong:We provide a comprehensive roundup of Hong Kong and discuss Hong Kongs key advantages as a dynamic investment gateway to the Chinese and Asia,including its business-friendly environment,low taxes,rule of law,free economy,

17、independent judiciary,modern infrastructure,I&T capabilities,and robust intellectual property protection.Incorporation and business registration:We include updates to the incorporation and business registration process,including changes in the business registration fee in 2023-24.The Companies(Amend

18、ment)Ordinance 2023:We add a new section introducing the new Companies(Amendment)Ordinance 2023,which comes into operation on April 28,2023.Fully virtual general meetings without the requirement for presence of members at any physical locations,as well as a mixed mode of such virtual general meeting

19、s and members attending at physical location(s),i.e.,hybrid general meetings,are allowed under this regime.Taxes,audit,and accounting:We update this chapter with the tax measures introduced in Hong Kongs 2023-24 Budget,including the reduction of profits tax,salaries tax,and tax under personal assess

20、ment for the year of assessment 2022/23.We also add a new section introducing Hong Kongs new rules on foreign source income exemption and amend the section on territorial source principle of taxation accordingly.Moreover,we introduce the application of the global minimum effective tax rate in Hong K

21、ong.Human resources and payroll:We update the calculation of salaries tax and amend the section on termination pay.We also briefly introduce the Employment and Retirement Schemes Legislation(Offsetting Arrangement)(Amendment)Bill 2022,which will be effective in 2025.Whats New in This Guide?6AN INTRO

22、DUCTION TO DOING BUSINESS IN HONG KONG 2023A highly dynamic city that serves as a gateway to the Chinese Mainland and Asia,Hong Kong is the ideal base for your investment in Asia.Hong Kongs business-friendly environment,low taxes,rule of law,free economy,independent judiciary,modern infrastructure,I

23、&T capabilities,and robust intellectual property protection allow businesses and individuals to succeed in this most competitive and international city.Why Hong Kong?Why Choose Hong Kong for Your Business?Largely autonomous political system under the“One Country,Two systems”Excellent legal and dispu

24、te resolution services under rule of lawWorld-class infrastructure with sophisticated support servicesActive participation in the global transition to a green economyProximity to markets in Asia,including the Chinese MainlandA leading international financial hub and a prime location for financial se

25、rvicesOpen,fair,and efficient business environmentLow,simple,and competitive tax regimeImproving data privacy protectionHighly skilled and multicultural talent poolHong Kong is allowed to retain its capitalist economic system and own currency,legal system,legislative system,and governmental system f

26、or 50 years till 2047.Hong Kongs strict maintenance of the rule of law and judiciary independence,its common law tradition,and its established English Chinese bilingual legal system has made it an ideal hub for dispute resolution worldwide.Hong Kong provides some of the most advanced business infras

27、tructure in the world.The city is easily accessible with efficient and affordable public transport systems.Hong Kong pledges to reach carbon neutrality by 2050.It has been trying to lead by example and making it easier for green bond issuers to come to Hong Kong to raise funds.Hong Kong enjoys an id

28、eal location in Asia that enables businesses to tap into the various opportunities in the Guangdong-Hong Kong-Macao GBA and throughout the rest of the region.Hong Kongs financial markets operate under effective and transparent regulations that are in line with international standards.The absence of

29、exchange controls,corruption-free government,free flow of information,capital,and talents,and low taxation has enabled Hong Kong to maintain a free and efficient environment for business activities and commerce.Hong Kong enjoys one of the most tax-friendly systems in the world.It adopts the territor

30、ial basis of taxation and does not have any turnover taxes,making it a favorable location for profit shifting and conducting re-invoicing.Hong Kong has been ramping up efforts to improve data privacy protection within its jurisdiction.The Personal Data(Privacy)Ordinance,Cap 486 was amended in 2021 t

31、o cope with new privacy challenges.Hong Kong has a diverse talent pool,equipped with the skills and knowledge to drive business in Hong Kong and beyond.The HKSAR government is also ramping up efforts in pooling more high-quality talents in 2023.7AN INTRODUCTION TO DOING BUSINESS IN HONG KONG 2023Pol

32、itical systemThe Hong Kong Special Administrative Region(HKSAR)was established on July 1,1997,after Great Britain returned it to the Peoples Republic of China(PRC).HKSAR is currently ruled by the Basic Law of the HKSAR the constitution adopted by the National Peoples Congress of the PRC on April 4,1

33、990.Under the Basic Law,Hong Kong is allowed to retain the social,economic and legal systems present at the time of the handover for a 50 year period under the principle of“One Country,Two Systems”.Additionally,the Basic Law designates a system of governance led by the Chief Executive,who is the hea

34、d of the HKSAR,and the Executive Council,which assists the Chief Executive in policy-making issues.Legal systemDue to its previous status as a British colony,Hong Kongs legal system is largely influenced by English common law.The constitutional framework for Hong Kongs legal system is provided by th

35、e Basic Law approved by the National Peoples Congress,which supplements the common law.The independent judiciary under the Basic Law ensures that Hong Kong remains within the common law system.The Court of Final Appeal is the highest court in HKSAR and is headed by the Chief Justice.Furthermore,refl

36、ecting its status as a Special Administrative Region,the HKSAR legal system is separated from the one governing the PRC under the principle of“One Country,Two Systems.”The PRC national laws will be applied to Hong Kong only if they are listed in Annex III to the Basic Law,after consultation with the

37、 Hong Kong Basic Law Committee.For example,in June 2020,the PRC Law on Safeguarding National Security in Hong Kong was added to Annex III.Economic system Hong Kongs economic system is defined as a free market economy and characterized by minimum intervention from the government.HKSAR is service orie

38、nted,and especially strong in the financial services,international trade,and tourism sectors.Additionally,it has strong economic links to the Chinese Mainland and other major economies in the Asia Pacific region.The absence of exchange controls,corruption-free government,and free flow of information

39、,capital,and talents has enabled Hong Kong to maintain a free and efficient business environment for business activities and commerce.Further,Hong Kong has a good reputation due to its“free port”and straightforward customs clearing procedure.The city has no tariffs on imported goods,no import quotas

40、,no dumping tax laws,and applies excise duties on only four commodities hard alcohol,tobacco,oil,and methyl alcohol.Moreover,Hong Kong does not impose taxes on dividends generated from doing business in the region.8AN INTRODUCTION TO DOING BUSINESS IN HONG KONG 2023Free trade and low taxation have h

41、elped Hong Kong become one of the worlds freest economies and among the easiest places in the world to do business.Financial systemThe Hong Kong financial system is composed of four different financial regulators,each one governing different parts of the financial sector.These include the Securities

42、 and Futures Commission(SFC,an independent body set up to regulate the securities and future markets),the Mandatory Provident Fund Schemes Authority(MPFA,a statutory body set up to assist Hong Kongs workforce to accumulate savings for their retirement),the Insurance Authority(IA,a body set up to pro

43、tect the interests of policyholders and promotes the general stability of the insurance industry),and the Hong Kong Monetary Authority(HKMA,the governments agency responsible for maintaining monetary and banking stability).Despite the HKMAs role as the currency board and de facto central bank,it doe

44、s not print currency notes itself.Instead,it grants Hong Kong dollar printing privileges to HSBC,Standard Chartered Bank,and the Bank of China.Under the Linked Exchange Rates System(LERS),the Hong Kong dollar has been pegged to the US dollar since 1983,at a rate of HK$7.80 to US$1,which has helped m

45、aintain monetary stability.Through the exchange rate system,the HKMA authorizes note-issuing banks to issue new banknotes,as long as an equivalent amount of US dollars is deposited with the HKMA.Tax regimeHong Kong offers one of the most tax-friendly systems in the world.It imposes only three kinds

46、of direct taxes profits tax(for incorporated body),salaries tax(for personal income),and property tax(for income sources from Hong Kong property).There are also generous allowances and deductions to reduce the burden of taxpayers.Hong Kong does not have sales tax,value added tax,capital gain tax,est

47、ate tax,and tax on on dividends,making it a favorable location for profit shifting and re-invoicing.Data privacy protection Like other major economies,Hong Kong has been ramping up efforts on improving data privacy protection within the jurisdiction.In Hong Kong,the Personal Data(Privacy)Ordinance,C

48、ap 486 of the Laws of Hong Kong(PDPO)protects the privacy of individuals in relation to personal data,and was recently amended in 2021 to cope with new privacy challenges and address public concerns.9AN INTRODUCTION TO DOING BUSINESS IN HONG KONG 2023When the PDPO was drafted,reference was made to t

49、he relevant requirements under the 1980 OECD Privacy Guidelines and the European Union(EU)Directive 95/46/EC.It may be noted that the EUs GDPR,in effect since 2018,contains significant new regulatory provisions impacting data protection and introduced major changes to its 1995 Directive.However,thes

50、e new requirements are not found under the PDPO.Geographical proximity to China and the Greater Bay AreaHong Kongs geographic position enables businesses to easily tap into the various opportunities in the Guangdong-Hong Kong-Macao Greater Bay Area(GBA)and the Chinese Mainland market.Hong Kong enjoy

51、s a highly active and cooperative business relationship with the Mainland.It is both the countrys leading conduit for foreign investment and its primary offshore capital raising center the city,as one of the worlds largest IPO markets,is expected to attract more Chinese companies to list amid tensio

52、ns between the US and China.The Mainland and Hong Kong Closer Economic Partnership Agreement CEPA provides Hong Kong products and services easier access to the vast Mainland market.The CEPA goes beyond Chinas WTO commitments,eliminating tariffs and allowing earlier or preferential access to some ser

53、vices sectors.Overseas companies can also benefit from CEPA.For trade in goods,foreign investors can set up production lines in Hong Kong to produce goods that meet the CEPA rules of origin(ROO)requirements.For trade in services,companies incorporated in Hong Kong by foreign investors can make use o

54、f CEPA as long as they satisfy eligibility criteria of a“Hong Kong Service Supplier”.In the financial sector,Hong Kong and the Chinese Mainland have made remarkable progress in opening new channels to enhance their financial connectivity,such as establishing the Shanghai-Hong Kong Stock Connect,Shen

55、zhen-Hong Kong Stock Connect and Bond Connect,Mainland-Hong Kong Mutual Recognition of Funds arrangement,and the two-way cross-boundary Wealth Management Connect in the GBA.Thus,Hong Kongs status as an international financial hub is expected to be further strengthened under the GBA development plan.

