Background

1. Mr. A originally buying from China and selling to France using his own French company as the middle trading firm (F Ltd);
2. Mr. A flies frequently to Hong Kong and China – to meet clients and suppliers;
3. Trading profit of Euro 100,000 is subject to french tax rate – around 40%.

New arrangement

1. Mr. A set up a Hong Kong company, H Ltd;
2. H Ltd becomes the middle trading company – buying from China and selling to France;
3. Goods still shipping directly from China to France;
4. Selling and purchase at same price as before;
5. Mr. A hires a staff in Hong Kong – to help handle the sales and purchase orders.

Benefit

1. Profit of Euro 100,000 will be profit of H Ltd;
2. Hong Kong profits tax rate of 16.5% applies;
3. There is saving of 23.5% in profits tax.

Background

1. Mr. A is originally buying from China and selling to France using his own French company as the middle trading firm (F Ltd);
2. Trading profit of Euro 100,000 is subject to French tax rate – can be as high as 40% ;
3. Mr. A controls the business remotely – no need to maintain any operation in China, Hong Kong or France.

New arrangement

1. Mr. A set up a Hong Kong company, H Ltd;
2. H Ltd becomes the middle trading company – buying from China and selling to France;
3. Goods still shipping directly from China to France;
4. Selling and purchase at same price as before;
5. Location of operation – Mr. A still is operating the business himself – without maintaining operating office in Hong Kong, China and France.

Benefit

1. Profit of Euro 100,000 will be profit of H Ltd;
2. As H Ltd maintains only a registered address in Hong Kong, but not operating office. And also fulfilling offshore operation test, Hong Kong tax department (Inland Revenue Department) (IRD) approves the “non-HK source” application;
3. There is saving of 40% in profits tax.

Background

1. Mr. A owns intellectual property or technology that can be licensed to other company for commercial use.

The arrangement

1. Mr. A set up Hong Kong company H Ltd, and register H Ltd as the owner of the intellectual property (IP);
2. H Ltd licensed use of the IP to a USA company for production use;
3. H Ltd received royalty income based on the use of the IP in USA.

Benefit

1. The royalty income received by H Ltd is not subject to HK profits tax;
2. Such income will be taxable if the use of IP is located in HK.
   
   ↑back to top↑
   

↑back to top↑

Background

1. Mr. A is 100% shareholder of H Ltd (a HK company);
2. H Ltd owns a HK property for long term investment and no finance required from bank.

The arrangement

1. Mr. A needs to sell the property to Mr. B ;
2. Market value of the property is HK$5,000,000 ;
3. If H Ltd sells the property to Mr. B, stamp duty payable is around 3% of HK$5,000,000 = HK$150,000 (the rate as at 7/2008);
4. If Mr. A sells shares of H Ltd to Mr. B, then, Mr. B owns the property indirectly.

Benefit

1. Share transfer stamp duty is HK$1 per HK$1,000 value;
2. Therefore, stamp duty will be around HK$5,000,000 / 1,000 = HK$5,000;
3. Even both buyer and seller need to pay the stamp duty, it is only around HK$10,000;
4. There is saving of around HK$140,000

↑back to top↑

Background

1. European company (E Ltd) is buying from China and selling to Europe;
2. A China company (C Ltd) is set up for the sourcing function;
3. Frequent payments to China suppliers are required;
4. Money transfers from E Ltd to supplier take time and complicated in procedure;
5. Money transferred into China (to C Ltd) is difficult to remit out of China again, and is subject to usage restriction.

The arrangement

1. A HK company (H Ltd) is set up with a HK bank account (such as HSBC);
2. Role of H Ltd is to handle money matters for group companies – receive money and transfer money;
3. HK bank account can be operated by internet banking;
4. H Ltd has no income.

Benefit

1. Money control is centralized and earns higher opportunity gain (such as interest rate, exchange rate etc.);
2. Money flows into and out of HK can enjoy high level of freedom (no supporting document required to convince reason of money movements);
3. Money to China can be done when it’s required and can be done swiftly;
4. No profits tax is imposed to H Ltd as there is no income.
   
   ↑back to top↑