Our tax specialists provide the full range of services required for a wide variety of local and international companies which operate in the Mainland and Hong Kong. Hong Kong, as a Special Administrative Region of China, is governed by separate tax laws from the Mainland. Our experts are able to advise on taxes / regulations for both jurisdictions.
When two or more tax jurisdictions have tax jurisdiction and tax on the same income or profit of a taxpayer, double taxation will occur.
By applying for a Hong Kong tax resident identity certificate, the company can reduce the double taxation of the company and enjoy a more favorable tax rate.
To illustrate, Mainland China companies pay dividends to Hong Kong companies. It is generally subjected to a 10% withholding tax to the Mainland tax authorities. If the Hong Kong company can successfully apply for Hong Kong tax resident identification, its withholding tax will be reduced from 10% to 5%.
Trends in tax bureau approval
- In order to avoid abuse of the treatment/concession of the tax bilateral agreement, the Hong Kong Inland Revenue Department has tightened the application for the Hong Kong Tax Resident Identity Certificate. The current “Tax Resident Identity Certificate” application has been more difficult to apply successfully than before.
- At present, the Hong Kong Inland Revenue Department’s application for “tax resident identification” is more complicated and comprehensive. It is not only considering the location of the company registration, but also the location of the central management and control and the commercial substance.
Our tax services
- Assist the company in reviewing the current tax situation
- Recommend the feasibility of applying for a Hong Kong tax resident identification
- Provide professional tax advice and analysis to help the company increase its chances of successfully applying for Hong Kong tax resident identification in order to enjoy the preferential tax rate under double taxation between Hong Kong and its neighboring countries.
Offshore tax planning
Impact of offshore tax policy change
Tax policy changes in the Cayman Islands and the British Virgin Islands 2019
The Cayman Islands and the British Virgin Islands Government have drafted a bill starting on January 1, 2019 (for a transitional period of six months), which requires the following industries to have economic substance in the Cayman Islands/British Virgin Islands:
- Fund management
- Corporate Headquarters
- Distribution and service centres
- Financing or leasing business
- Holding companies
- Intellectual property
If the above company is registered in the Cayman Islands/British Virgin Islands and operates one or more of the above businesses, and the Cayman Islands/British Virgin Islands registered company is not a tax resident of another country, this type of company needs to have economic substance and a large number of commercial activities (for example, their central control and management must be in the Cayman Islands/British Virgin Islands, hiring local staff, having a substantial economic place, operating an office, etc.).
This drafting bill will not apply to the Cayman Islands/British Virgin Islands registered company whose central management and control are not in the Cayman Islands/British Virgin Islands and the company has become a tax resident of other countries.
Our services include:
- Assist the Company in reviewing the current group structure involving the Cayman Islands/British Virgin Islands
- Assist the Group in the details of restructuring or business relocation
The Hong Kong taxation principle generally adopts the “territorial concept”. If income-generating activities are carried out in Hong Kong, the relevant income is subject to Hong Kong profits tax in Hong Kong.
Hong Kong profits tax is generally 16.5%; the first HKD 2 million assessable profits can enjoy a preferential tax rate of 8.25%, and the remaining assessable profits will be subject to profits tax at 16.5%.
If your company’s income-generating activities are not carried out in Hong Kong, you may consider making offshore declarations in Hong Kong and you are not required to pay Hong Kong profits tax.
Professional tax service
- Assist your company in reviewing current operations and assess the feasibility of your offshore application.
- Assist your company in handling tax returns in Hong Kong in order to meet tax compliance requirements.
Perennial Tax Consultant
Perennial consultancy service fee: HKD 3,000 per month
(adjustment required according to your tax requirements)
Individual tax consulting projects
If you encounter the company’s tax opportunities during the negotiation process or the company has individual tax consulting projects, an independent tax advisory service agreement will be prepared for your consideration.
Tax Consulting Service
We provide tax advisory services on the tax issues encountered by the company on a daily basis, especially for the Hong Kong tax issues that it encounters in its operations.
Tax Details Communication
Corresponding suggestion will be provided through phone conference or face-to-face interview according to companies’ requirements, and further details will be discussed with the company management team based on the actual needs of the companies.
The background of the tax incentives for corporate treasury centers:
In order to attract multinational corporations and Chinese companies to establish global or regional corporate treasury centers (Corporate Treasury Centers “CTCs”) in Hong Kong, the Hong Kong Legislative Council passed the new Corporate Treasury Center Tax Preferential Policy on May 26, 2016. Inland Revenue (Amendment) (No. 4) Bill.
Corporate Treasury Center Tax Preferential Policy:
Under this preferential policy, the profitable tax rate of eligible treasury operations of eligible treasury centres is halved (ie from 16.5% to 8.25%). In addition, the relevant interest expenses (including interest expenses paid to overseas affiliates) can be taxed before the tax is met. (There is no interest expense paid to overseas affiliates before this new case, even if the relevant income is taxable, it is not taxable. Forefront of the branch).
The tax bureau’s regulations to tighten offshore interest income:
At the same time as the introduction of the new case, the Inland Revenue Department has tightened the regulations on offshore interest income. The interest income of affiliates in the group’s financing business must be taxed in Hong Kong (ie, it is not taxable for offshore income). Therefore, if a Hong Kong company engaged in intra-group financing does not apply for a qualified treasury centre, its income minus tax deductible expenses is subject to a 16.5% tax.
Our services include:
- Assist in illustrating the specific regulatory requirements of the tax incentives of the Hong Kong Corporate Treasury Center and the definition of the corporate treasury center and the conditions that need to be met and provide specific implementation methods for the client company, for example, how to apply for offers and matters needing attention.
- Communicate and interact with the company to understand the specific conditions of the business essence of the company’s treasury center and provide assessment progress, and assess whether the company’s construction and specific operations meet the requirements of becoming a corporate treasury center.