56、10AN INTRODUCTION TO DOING BUSINESS IN HONG KONG 202310AN INTRODUCTION TO DOING BUSINESS IN HONG KONG 2023Table of ContentsPreface04Whats New in This Guide?05Why Hong Kong?06Part 1|Establishing and Running a Business13What are my options for investment?14Hong Kong companies14Branch offices15Represen

57、tative offices16Sole proprietorship16Partnership17Restrictions on foreign investment18How do I establish a business?19Requirements and steps to set up a company in Hong Kong19Opening a bank account in Hong Kong21Intellectual property23What are the key compliance requirements?27Annual compliance requ

58、irements27New regime of significant controller register27Compliance of anti-money laundering and counter-terrorist financing requirements for trust or company service providers28New inspection regime29How do I make changes to my company?31Dormant company31Changing a company name3111AN INTRODUCTION T

59、O DOING BUSINESS IN HONG KONG 202311AN INTRODUCTION TO DOING BUSINESS IN HONG KONG 2023Changing the companys Articles of Association32How do I deregister my company?33How do I solve legal disputes?35Alternative Dispute Resolution(ADR)35Litigation36Part 2|Tax,Audit,and Accounting38What are the major

60、taxes in Hong Kong?39Key features of Hong Kongs taxation system39Salaries tax39Profits tax 42Property tax47Hong Kongs principle of taxation based on territorial source48New rules on foreign source income exemption49What are the key compliance requirements?52Accounting standards52Bookkeeping requirem

61、ents52Financial reporting requirements53International taxation55Hong Kongs new transfer pricing regime55AEOI reporting57BEPS 2.058Hong Kongs double taxation agreement network58Certificate of Resident Status59Part 3|Human Resources and Payroll64What obligations do I have as an employer?65Employers ma

62、ndatory obligations65Other payroll obligations67Salaries tax in Hong Kong69Employer69Employee6912AN INTRODUCTION TO DOING BUSINESS IN HONG KONG 202312AN INTRODUCTION TO DOING BUSINESS IN HONG KONG 2023Case study70Visa requirements and procedures in Hong Kong72Visitors visa72Employment visa72Employee

63、 leaves and vacations74Statutory holidays74Annual leave75Sick leave76Maternity leave77Paternity leave78Other Leave78Terminating an employee79Types of termination79Termination payments81Long service payment82Part 4|Cybersecurity and Data Protection83What are the major cybersecurity and data protectio

64、n laws?84What are some of the key compliance requirements?85Purpose and manner of collection85Accuracy and duration of retention86Use of data86Data security86Openness and transparency87Access and correction87Exemptions871What are my options for investment?How do I establish a business?What are the k

65、ey compliance requirements?How do I make changes to my company?How do I deregister my company?How do I solve legal disputes?Establishing and Running a Business14AN INTRODUCTION TO DOING BUSINESS IN HONG KONG 2023Foreign investors can carry on business in Hong Kong through multiple business vehicles,

66、including:A company incorporated in Hong Kong A branch office registered in Hong Kong of the foreign corporation A representative office established in Hong Kong Sole proprietorship PartnershipWhile some options are more commonly adopted than others,investors are advised to choose the most appropria

67、te business structure based on the pros and cons of each option.Hong Kong companiesForeign investors can establish their presence in Hong Kong by setting up a Hong Kong company.Companies incorporated in Hong Kong can be limited or unlimited and can be public or private.To be more detailed,there are

68、five types of companies that may be formed under the Companies Ordinance(Cap.622):Private companies limited by shares(private limited company)Public companies limited by shares(public limited company)Companies limited by guarantee without a share capital Private unlimited companies with a share capi

69、tal(private unlimited company)Public unlimited companies with a share capital(public unlimited company)What are my options for investment?Limited companyCompany limited by sharesPrivate limited companyPrivate unlimited companyPublic limited companyPublic unlimited companyCompany limited by guarantee

70、 without a share capitalUnlimited company with a share capital15AN INTRODUCTION TO DOING BUSINESS IN HONG KONG 2023A company limited by guarantee does not have share capital,but the liability of its members is limited by the amount of assets they have undertaken to contribute.This is the type of com

71、pany that is most suitable for nonprofit activities,such as operating a nonprofit research institute.It is not a suitable structure for a business undertaken for profit making purposes.A company limited by shares has a share capital that is divided into a number of shares.The shares are issued to sh

72、areholders and the liability of its shareholders will be limited to the unpaid subscription price for the shares.This is most suitable for a company that carries on a business for profit making purposes.A private limited company is a company limited by shares which:restricts the ability of its membe

73、rs to transfer shares;limits the number of members to 50(not including employees or former employees);and does not issue invitations to the public to subscribe for shares or debentures of the company.It is the most dominant type of business entity in Hong Kong,accounting for 99 percent of all compan

74、ies incorporated in Hong Kong.Most small to medium sized companies are set up as private limited companies due to its many advantages,such as its separate legal entity,its limited liability to members,its positive image among banks and investors,and the convenience of ownership transfer.A public lim

75、ited company is a company whose shares and debentures are offered to the public.If a company is a limited liability company but does not fall into the scope of a private limited company or a company limited by guarantee,then it is a public limited company.Many public companies are listed on the Stoc

76、k Exchange of Hong Kong Limited and the statutory requirement for a public company is much stricter as it raises capital from the public.A medium to large private limited company may decide to transfer the company structure to that of a public limited company(and thereby expanding its share base)whe

77、n they achieve significant growth in the industry.An unlimited company is one where the liability of its members is not limited.This business structure is rarely adopted by investors.Branch offices A branch office has no separate legal identity and is treated as an extension of the overseas parent c

78、ompany in Hong Kong.As such,the overseas parent company is liable for all the debts and liabilities of the branch office.A foreign corporation wishing to establish a Hong Kong branch office must register with theCompanies Registry as a non-Hong Kong company and obtain a Business Registration Certifi

79、cate.GIGI WONGManagerBusiness Advisory ServicesHong Kong Office“The statutory requirement for a public company is much more stricter than for a private one.As such,for most purposes,the private limited company is the most popular option for foreign investors.”16AN INTRODUCTION TO DOING BUSINESS IN H

80、ONG KONG 2023In general,branch offices of foreign companies registered in Hong Kong are subject to similar legal and tax requirements and consequences as companies incorporated in Hong Kong.The business activities that can be carried on in Hong Kong and the profit tax rate are the same for branch of

81、fices of foreign companies and locally incorporated companies.While this option is generally not recommended for that parent company assumes larger liability for branch offices,foreign investors may prefer a branch over a subsidiary considering:A branch office might be more tax efficient for the par

82、ent company under certain circumstances,such as when losses incur in the Hong Kong branch.Generally,the transfer of the shares of a foreign company operating a branch in Hong Kong are not subject to stamp duty in Hong Kong.A branch office is subject to limited compliance requirements under the Compa

83、nies Ordinance.A branch office is not required to conduct separate audit.A branch office can be terminated easily by notifying the Company Registry.Representative officesLike a branch office,a representative office also has no separate legal identity,and the overseas parent company shall bear full r

84、esponsibility for its debts and liabilities.Nevertheless,a representative office is not allowed to conduct any profit generating business activities(or else it is required to register as a branch office).It can only engage in promotion,liaison,and market research activities.Representative offices ne

85、ed not be registered with the Companies Registry but are required to file for a Business Registration Certificate with the Inland Revenue Department.Foreign investors who seek to study the market in Hong Kong may prefer representative offices over branches considering representative offices are exem

86、pted from filing profit tax returns if it does not conduct profit-generating businesses in Hong Kong.Sole proprietorshipA sole proprietorship is the easiest and simplest form of business that is owned and operated by a sole person.It has no separate legal identity,and the sole proprietor is entitled

87、 to all the profits from the business and is personally responsibly for all the liabilities.The only procedural step in establishing a sole proprietorship is to obtain a Business Registration Certificate.In addition to easy setup,the sole proprietorship has certain tax advantages.The sole proprietor

88、 can elect for“Personal Assessment”in their tax return filed for the tax year,so that the profits from the sole proprietorship will be assessed under the salaries tax scheme,which are subject 17AN INTRODUCTION TO DOING BUSINESS IN HONG KONG 2023to generous allowance and deductions and the progressiv

89、e rate of which may be lower than the corporate tax rate.Moreover,the business losses of the sole proprietorship can be offset against other income of the proprietor.On the other hand,sole proprietorship is considered to be the riskiest business form as the sole proprietor shall bear joint liability

90、 for the debt that the business incurs.There is no protection of their personal assets.Thus,sole proprietorship is generally not recommended for investors.PartnershipPartnership is a form of business where two or more people carry on business in common with a view of sharing profits.There are two ty

91、pes of partnerships in Hong Konggeneral partnership and limited partnership.In a general partnership,the partners enjoy all the property rights and are personally liable to other partners debts and obligations of the partnership.The only procedural step in establishing a partnership is to obtain a B

92、usiness Registration Certificate.In a limited partnership,there should be one or more general partners,who are responsible for the management of the partnership and liable for all its debt,and one or more limited partners,who are liable for the debts of the partnership within the amount they contrib

93、ute to the capital of the partnership.A limited partner is not allowed to manage or control the partnership.A limited partnership is required to be registered with the Companies Registry and obtain a Business Registration Certificate.Partnerships are generally easier to set up,maintain,and dissolve

94、as compared to companies.There are fewer compliance requirements imposed on partnerships.Besides,partnerships might be more efficient in attracting talents as employees with skills,knowledges,and expertise have the chance to be promoted to partners.18AN INTRODUCTION TO DOING BUSINESS IN HONG KONG 20

95、23Restrictions on foreign investmentHong Kong does not subject foreign investments to special regulatory regimes or requirements per se.However,on the basis of public interest,there are restrictions on voting control by non-Hong Kong residents and corporations in the broadcasting sector.Such restric

96、tions are set out in the Broadcasting Ordinance(Cap.562)and the Telecommunications Ordinance(Cap.106).The governments special industrial-land policy features somewhat more complex rules,but it is still less demanding than the policies of many other Asian investment centers.Television The Broadcastin

97、g Ordinance states that foreign ownership of a Hong Kong company with a license to broadcast domestic free television requires written consent from the Broadcasting Authority at three thresholds:Shareholding of 5-10 percent;Shareholding of 10-15 percent;or Shareholding of over 15 percent.In addition

98、,if foreign entities in aggregate hold over 49 percent of voting control in such a company,their votes shall be subject to a formula as outlined in the Broadcasting Ordinance.Companies with a license to broadcast domestic free television must be Hong Kong companies,and may not be the subsidiary of a

99、nother company.These restrictions do not apply to paid television,or non-domestic television.RadioForeign shareholding in a company with a sound-broadcasting license may not exceed 49 percent.Sound-broadcasting licenses can only be given to Hong Kong companies.Such companies may not be the subsidiar

100、y of another company.RELATED SERVICESDezan Shira&Associates provides pre-investment market intelligence to foreign companies looking to establish a business in Hong Kong.For more information,please contact our experts at 19AN INTRODUCTION TO DOING BUSINESS IN HONG KONG 2023Requirements and steps to

101、set up a company in Hong KongFor the purpose of this guide,we only introduce the setup requirements and process of a private limited company in this chapter,as it is the most popular option for foreign investors.The registration of a company in Hong Kong usually starts with the creation of the compa

102、ny name and ends with the issue of a business registration certificate.During the whole process,there are mainly two government departments involved,namely the Companies Registry and Business Registration Office under Inland Revenue Department.The detailed procedures are set out below.Step 1:Selecti

103、ng a company nameA company may be registered with an English name,a Chinese name,or an English and Chinese name.But a company name with a combination of English words/letters and Chinese characters are not allowed.Investors can look up whether the desired name already registered(or if there is a sim

104、ilar name already registered)in the Companies Registry.Also,the name may not infringe upon other parties intellectual property rights.This can be searched on the website of the Intellectual Property Department.Moreover,a limited company must include the word“Limited”at the end of its name unless a s

105、pecial application is submitted for not including the word“limited”to the Companies Registry.Step 2:Deciding the organizational structure,amount of capital,company secretary,and registered office addressAfter selecting a company name,the investor should decide the member of the board of directors of

106、 the intended company.The first shareholder(i.e.,founder member)should obtain a written consent from the director.At the same time,the investor should determine the amount of capital and the number of shares to be issued to the first shareholder(s).The Companies Ordinance(Cap.622)does not impose any

107、 restrictions on the minimum and maximum amounts of capital.It is the sole discretion of the investor to determine the amount of capital for the company based on the need of the operation and whether an extra license is required for the intended business activity.Since March 3,2014,par values are no

108、t attached to shares.The Articles of Association(“AA”)should only state the number of shares and the amount of capital.The investor should contribute whatever amount stated in the AA immediately after the company is registered.How do I establish a business?It should be noted that since March 3,2014,

109、all companies registered in Hong Kong should appoint at least one natural person to act as its director.However,there are no restrictions on the nationality of the director.20AN INTRODUCTION TO DOING BUSINESS IN HONG KONG 2023The investor should also decide the company secretary,the designated repre

110、sentative of the significant controllers register,and address of the registered office before registration.If there are two or more directors,one of the directors could act as company secretary.However,if the investor will be the sole director of the intended company,another person should be appoint

111、ed to act as company secretary.A written consent to act as company secretary should be obtained.The investor could also engage the service of a professional firm,duly registered in Hong Kong,to provide company secretarial service with a fixed annual fee.The address of the registered office should be

112、 located in Hong Kong.There is not other particular limitation on the registered office address,but a postal box number cannot be used as registered office address of a Hong Kong company.If the founder does not plan to lease a physical office,he can utilize the service of a professional firm.But it

113、should be ensured that the service provider must possess a TCSP license.Step 3:Preparing registration documents and registering with the Companies RegistryIn this step,the investor should prepare the registration documents,including mainly the AA,the incorporation form,and a Notice to Business Regis

114、tration Office,and submit the aforesaid documents to the Companies Registry for registration.At the same time,the investor should pay the application fee for incorporation and business registration fee and levy.The application fee for incorporation is HK$1,720(subject to a 10%reduction for incorpora

115、tion through the“e-Registry”portal).The business registration and levy fee is HK$2,150 for one-year certificate and HK$5,650 for three-year certificate,in the period from April 1,2023 onwards.Investors can choose to register for one year or three years.If the documents are prepared in accordance wit

116、h the prevailing laws and regulations,the Companies Registry will issue the Certificate of Incorporation together with the Business Registration Certificate,which signifies that the company legally exists.Requirements of Acting as Company Secretary and Designated RepresentativeThe secretary of a com

117、pany may be:An individual-must ordinarily reside in Hong Kong;or A body corporate-must have its registered office or a place of business in Hong Kong.A companys designated representative must be either:A director,employee,or member of the company who is a natural person resident in Hong Kong;or An a

118、ccounting professional,a legal professional,or a person who possesses a Trust or Company Service Provider(TCSP)license.21AN INTRODUCTION TO DOING BUSINESS IN HONG KONG 2023Generally,companies can be fully registered online if the founder members are individuals and the individual user accounts have

119、been registered with the e-Registry,but investors can also file a paper company registration.Excluding the time needed to prepare the registration documents,the whole registration process will take one to five working days.Note that some business activities may require additional permits,certificate

120、s,and approvals,the details of which can be checked on the Business License Information Service under the Trade and Industry Department.Step 4:Making company chop and printing the AA(Optional)After the company is officially incorporated,the investor could find a service provider to make the company

121、chop and print the AA.After March 3,2014,the new Companies Ordinance(Cap.622)has simplified the execution of documents by companies.It is now optional for companies to keep and use the common seal and the AA of the company can be in electronic form.Opening a bank account in Hong KongOpening a bank a

122、ccount in Hong Kong is often a vital first step to establishing business presence.However,many investors believe it is more difficult to open an account in Hong Kong now as compared to before.This is mostly because financial regulations have been tightened in order to combat the designation of the c

123、ity as a tax heaven.Common issues faced by investors relate to producing required documents and conditions on maintaining fixed deposits.For many banks,it is common to impose a monthly charge for failing to maintain a balance above a certain minimum amount.It is therefore important for foreign inves

124、tors to understand the procedures and documents required.The internal practices of the bank may vary from one to another,but generally the following procedures can be expected:Most banks will require an initial appointment,via phone,email,or physical visit;Following this,a preliminary review is usua

125、lly conducted by phone interview,electronic questionnaires,or physical meeting with directors,or by sending supporting documents to bank manager;If the preliminary review is passed,both parties will meet to sign the relevant bank application forms and documents,as well as pay the initial deposit and

126、 application fee:Deposit differs according to the bank and is subject to change from time to time.Signatories also differ according to the bank and time.While some banks accept certified and true copy of shareholders ID,others require the director/shareholder/beneficial owner/nominee to be physicall

127、y present.In most cases,banks require the same number of people present as that forms quorum in a board meeting according to the AA to satisfy their Know Your Customer procedure.22AN INTRODUCTION TO DOING BUSINESS IN HONG KONG 2023 At this stage,the bank manager will send the application for the dep

128、artment review,which normally takes approximately one to two months.It is not uncommon for the review department to require further supporting documents before finally opening a new bank account on your behalf.Generally,the following documents are required during the application:Company documents:Bu

129、siness Registration Certificate,Certificate of Incorporation,AA,and NNC1 form.Proof of business:Documents required varies from bank to bank,but generally include evidence of the nature of the business,experience in the industry etc.For example,issued/received invoices,business plan description,agree

130、ment with suppliers,bank reference letter,and website.Personal documents:Passport and residency proof(for example,utility bill,electricity bill,or bank statement which are issued within three months and include the holders address and name).Source of Funds:The bank would ask for the source of fund o

131、f the investment to the Hong Kong company.For example,investors bank statements.Please note that when a company is marked as a shell company,it will be subject to a higher level of scrutiny.Here,a shell company is understood to be a corporation that does not conduct business activities itself,but ch

132、annels funds for group companies.To open a bank account for a shell company,the identity documents of the beneficial owners is required as well.Once the bank account has been approved,the investor will receive the bank account number,bank cards,and access codes.Virtual banks and money service operat

133、ors In addition to traditional banks,another emerging option is using virtual banks,which have no physical branches and focus on digital services.This concept is still very new to Hong Kong and for now,the HKMA only granted eight licenses for virtual banking.These banks are a good alternative for te

134、ch-savvy people and remote operations.However,it should be noted that some banks are not yet offering corporate bank accounts,or cater only to Hong Kong residents.Advantages of virtual banks include better rates and lower fees,integrations with enterprise software,a high set up convenience,and a hea

135、vy focus on small-and medium-sized enterprises(SMEs).Disadvantages include less personal relationship development,lack of ATM network,deposit inflexibility,and unavailability of specific services.GIGI WONGManagerBusiness Advisory ServicesHong Kong Office“Companies that have a physical office or empl

136、oyee located in Hong Kong usually have a much higher chance of success.”23AN INTRODUCTION TO DOING BUSINESS IN HONG KONG 2023Another digital banking solution are money service operators.They usually offer services,such as dedicated payment instructions,the ability to receive money via domestic or in

137、ternational bank transfers,and linking to third party services or currency exchange.For foreign SMEs operating in Hong Kong,virtual banks could offer a more convenient and cheaper service.This is particularly true for business owners who operate subsidiaries in Hong Kong that primarily function as h

138、olding companies.But it should be noted that the virtual banking industry is still very new and growing and as of now,not reliable enough for companies.Nevertheless,the market is expanding,and this might be a valuable option in the future.Gradual improvements to the banking environmentThe HKMA has a

139、nnounced that it has taken steps to improve its internal banking environment taking the time to engage with various stakeholders to gather details of specific incidents relating to difficulties around bank account opening.As a result,the HKMA has cautioned financial institution against a one-size-fi

140、ts-all approach and encouraged them to take a risk-based approach that differentiates the“risk levels of individual customers in accordance with their backgrounds and circumstances”.The situation is improving,but there is still a long way to go.Hong Kong needs to continue to ease its administrative

141、red-tape in order to stay competitive with other international financial hubs in the region,such as Singapore which like Hong Kong,serves as a financial gateway to Asia,but benefits from a more relaxed banking environment for foreign businesses.Intellectual propertyHong Kong offers a high level of p

142、rotection for intellectual property(IP),ranking 16th according to the Intellectual Property Rights Index 2022.It is also a major global IP trading hub.Hong Kong recognizes several different classes of IP,including trademarks,patents,designs,copyright,trade secrets,plant variations,domain names,and l

143、ay-out designs of integrated circuits.Registering a trademarkFor the benefits of a registered trademark,an application for registration must be made to the Trade Marks Registry,Intellectual Property Department(IPD).Registration only covers the territory of the Hong Kong SAR.Registration of a tradema

144、rk in Hong Kong does not affect the Chinese Mainland,and vice versa.To register a trademark in Hong Kong,the investor should first investigate whether the trademark is already registered.This can be done online on the Trademark Online Search System(https:/esearch.ipd.gov.hk/nis-pos-view/#/).The inve

145、stor can also use the Search and Preliminary 24AN INTRODUCTION TO DOING BUSINESS IN HONG KONG 2023Advice services provided by the Trade Marks Registry by simply completing Forms T1 and submitting the appropriate fee.If the trademark is available,the application to register a trademark can be made on

146、line through the IPD Electronic Filing Services,or it can be filed physically with the Trade Marks Registry by filling Form T2,with a graphic representation of the trademark attached.After filing,the Trade Mark Registry will examine whether the application meets the requirements laid out in the Trad

147、e Marks Ordinance(Cap.559)and the Trade Mark Rules(Cap.559A),including the following:The trademark needs to be distinctive;It cannot be a description of the goods or services the investor is providing or seeking to provide;It cannot be an industry or business term;and The trademark has not been regi

148、stered or applied for by another trader.Provided that the application is complete and correct,the trademark registration can be completed within six months,upon which it will be published in the Hong Kong Intellectual Property Journal.If the IPD objects the registration,it will notify the investor i

149、n writing.The applicant will have six months to ratify the application.A further period of three months extension may be granted.Registering a patentPatents protect inventors by giving them the legal right to prevent others from manufacturing,using,selling,or importing their patented invention.Hong

150、Kong has two types of patents:standard and short-term.Protection under standard patents is renewable annually after the end of the first third year,for a maximum of 20 years.Protection under short-term patents is renewable after four years from first filing,for a maximum term of eight years.Applying

151、 for a patent elsewhere in the world or in other regions of China does not automatically give you protection in Hong Kong.Investors need to file an application with the Patents Registry of the IPD,which conducts only a formal examination of the patent paperwork.However,in order to be granted an effe

152、ctive patent in Hong Kong,the investor must have first registered the patent in one of three designated patent offices-the State Intellectual Property Office of the PRC,the European Patent Office,or the United Kingdom Patent Office.The application for a standard patent goes through two phases.The fi

153、rst phase is to file a request to record the existing patent(either from the Chinese Mainland,the EU,or the United Kingdom).This needs to be done within six months after the designated patent application.Within two months after the request,the IPD will give the applicant notice of any issues with 25

154、AN INTRODUCTION TO DOING BUSINESS IN HONG KONG 2023the application.If there are no issues,or if these have been corrected,the request will be published in the Hong Kong Intellectual Property Journal.The second phase is to file a request for registration and grant of the Chinese,European,or UK grante

155、d patent in Hong Kong,which should be conducted within six months after publication of the request to record,or the grant of the patent by the designated patent office.The grant of a short-term patent is based on a search report from an international searching authority or one of three designated pa

156、tent offices.The application for a short-term patent only needs to be submitted once and there is generally no time limit for filing.But if the applicant wishes to claim priority from a first application in a Paris Convention country or World Trade Organization member territory,the short-term patent

157、 application should be filed in the Hong Kong SAR within 12 months of filing the first application.Within two months after the submission of the application,the IPD will examine the application and give the applicant notice to correct any issues.If there is no issue or the issues are corrected,a sho

158、rt-term patent for the invention will be granted and published in the Hong Kong Intellectual Property Journal.Registering a designThe Registered Design Ordinance(Cap.522)defines designs as“features of shape,configuration,pattern or ornament applied to an article by any industrial process,being featu

159、res which in the finished article appeal to and are judged by the eye”.Registered designs protect only the appearance of products,for example the look of a computer monitor.Registration of the design does not protect the way in which the product relating to the design works.Designs can be registered

160、 and protected if the designer can show that they are new at the filing date of the application,or the priority date(if claimed).A design is new if it has not been previously registered,or has never been published or disclosed before.To file for the registration of a design,the applicant needs to su

161、bmit the prescribed form,provide a representation and statement of novelty,and pay the registration fee.If the application is in order,the Designs Registry of IPD will publish the registration in the Hong Kong Intellectual Property Journal.The design will be protected for a maximum of 25 years from

162、the filing date,and needs to be renewed every five years.26AN INTRODUCTION TO DOING BUSINESS IN HONG KONG 2023CopyrightUnlike the other IP rights in Hong Kong,copyright arises automatically and does not need to be registered.It differs from design in that design protects the shape of an object.A cop

163、yright applies to the following:Literary,dramatic,musical,or artistic work;Sound recordings,films,broadcasts,or cable programs;and The typographical arrangement of published editions.With the copyright,the owner has the exclusive right to:Copy the work;Issue or make available copies of it to the pub

164、lic;Rent out copies of it to the public;Perform the work;Broadcast the work;and Make an adaptation to the work.Others are restricted from copying the work,which is defined as reproducing the work in any material form.The protection for copyright differs from that of registered design in that copyrig

165、ht only protects against reproduction of the works,whereas a registered design also protects against the independent creation of a new design that is not substantially different from the registered design.The threshold to prove a copyright infringement is also higher than for a registered design.For

166、 copyright infringement,the owner needs to show there is a reproduction in material form,whereas for registered design infringement,the designer needs to establish that the design is the same as or not substantially different from the registered design.The owner of a copyright may seek a court injun

167、ction to prevent the reproduction and distribution of copyrighted materials,as well as claiming financial compensation.27AN INTRODUCTION TO DOING BUSINESS IN HONG KONG 2023What are the key compliance requirements?Annual compliance requirementsA company is a separate legal entity,that is to say,it is

168、 a legal person in its own right and separate from its owners.The benefit of limited liability through operating as a limited company also brings with it obligations in so much as the company must comply with the various provisions in the Companies Ordinance(Cap.622).These obligations include the ti

169、mely disclosure and reporting of specified information about the company,its officers and shareholders,etc.and any changes in such information to the Registrar of Companies so that members of the public can have ready access to the latest information of the company kept by the Registrar of Companies

170、.Basically,annual compliance of a Hong Kong company includes:Filing of annual return;Renewal of business registration;Holding of annual general meeting;Appointment of auditor;Arrangement of audited financial statements;and Update of changes of company particulars/structure with Companies Registry.Ne

171、w regime of significant controller registerUnder the Companies(Amendment)Ordinance 2018(“the Amendment Ordinance”),all companies incorporated in Hong Kong(except listed companies)need to comply with the significant controllers register requirements starting from March 1,2018.Some of the key requirem

172、ents prescribed by the Amendment Ordinance include:Identify and ascertain a person/persons who has/have significant control over the company;Maintain a significant controllers register to be accessible by law enforcement officers upon demand;Designate at lease one person as its representative to pro

173、vide assistance relating to the companys significant controllers register to the law enforcement officers;Keep the significant controllers register at the companys registered office or a prescribed place in Hong Kong;and Keep the significant controllers register updated.Failure to comply with the si

174、gnificant controllers register requirements set forward in the Amendment Ordinance could qualify as a criminal offense.The company and every responsible person in breach of the Amendment Ordinance could liable for a fine levied at HK$25,000,and where applicable,a further daily fine.28AN INTRODUCTION

175、 TO DOING BUSINESS IN HONG KONG 2023A significant controller is a person or legal entity who meets one or more of the following conditions:Holds,directly or indirectly,more than 25 percent of the companys issued shares or a right to share more than 25 percent of the capital or profits of the company

176、;Holds,directly or indirectly,more than 25 percent of the voting rights of the company;Holds,directly or indirectly,the right to appoint or remove the majority of the board of directors of the company;Has the right to exercise,or actually exercises,significant influence or control over the company;o

177、r Has the right to exercise,or actually exercises,significant influence or control over the activities of a trust or a firm that is not a legal person,but whose trustees or members satisfy any of the above four conditions in relation to the company.To identify a significant controller,companies can

178、review their register of members,articles of association,shareholders agreements or other relevant agreements,and issue notice(s)to any person who is believed to be the significant controller and any person who is believed to know the identity of the significant controller and obtain their required

179、particulars.Compliance of anti-money laundering and counter-terrorist financing requirements for trust or company service providersAccording to the Anti-Money Laundering and Counter-Terrorist Financing Ordinance Ordinance(Cap.615)(AMLO)issued by the Companies Registrar,starting from March 1,2018,per

180、son carries on trust or company services are required to possess a TCSP license.In general,TCSP licensees are required to:Take all reasonable measures to mitigate the risk of money laundering and terrorist financing;and Ensure that,among other things,the anti-money laundering and counter-terrorist f

181、inancing requirements under the AMLO are complied with.To fulfil the above-mentioned obligations,TCSP licensees must assess the money laundering and terrorist financing risk of their businesses,develop,and implement policies and procedures on:Risk assessment;Customer due diligence measures;Ongoing m

182、onitoring of customers;Suspicious transactions reporting;Record keeping;and Staff training.Accordingly,companies are required to provide the due diligence documents to the service provider(TCSP licensee)due to this new requirement.29AN INTRODUCTION TO DOING BUSINESS IN HONG KONG 2023New inspection r

183、egimeA new inspection regime is being implemented under the Hong Kong Companies Ordinance(Cap.622),which provides additional protection to the personal information of directors and other relevant individuals who appear on the Companies Register.Under the new inspection regime,(a)correspondence addre

184、sses instead of usual residential addresses(URAs)of directors and(b)partial identification numbers(IDNs)instead of full IDNs of directors,company secretaries,and other relevant persons like liquidators,will be made available on the Companies Register for public inspection.Meanwhile,companies can wit

185、hhold the URAs and full IDNs(except the first part)on the registers where the information is maintained from public inspection.(The first part of the IDN is decided by an established rule,which is usually the first half of the sequence number if the IDN is an even number,or the part that begins with

186、 the first character in the sequence and ends with the character that falls on the middle of the sequence if the IDN is an odd number.)The URAs and full IDNs are regarded as“Protected Information”under the new inspection regime.Previously,the URAs and full IDNs of any companys director,company secre

187、taries,or other relevant persons could be accessed by the public.By replacing URAs and full IDNs with correspondence addresses and partial IDNs,the protection of personal information will be enhanced.At the same time,it will ensure the transparency of the Companies Register by allowing the public to

188、 access it for the purposes stipulated under the Companies Ordinance(Cap.622).Since substantial modifications are being made to the integrated Companies Registry Information System(“ICRIS”),the new inspection regime will be implemented in three phases.The respective commencement dates of each phase

189、are August 23,2021(phase 1);October 24,2022(phase 2);and December 27,2023(phase 3).Under phase 1,companies may replace URAs of directors with correspondence addresses and full IDNs of directors and company secretaries with their partial IDNs on their own registers for public inspection.Under phase 2

190、,Protected Information on the Index of Directors on the Companies Register will be replaced with correspondence addresses and partial IDNs for public inspection.Documents containing Protected Information that are filed for registration after the commencement of this phase,i.e.,October 24,2022 will n

191、ot be provided for public inspection,except for“specified persons”upon application.Under phase 3,data subjects(i.e.,individuals whose URA and full IDNs are contained in documents filed with the Companies Registry before the new inspection regimes commencement)can apply to the Companies Registry for

192、withholding their Protected 30AN INTRODUCTION TO DOING BUSINESS IN HONG KONG 2023Information contained in documents registered with the Companies Registry from public inspection and replace such information with their correspondence addresses and partial IDNs.Same as phase 2,only specified persons c

193、an apply to the Registry for access to the Protected Information of directors and other persons.To meet the requirements of this new regime,and if data subjects and Hong Kong registered companies want to withhold their Protected Information from public inspection,they should contact their service pr

194、ovider to update their personal information accordingly and make corresponding applications.RELATED SERVICESDezan Shira&Associates provides compliance assistance to foreign companies operating in Hong Kong.For more information,please contact our experts at .The Companies(Amendment)Ordinance 2023 The

195、 Companies(Amendment)Ordinance 2023(“the Amendment Ordinance”)comes into operation on April 28,2023.The Companies Ordinance(Cap.622)provides that a company must hold an annual general meeting within the prescribed time.A company may also hold a general meeting out of its own initiatives from time to

196、 time as necessary.The manner of holding a general meeting is governed by the provisions in the Companies Ordinance(Cap.622)and the Companies(Model Articles)Notice(Cap.622H)as well as provisions of the companys own AA.The Amendment Ordinance seeks to modernize the Companies Ordinance(Cap.622)and the

197、 Companies(Model Articles)Notice(Cap.622H)to expressly cater for the scenario of companies holding fully virtual general meetings without the requirement for presence of members at any physical locations,as well as a mixed mode of such virtual general meetings and members attending at physical locat

198、ion(s),i.e.,hybrid general meetings.31AN INTRODUCTION TO DOING BUSINESS IN HONG KONG 2023How do I make changes to my company?Dormant companyA dormant company is a company that has no significant accounting transactions during a fiscal year.“Accounting transaction”,in relation to a company,means a tr

199、ansaction that is required to be entered in the companys accounting records,excluding a transaction arising from the payment of any fee that the company is required by an Ordinance to pay.A company can become dormant when it passes a special resolution(resolution approved by at least 75 percent of s

200、hareholders),and the resolution is delivered to the Registrar of Companies.If a company is dormant,many of its compliance requirements are reduced or lifted.The company no longer needs to:Hold annual general meetings;Deliver annual returns*;Prepare financial statements and Directors Reports;Appoint

201、auditors and undergo annual audits;or Publish financial statements to the shareholders before general meetings.Despite all the benefits,a dormant company still needs to maintain a registered office,corporate secretary,designated representative of significant controller(s),fulfill annual business reg

202、istration,and comply with the taxation requirements of the Inland Revenue Department.A company ceased to be dormant if the company passes a special resolution declaring that the company intends to enter into an accounting transaction and the resolution is delivered to the Registrar of Companies or t

203、here is an accounting transaction in relation to the company.Changing a company nameTo change the company name,the company needs to pass a special resolution,a resolution that is passed by a majority of at least 75 percent.The special resolution and the AA as altered need not be delivered to the Com

204、panies Registry,but a“Notice of Change of Company Name”(Form NNC2)should be filled and delivered within 15 days after the passing of the special resolution together with the required fee(HK$295)either electronically through the“e-Registry”portal(www.eregistry.gov.hk)or in hard copy form to the Shrof

205、f on the 14th floor of the Queensway Government Offices.*However,a private company is still required to deliver an annual return for the year in which it declares itself to be dormant if the effective date on which the company becomes dormant falls after the 42nd day after the anniversary of its dat

206、e of incorporation.32AN INTRODUCTION TO DOING BUSINESS IN HONG KONG 2023Electronic Certificate of Change of Name will normally be issued within an hour by email.But if the Form NNC2 is delivered in hard copy,the Certificate of Change of Name will normally be issued within four working days,and has t

207、o be collected in person.The change of name will be effective from the date on which the Certificate of Change of Name is issued.Please note that the intended company name should not be the same as or too similar to a name appearing in the index of company names kept by the Registrar of Companies,or

208、 in conflict with a trademark in the Trademark Register maintained by the Intellectual Property Department.Or else the change may be rejected by the Registrar,or the company may be subject to a change of name direction by the Companies Registry after change of name.Changing the companys Articles of

209、AssociationA company may alter most of its AA except:Articles on the liability of its members as stated in Section 83 and 84(1)of the Companies Ordinance(Cap.622);Articles that are inconsistent with any rights attached to shares in a class of shares(for company with shared capital)or any rights of a

210、 class of members(for company without a share capital);and Articles related to the contributions of members of a company limited by guarantee under Section 84(2)of the Companies Ordinance(Cap.622)other than to increase the specified amount.Under most circumstances,the alteration of the AA can only b

211、e done by passing a special resolution.However,an alteration in articles to the maximum number of shares that the company may issue may be made by ordinary resolution.Within 15 days after the alteration is made,the following documents are required to be delivered to the Companies Registry:A copy of

212、the special resolution for alteration of the AA;A notice of alteration in the relevant specified forms,namely Forms NAA1,NAA2,NAA3,or NAA4;A certified copy of the AA as altered(for Forms NAA1,NAA2,and NAA3);and Other relevant documents required to be delivered with the specified forms for registrati

213、on as appropriate.To be noted,the holders of at least five percent of the shares or five percent of the companys members can appeal to the court to cancel an alteration of the objects of a company.33AN INTRODUCTION TO DOING BUSINESS IN HONG KONG 2023A private company or a company limited by guarante

214、e,other than those companies specified in Section 749(2)of the Companies Ordinance(Cap.622),may apply for deregistration when it is defunct.To do so,the following conditions need to be met:All shareholders agree to the deregistration;The company has not yet commenced operations or business,or has ce

215、ased operations or business during the three months before the application;The company has no outstanding liabilities;The company is not involved in any ongoing legal proceedings;The company holds no assets consisting of any immovable property situated in Hong Kong;and If the company is a holding co

216、mpany,its subsidiaries assets do not consist of immovable property situated in Hong Kong.Before the company can be deregistered,it first needs to obtain a letter of“Notice of No Objection to a Company being Deregistered”(Notice of No Objection)from the Commissioner of Inland Revenue Department(IRD),

217、the Hong Kong tax office.Directors and shareholders,or a person authorized by the company,can apply for such a letter.To apply for this letter,the applicant has to fill in a form,retrievable from the tax office website,and pay a prescribed fee.With the Notice of No Objection,the investor should then

218、 apply for deregistration with the Companies Registry within three months.To apply for deregistration,the investor has to fill in the designated form and pay a fee.The Notice of No Objection needs to be included in the submission.Where the applicant is a company,it must designate a natural person to

219、 give notice to the Companies Registry.The deregistration will then be published in the Gazette on the website of the Government Logistics Department.If no objections are made within the following three months such as by alleged creditors the Registrar may deregister the company by publishing in the

220、 Gazette another notice declaring it to be deregistered on the date of publication of that other notice.Former directors must keep the books and papers of the company for six years after deregistration.How do I deregister my company?34AN INTRODUCTION TO DOING BUSINESS IN HONG KONG 2023 Deregister a

221、Company in Hong KongAssess whether the Company fulfils the conditions of deregistration12345678Confirm the date of cessation of business,if applicable Officially dissolved by deregistration Confirmation of tax clearance with the IRDLead time:case by case Application of deregistration with the Compan

222、ies Registry Lead time:around 1 monthPreparation of last audit,if applicable Lead time:case by caseApplication of Notice of No Objection to a Company Being Deregistered with the IRD Lead time:around 1 monthPublication of Gazette for the proposed deregistrationLead Time:5 months 35AN INTRODUCTION TO

223、DOING BUSINESS IN HONG KONG 2023Located in the center of Asia,Hong Kong prides itself as an ideal location for dispute resolution not only in Asia,but also worldwide.Given its geographic and economic proximity to the Chinese Mainland,Hong Kong acts as a bridge for cross-border disputes that involve

224、this region.Thanks to Hong Kongs reputation for its strict maintenance of the rule of law and judiciary independence,its common law tradition,and its established English-Chinese bilingual legal system,Hong Kong has also become an ideal hub to resolve international disputes for foreign investors doin

225、g business in Hong Kong.Below we introduce the common dispute resolution methods in Hong Kong.Alternative Dispute Resolution(ADR)Alternative Dispute Resolution(ADR)is a voluntary and private dispute resolution process in which the parties agree to appoint a neutral third party to assist them to sett

226、le or resolve their dispute.Under the new High Court and District Court rules,which came into effect on April 2,2009,the courts are required to actively manage cases and facilitating dispute resolution.Such case management includes,where appropriate,encouraging the parties to use procedures alternat

227、ive to litigation to resolve their dispute,i.e.,ADR.ADR has certain advantages over litigation.In addition to cost and time saving,parties have more control over how the dispute is solved.Because of its confidential nature,it can sometimes preserve business relationship between the disputed parties.

228、Unlike litigation in open courts,trade terms are not disclosed to the public.Mediation and arbitration are the most commonly used forms of ADR.MediationMediation is a voluntary,confidential,and private dispute resolution process in which a neutral person,the mediator,helps the parties to reach their

229、 own negotiated settlement agreement.The mediator has no power to impose a settlement,other than the power of persuasion.A successful mediation results in an agreement signed by the parties.Despite being widely supported and recognized as having the potential to resolve disputes in a quick,cheap,and

230、 confidential way,mediation remains under-utilized when compared to arbitration.ArbitrationArbitration is a private process where disputing parties agree that one or several individuals can make a binding decision about the dispute after receiving evidence and hearing arguments.In an arbitration,the

231、 arbitrator investigates the legal rights and wrongs of a dispute and makes a decision.Once the arbitrator has arrived at a decision,it is binding on parties,whether they agree with it or not.This is how arbitration is different from mediation.How do I solve legal disputes?36AN INTRODUCTION TO DOING

232、 BUSINESS IN HONG KONG 2023Arbitration is very much like the way a court case is decided by a judge,except that the process does not take place in a court room,and it is not open to the public.As a leading seat of arbitration,Hong Kong maintains several the worlds top arbitral institutions,such as:H

233、ong Kong International Arbitration Centre(HKIAC);The International Court of Arbitration of the International Chamber of Commerce(ICC-ICA);China International Economic and Trade Arbitration Commission(CIETAC);China Maritime Arbitration Commission(CMAC);Permanent Court of Arbitration(PCA);and The Hong

234、 Kong Maritime Arbitration Group(HKMAG).For parties who wish to commence an arbitration to resolve disputes,there must be a valid arbitration agreement,and as an arbitration friendly jurisdiction,Hong Kong adopts a broad definition of what constitutes a valid arbitration agreement.It could be a clau

235、se in the main contract,or a separate agreement made prior to or after the dispute happens.Among others,an arbitration agreement should set out how a party commences arbitration and the procedural guidelines of the arbitration.It must be made in writing or recorded in any written form to be enforcea

236、ble in Hong Kong.Arbitral awards made in Hong Kong can be enforced in all state parties to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.Besides,in order to complete the network for recognition and enforcement of arbitral awards,the HKSAR has respectively ente

237、red into reciprocal arrangements with the Mainland and the Macao SAR.In 2019,HKSAR and the Chinese Mainland,signed the Arrangement Concerning Mutual Assistance in Court-ordered Interim Measures in Aid of Arbitral Proceedings by the Courts of the Mainland and of the Hong Kong Special Administrative R

238、egion,according to which parties to arbitral proceedings seated in the HKSAR and administered by designated arbitral institutions may apply to the Mainland courts for interim measures,including property preservation,evidence preservation,and conduct preservation.Notably,Hong Kong has become the firs

239、t jurisdiction outside the Chinese Mainland where,as a seat of arbitration,parties to arbitral proceedings administered by its arbitral institutions would be able to apply to the Mainland courts for interim measures.Litigation Court litigation is the traditional legal dispute resolution method,commo

240、nly adopted in Hong Kong.Generally,people have no preference between litigation and arbitration,rather,they choose the best dispute resolution method based on a particular scenario.For example,litigation is usually preferred in insolvent related cases,intra-company dispute,debt enforcement,as well a

241、s cases where the enforcement is anticipated to be problematic because the counterparty is not located in an arbitration-friendly jurisdiction.37AN INTRODUCTION TO DOING BUSINESS IN HONG KONG 2023With a legal system that is based on common law,the litigation process in Hong Kong is generally an adve

242、rsarial one,during which opposing parties act as adversaries seeking to convince the court or tribunal that their version of events or their legal submissions should prevail over those of the other side.This provides international parties with the familiarity of a legal system.Civil procedures are m

243、ostly governed by legislation,including the High Court Ordinance and Rules of the High Court,the District Court Ordinance,and Rules of the District Court.To commence litigation in Hong Kong,the party has first to identify the appropriate court,based on the nature and amount of the claim.For commerci

244、al disputes,it would often be the District Court or the Court of First Instance of the High Court,in which a party would commence an action.In addition to the above,complicated commercial cases(e.g.,construction of mercantile documents,export or import of the merchandise,insurance,banking,etc.)will

245、be directed by the court to the Commercial List,which is developed by the Chief Justice to facilitate the disposal of actions involving commercial matters.The matters are heard before a Commercial List judge,most of whom have expertise in commercial disputes and are bilingual so that they can unders

246、tand the complexity of the case in both Chinese and English.Corporate insolvency and shareholder disputes are generally handled in an informal companies list headed by a judge experienced in such matters.The courts follow the doctrine of precedents,by which a lower court is bound to follow the ratio

247、 decidendi(i.e.the legal precept applied by the Court in resolving the issues before the Court)of a judgment by a superior court.Court decisions are generally made public and accessible online via the Judiciarys website at https:/www.judiciary.hk/en/judgments_legal_reference/judgments.html.If an app

248、licant succeeds in his application for judicial review,the Court has the discretionary power to grant a form of final relief appropriate to the circumstances,including an order of mandamus(to perform an act),prohibition,or certiorari(to bring up and quash a decision),an injunction,a declaration(as t

249、o legal rights),or an award of damages,as the case may be.Subject to relevant law and procedures,appeals from decisions of the Court of First Instance in civil proceedings can be brought to the Court of Appeal and the Court of Final Appeal,which is the apex of the Court system.The Court of Final App

250、eal is vested with the“power of final adjudication”by the Basic Law.As for enforcement outside Hong Kong,the Supreme Peoples Court of China and the Department of Justice at Hong Kong SAR have signed the Arrangement between Mainland and the HKSAR on Reciprocal Recognition and Enforcement of the Decis

251、ions of Civil and Commercial Cases under Consensual Jurisdiction(the Arrangement)on January 18,2019.The Arrangement makes provisions about the scope,procedures,and means of reciprocal recognition and enforcement of court decisions on civil and commercial cases.At the time of writing,the Arrangement

252、has yet to become effective.2What are the major taxes in Hong Kong?What are the key compliance requirements?International taxationTax,Audit,and Accounting39AN INTRODUCTION TO DOING BUSINESS IN HONG KONG 20232JENNIFER LUDirector Hong Kong Office“Hong Kong doesnt have any turnover taxes,including sale

253、s tax or value added tax,making it a favorable location for various business activities.”According to the Basic Law of Hong Kong,the taxation system of the Chinese Mainland is not applicable to Hong Kong,which essentially means that Hong Kong enjoys an independent taxation system.Because the city on

254、ly imposes three direct taxes,Hong Kong has one of the simplest tax systems in the world.There are also generous allowances and deductions to reduce the burden of taxpayers.Apart from direct taxes,certain indirect taxes are also collected,such as stamp duty and betting duty.One thing to be noted is

255、that Hong Kong doesnt have any turnover taxes,including sales tax or value added tax,making it a favorable location for various business activities.In this part of the guide,we first introduce the unique features of Hong Kongs taxation system and then concentrate on its three direct taxes,which cons

256、titute a major part of the governments fiscal revenue.Tax administration is charged by the Inland Revenue Department(IRD).The tax assessment year usually runs from April 1 to March 31 each year.A company may also choose its fiscal year at its own discretion.Key features of Hong Kongs taxation system

257、Taxes in Hong Kong are only levied on a territorial basis,unlike most countries which apply both residential jurisdiction and territorial jurisdiction in determining tax liability.That is to say,only income arising in or derived from Hong Kong is taxable,whereas worldwide income is not taxable,irres

258、pective of the residence status of the taxpayers.That said,some foreign source income could be regarded as arising or derived from Hong Kong,under the 2022 amendment of the Inland Revenue Ordinance in relation to the foreign source income exemption(FSIE)standard.Besides,there is no comprehensive sys

259、tem of income taxation in Hong Kong.Instead,a taxpayer is liable for tax on three different types of income.If an income fails to fall within any of the three specific tax provisions,then it shall not be subject to tax.Salaries taxAll individuals earning income arising in or derived from Hong Kong f

260、rom an office,employment,or pension are subject to salaries tax in Hong Kong.Tax payable is calculated at a progressive rate on the“net chargeable income”or at a standard rate on the“net income”(before deduction of the allowances),depending on which is lower.It is further reduced by the tax reductio

261、n,subject to a maximum.What are the major taxes in Hong Kong?NET CHARGEABLE INCOMETOTAL INCOME DEDUCTIONS ALLOWANCES=NET INCOMETOTAL INCOME DEDUCTIONS=40AN INTRODUCTION TO DOING BUSINESS IN HONG KONG 2023Tax RatesProgressive rates(Year of Assessment 2018/19 onwards)Net chargeable income(HK$)RateTax(

262、HK$)On the first 50,0002%1000On the next 50,0006%3,000On the next 50,00010%5,000On the next 50,00014%7,000Remainder17%Standard rate of tax(year of assessment 2017/18 onwards)15%AllowanceYear of assessment 2023/24 onwards,in HK$Basic allowance132,000Married persons allowance264,000Child allowance(For

263、 each of the 1st to 9th child)130,000For each child born during the year,the child allowance will be increased by130,000Dependent brother or sister allowance(for each dependent)37,500Dependent parent and dependent grandparent allowance(for each dependent)Parent/grandparent aged 60 or above or is eli

264、gible to claim an allowance under the Governments Disability Allowance Scheme50,000 Parent/grandparent between the age of 55 to 6025,000Additional dependent and dependent grandparent allowance Parent/grandparent aged 60 or above or is eligible to claim an allowance under the Governments Disability A

265、llowance Scheme50,000 Parent/grandparent between the age of 55 to 6025,000Single parent allowance132,000Disabled dependent allowance(for each dependent)75,000Personal disability allowance75,00041AN INTRODUCTION TO DOING BUSINESS IN HONG KONG 2023Deductions(Maximum Limits)Year of assessment 2023/24 o

266、nwards,in HK$Expenses of self-education100,000Elderly residential care expense100,000Home loan interest100,000Mandatory contribution to recognized retirement schemes18,000Approved charitable donations(income-allowable expenses-depreciation allowance)x percentage35%Qualifying premiums paid under Volu

267、ntary Health Insurance Scheme(VHIS)policy(for each insured person)8,000Qualifying annuity premiums and tax deductible MPF voluntary contributions 60,000Domestic rent deduction*100,000Maximum tax reductionsSalaries tax for the year of assessment 2022/23*is further reduced by a one-off tax reduction o

268、f 100 percent,subject to a ceiling of HK$6,000 per case.For single taxpayers,the ceiling is applied to each individual;for couples jointly assessed,the ceiling is applied to each married couple(that is,capped at HK$6,000 in total).Married persons may elect personal assessment separately to reduce ta

269、x liability.The tax reduction will only be applicable to the final tax for the year of assessment 2022/23,but not to the provisional tax of the same year.Therefore,taxpayers are still required to pay their provisional tax on time despite the reduction measure.Provisional salaries taxSalaries tax is

270、chargeable on the assessable income for each year of assessment.As the assessable income for any particular year cannot be known until after the end of the year concerned,a provisional tax charge has to be raised.When the assessable income for the year of assessment is subsequently ascertained,an as

271、sessment will be made and the provisional salaries tax paid will be utilized to offset the tax liability under the assessment.The tax payer can apply in writing for holding over of the whole or part of the provisional salaries tax on the grounds as specified in the Inland Revenue Ordinance(Cap.112).

272、*Legislative amendments are required for implementing the tax measures as proposed by the Financial Secretary in the 2023-24 Budget.42AN INTRODUCTION TO DOING BUSINESS IN HONG KONG 2023Profits taxAny party,including corporations,partnerships,trustees,and organizations involved in any trade,professio

273、n,or business in Hong Kong,is subject to tax on all profits arising in or derived from Hong Kong(excluding profits arising from the sale of capital assets).Profits tax is levied based on assessable profits,which is determined by excluding deductions and tax-exempt incomes.It is further reduced by th

274、e tax reduction,subject to a maximum.Profits tax rateNormal rate Generally,profits earned by a corporation are taxed at a standard rate of 16.5 percent,whileprofits earned by unincorporated businesses are taxed at a standard rate of 15 percent.Starting from the year of assessment 2018/19.the two-tie

275、red profits tax regime has been introduced,which lowers the tax rate for the first HK$2 million of assessable profits.Under the two-tiered tax regime,the first HK$2 million of profits earned by a corporation will be taxed at 8.25 percent.The remaining profits will continue to be taxed at the existin

276、g 16.5 percent tax rate.For unincorporated businesses,the first HK$2 million of profits earned will be taxed at 7.5 percent.The remaining profits thereafter will be taxed at the existing 15 percent tax rate.However,for two or more connected entities,only one of them may elect the two-tiered profits

277、tax rates.The rest of the entities shall still be taxed at 16.5 percent for corporations and 15 percent for incorporated businesses.In order to avoid double benefits,enterprises that already benefit from preferential tax regimes,such as the corporate treasury center regime,aircraft leasing regime,et

278、c.shall be excluded from the two-tiered profits tax regime.Additionally,the assessable profits for sums received by or accrued to holders of qualifying debt instruments as interest,gains,or profits shall be excluded,as these should already be taxed at half the rate(8.25 percent or 7.5 percent,as the

279、 case may be).Two-Tiered Profits Tax Rates in Hong KongAssessable profitsCorporationsUnincorporated businessesFirst HK$2 million8.25%7.5%Over HK$2 million16.5%15%43AN INTRODUCTION TO DOING BUSINESS IN HONG KONG 2023Concessionary rateA tax rate at 50 percent of the normal profits tax rate will be app

280、lied to:trading profits and interest income received or derived from“short/medium term debt instruments”(issued before 1 April 2018);qualifying profits of a qualifying corporate treasury centre(for the year of assessment 2016/17 onwards);qualifying profits of a qualifying aircraft lessor or a qualif

281、ying aircraft leasing manager(for the year of assessment 2017/18 onwards);qualifying profits of a professional reinsurer or authorized captive insurer(for the year of assessment 2018/19 onwards);qualifying profits of a specified insurer or licensed insurance broker company(for the year of assessment

282、 2020/21 onwards);and qualifying profits of a qualifying ship lessor or a qualifying ship leasing manager(for the year of assessment 2020/21 onwards).A profits tax rate at 0 percent or 50 percent of the normal profits tax rate will be applied to:qualifying profits of a qualifying ship lessor or a qu

283、alifying ship leasing manager(for the year of assessment 2020/21 onwards);and qualifying profits of a qualifying ship agent,a qualifying ship manager,or a qualifying ship broker(for the year of assessment 2021/22 onwards).Moreover,the concessionary profits tax rate for the assessable profits of(a)el

284、igible family-owned investment holding vehicles managed by eligible single family offices in Hong Kong and(b)family-owned special purpose entities earned from the qualifying transactions and incidental transactions for a year of assessment commencing on or after April 1,2022 is 0 percent.ExemptionsT

285、he following sums can be exempted from the assessable profits of a company:Dividends received from a corporation which is subject to Hong Kong profits tax;Amounts already included in the assessable profits of other persons chargeable to profits tax;Interest on Tax Reserve Certificates;Interest on,an

286、d any profit made in respect of,a bond issued under the Loans Ordinance(Cap.61)or the Loans(Government Bonds)Ordinance(Cap.64),or in respect of an Exchange Fund debt instrument or in respect of a Hong Kong dollar-denominated multilateral agency debt instrument;Interest income and trading profits der

287、ived from long term debt instruments;Interest,profits or gains from qualifying debt instruments(issued on or after April 1,2018)exempted from payment of profits tax;and44AN INTRODUCTION TO DOING BUSINESS IN HONG KONG 2023VISIT US ON LINKEDIN Sums received or accrued in respect of a specified investm

288、ent scheme by or to the person as:A person chargeable to profits tax in respect of a mutual fund,unit trust,or similar investment scheme that is authorized as a collective investment scheme under section 104 of the Securities and Futures Ordinance(Cap.571);or A person chargeable to profits tax in re

289、spect of a mutual fund,unit trust,or similar investment scheme where the Commissioner is satisfied that the mutual fund,unit trust,or investment scheme is a bona fide widely held investment scheme,which complies with the requirements of a supervisory authority within an acceptable regulatory regime.

290、A person is exempt from payment of profits tax in respect of the following sums:Interest(accrued on or after 22 June 1998)that is derived from any deposit placed in Hong Kong with an authorized institution,excluding interest received by or accrued to a financial institution;and Starting from the yea

291、r of assessment 2009/10,interest on and any profit made in respect of Renminbi sovereign bonds.Deductions Deductible expensesGenerally,all outgoings and expenses,to the extent to which they have been incurred by the taxpayer in the production of chargeable profits,are allowed as deductions.A transfe

292、r of certain allowable head office administrative expenses by means of a charge to a local branch or subsidiary in Hong Kong would be allowed as a deduction for Hong Kong tax purposes,to the extent to which they were incurred during the basis period for the year of assessment in the production of pr

293、ofits chargeable to tax.Non-deductible items Domestic or private expenses and any sums not expended for the purpose of producing the profits;Any loss or withdrawal of capital,the cost of improvements,and any expenditure of a capital nature;Any sum recoverable under insurance or contract of indemnity

294、;Rent of or expenses relating to premises not occupied or used for the purpose of producing the profits;Taxes payable under the Inland Revenue Ordinance(Cap.112),except salaries tax paid in respect of employees remuneration;and Any remuneration or interest on capital or loans payable to section 16AA

295、;contributions made to a mandatory provident fund scheme in respect of the proprietor or the proprietors spouse or,in case of a partnership,to its partners or their spouses.45AN INTRODUCTION TO DOING BUSINESS IN HONG KONG 2023 Expenditure on building refurbishment A person who incurs capital expendi

296、ture on the renovation or refurbishment of business premises is allowed to deduct that expenditure over a period of five years in equal installments commencing the year in which the expenditure is made.Expenditure on plant and machinery specially related to manufacturing,and on computer hardware and

297、 software For this kind of expenditure,a full deduction is allowed during the basis period in which the expenditure was incurred.Expenditure on environmental protection facilities Expenditure on environmental protection machinery with effect from the year of assessment 2008/09,a full deduction is al

298、lowed during the basis period in which the expenditure is incurred.Expenditure on environmental protection installation with effect from the year of assessment 2008/09,a deduction at 20 percent of the expenditure is allowed during the five consecutive years commencing from the year in which the expe

299、nditure is incurred;with effect from the year of assessment 2018/19,a full deduction is allowed during the basis period(instead of over five years)in which the expenditure is incurred for procuring environmental protection installations,including any part of expenditure on environmental protection i

300、nstallation that remains to be deducted(and is to be fully deducted)in the year of assessment 2018/19.Expenditure on environmentally friendly vehicles with effect from the year of assessment 2010/11,a full deduction is allowed during the basis period in which the expenditure is incurred.Depreciation

301、 allowances Industrial building allowances on industrial buildings and structures Initial allowance 20 percent on the cost of construction of the premises Annual allowance four percent on the cost of construction of the premises Balancing allowance or charge will be due upon disposal of the premises

302、 Commercial buildings allowances on commercial buildings and structures Annual allowance four percent on the cost of construction of the premises Balancing allowance or charge will be due upon disposal of the premises46AN INTRODUCTION TO DOING BUSINESS IN HONG KONG 2023 Plant and machinery Initial a

303、llowance 60 percent on the cost Annual allowance at rates of 10 percent,20 percent or 30 percent as prescribed by the Board of Inland Revenue in the Inland Revenue Rules,on the reducing value of the asset.Items qualifying for the same rate of annual allowance are grouped under one“pool”.A balancing

304、allowance is available only on cessation of a business to which there is no successor.A balancing charge can,however,arise whenever the disposal proceeds of one or more assets exceed the reducing value of the whole“pool”of assets to which the disposed items belong.Donations Charitable donations made

305、 to approved charitable institutions or trusts of a public character or to the Government of the Hong Kong SAR,amounting in aggregate not less than HK$100 but not exceeding 35 percent(Year of Assessment 2008/09 onwards)of the adjusted assessable profits before deduction of donations,are allowable fo

306、r deduction in computing the assessable profits.Maximum tax reductionsProfits tax for the year of assessment 2022/23*is further reduced by the tax reduction of 100 percent,subject to a ceiling of HK$6,000 per case.The reduction will be reflected in the final tax payable for the year of assessment 20

307、22/23,but not to the provisional tax of the same year.Therefore,taxpayers are still required to pay their provisional tax on time despite the reduction measure.Provisional profits tax Profits tax is chargeable on the assessable profits for each year of assessment.As the assessable profits for any pa

308、rticular year cannot be known until after the end of the year concerned,a provisional tax charge has to be raised.When the assessable profits for the year of assessment are subsequently ascertained,an assessment will be made and the provisional profits tax paid will be utilized to offset the tax lia

309、bility under the assessment.*Legislative amendments are required for implementing the tax measures as proposed by the Financial Secretary in the 2023-24 Budget.47AN INTRODUCTION TO DOING BUSINESS IN HONG KONG 2023RELATED SERVICESFor assistance navigating Hong Kongs various tax compliance requirement

310、s,please contact our tax experts at The tax payer can apply in writing for holding over of the whole or part of the provisional tax on the grounds as specified in the Inland Revenue Ordinance(Cap.112).If the provisional tax is payable by two installments and the first installment has been settled by

311、 the due date,an application for holding over of the whole or part of the second installment may be made subject to the prescribed time limit and grounds for application.Property taxProperty tax is levied on income arising from the letting of immovable property in Hong Kong,which is payable by the o

312、wner(s)at the standard rate of the year of assessment on“net assessable value”(NAV).Under the provisions of the Inland Revenue Ordinance(Cap.112),each and every joint owner or owner in common is responsible for reporting rental income on tax returns and paying property tax as if he/she is the sole o

313、wner.Where the owner receives only rent and no other benefit,the annual rent is the“assessable value”(AV).Rent receivable(due but not yet received)should be included in the AV.Irrecoverable rent can be excluded from tax charge in the year in which it became irrecoverable.Any amount subsequently reco

314、vered is assessable to tax as income in the year of recovery.The property tax is paid on 15 percent of the NAV:If the tenant pays rates,the NAV is equal to AV less than a standard allowance of 20 percent for repairs and outgoings;and If the owner is responsible for paying rates,rates paid can be ded

315、ucted before allowing for the 20 percent deduction.Provisional property taxProperty tax is chargeable on NAV for each year of assessment.As the NAV for any particular year cannot be known until after the end of the year concerned,a provisional tax charge has to be raised.When the NAV for the year of

316、 assessment are subsequently ascertained,an assessment will be made and the provisional property tax paid will be utilized to offset the tax liability under the assessment.The tax payer can apply in writing for holding over of the whole or part of the provisional property tax on the grounds as speci

317、fied in the Inland Revenue Ordinance(Cap.112).48AN INTRODUCTION TO DOING BUSINESS IN HONG KONG 2023Hong Kongs principle of taxation based on territorial sourceHong Kong adopts a territorial source principle of taxation.Only profits derived from a trade,profession,or business carried on in Hong Kong

318、are taxable here.Profits sourced elsewhere are not subject to Hong Kong profits tax.The principle itself is very clear but its application in particular cases can be contentious.Over the years,the following principles have emerged from authoritative court decisions:Matter of fact the question of loc

319、ality of profits is a hard,practical matter of fact.No universal rule can apply to every scenario.Whether profits arise in or are derived from Hong Kong depends on the nature of the profits and of the transactions which give rise to such profits.The operations test identifying the operations that ge

320、nerated the profits in question and determining where they were carried out.The guiding principle is to examine what the taxpayer has done to earn the profits and where they were earned.The source of profits must be attributed to the operations of the taxpayer responsible for generating them,rather

321、than to those of other entities within the taxpayers group.Antecedent or incidental activities the relevant operations do not comprise the whole of the taxpayers activities.The focus is on establishing the geographical location of the taxpayers profit-producing transactions as distinct from activiti

322、es antecedent or incidental to those transactions.Place where decision is made the place where the day-to-day investment and business decisions take place is only one factor which must be considered in determining the source of profits.It is not usually the deciding factor.Gross profits from transac

323、tions the distinction between Hong Kong profits and offshore profits is made by reference to the gross profits arising from individual transactions.Business presence overseas while a company may have operations outside of Hong Kong that generate profits,the lack of such a presence does not automatic

324、ally mean that all profits arise in or derive from Hong Kong.However,if the companys main operations are in Hong Kong and there is no presence overseas,it is highly likely that any profits earned will be subject to profits tax in Hong Kong.In trading companies,the location of profits from goods and

325、commodities is typically determined by the place where contracts for their purchase and sale are“effected.”This includes not only the legal execution of the contracts,but also the negotiation,finalization,and fulfillment of their terms.In manufacturing businesses,the source of profits is determined

326、by the location where the goods are produced.Profits derived from the sale of goods manufactured in Hong Kong are subject to full taxation here.If the goods are produced both inside and outside of Hong Kong,the portion of profits related to the production outside of Hong Kong will not be considered

327、to arise in Hong Kong.The location where the goods are sold does not factor into this determination.49AN INTRODUCTION TO DOING BUSINESS IN HONG KONG 2023If a business earns commission by securing buyers for products or by securing suppliers of products needed by customers,the source of commission in

328、come is the location where the agent performs these activities.The income arises from the arrangement of transactions between the parties.Therefore,if these activities take place in Hong Kong,the commission income is sourced in Hong Kong.To provide certainty and clarity in the operation of the terri

329、torial source principle,the IRD provides advance rulings on the source of profits of a business for profits tax purposes.The service is subject to the payment of a fee.New rules on foreign source income exemption In 2022,Hong Kong amended the provisions of the Inland Revenue Ordinance in relation to

330、 the foreign source income exemption(FSIE),in a move to comply with international tax standards,to avoid being added to the European Union(EU)s grey list of non-cooperative tax jurisdictions.The FSIE amendments came into effect on January 1,2023.Under the new FSIE regime,certain foreign-sourced inco

331、me accrued to a member of a multinational entity(MNE)group carrying on a trade,profession,or business in Hong Kong is to be regarded as arising in or derived from Hong Kong and chargeable to profits tax when it is received in Hong Kong,unless certain additional conditions can be satisfied.Previously

332、,these incomes were not subject to profits tax at all if they were foreign-sourced.The in-scope foreign source income include interest,dividend,disposal gain from the sales of equity interests in an entity(disposal gain),and IP income.Nevertheless,any interest,dividend,or disposal gain derived by ce

333、rtain entities,such as a regulated financial entity,do not fall into the scope.Meanwhile,the in-scope foreign-sourced income received in Hong Kong will not be brought into charge if the MNE entity meets the exception requirements specifically for the particular types of incomes.The exception requirements are as follows:Exception Requirements for Specified Foreign-Sourced Income under the New FSIE