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Hong Kong


Hong Kong

HISTORY AND POLITICAL STRUCTURE

Hong Kong is one of two special administrative regions (SARs) of the People’s Republic of China (PRC), the other being Macau. Situated on China’s south coast and enclosed by the Pearl River Delta and South China Sea, it is renowned for its expansive skyline and deep natural harbour. With a land mass of 1,104 km2 (426 sq mi) and a population of seven million people, Hong Kong is one of the most densely populated areas in the world. Hong Kong’s population is 95 percent ethnic Chinese and 5 percent from other groups. Hong Kong’s Han Chinese majority originate mainly from the cities of Guangzhou and Taishan in the neighbouring Guangdong province.

Hong Kong became a colony of the British Empire after the First Opium War (1839-42). Originally confined to Hong Kong Island, the colony’s boundaries were extended in stages to the Kowloon Peninsula and the New Territories by 1898. It was occupied by Japan during the Pacific War, after which the British resumed control until 1997, when China regained sovereignty. Under the British governance, Hong Kong had not suffered from the unrest in mainland China, such as the Taiping Rebellion, Warlord, Civil War, Anti-Rightist Movement, Great Leap Forward, and Cultural Revolution. And thus compared to other regions in mainland, Hong Kong has successfully developed. The region espoused minimum government intervention under the ethos of positive non-interventionism during the colonial era. The time period greatly influenced the current culture of Hong Kong, often described as “East meets West”, and the educational system, which used to loosely follow the system in England until reforms implemented in 2009.

Under the principle of “one country, two systems”, Hong Kong has a different political system from mainland China. Hong Kong’s independent judiciary functions under the common law framework. The Basic Law of Hong Kong, its constitutional document, which stipulates that Hong Kong shall have a “high degree of autonomy” in all matters except foreign relations and military defence, governs its political system. Although it has a burgeoning multi-party system, a small-circle electorate controls half of its legislature. An 800-person Election Committee selects the Chief Executive of Hong Kong, the head of government.

As one of the world’s leading international financial centres, Hong Kong has a major capitalist service economy characterised by low taxation and free trade, and the currency, Hong Kong dollar, is the ninth most traded currency in the world. The lack of space caused demand for denser constructions, which developed the city to a centre for modern architecture and the world’s most vertical city. The dense space also led to a highly developed transportation network with public transport travelling rate exceeding 90 percent, the highest in the world. Hong Kong has numerous high international rankings in various aspects. For instance, its economic freedom, financial and economic ompetitiveness, quality of life, corruption perception, Human Development Index, etc., are all ranked highly.

ECONOMY

Hong Kong was once described by Milton Friedman as the world’s greatest experiment in laissez-faire capitalism. It maintains a highly developed capitalist economy, ranked the freest in the world by the Index of Economic Freedom for 15 consecutive years. It is an important centre for international finance and trade, with one of the greatest concentrations of corporate headquarters in the Asia-Pacific region, and is known as one of the Four Asian Tigers for its high growth rates and rapid development from the 1960s to the 1990s. Between 1961 and 1997 Hong Kong’s gross domestic product grew 180 times while per-capita GDP increased 87 times over.

The Hong Kong Stock Exchange is the seventh largest in the world, with a market capitalisation of US$2.3 trillion as of December 2009. In that year, Hong Kong raised 22 percent of worldwide initial public offering (IPO) capital, making it the largest centre of IPOs in the world. Hong Kong’s currency is the Hong Kong dollar, which has been pegged to the U.S. dollar since 1983.

The Hong Kong Government has traditionally played a mostly passive role in the economy, with little by way of industrial policy and almost no import or export controls. Market forces and the private sector were allowed to determine practical development. Under the official policy of “positive non-interventionism”, Hong Kong is often cited as an example of laissez-faire capitalism. Following the Second World War, Hong Kong industrialised rapidly as a manufacturing centre driven by exports, and then underwent a rapid transition to a service-based economy in the 1980s.
Hong Kong matured to become a financial centre in the 1990s, but was greatly affected by the Asian financial crisis in 1998, and again in 2003 by the Severe Acute Respiratory Syndrome (SARS) outbreak. A revival of external and domestic demand has led to a strong recovery, as cost decreases strengthened the competitiveness of Hong Kong exports and a long deflationary period ended. Government intervention, initiated by the later colonial governments and continued since 1997, has steadily increased, with the introduction of export credit guarantees, a compulsory pension scheme, a minimum wage, anti-discrimination laws, and a state mortgage backer.

The territory has little arable land and few natural resources, so it imports most of its food and raw materials. Hong Kong is the world’s eleventh largest trading entity, with the total value of imports and exports exceeding its gross domestic product. It is the world’s largest re-export centre. Much of Hong Kong’s exports consist of re-exports, which are products made outside of the territory, especially in mainland China, and distributed via Hong Kong. Even before the transfer of sovereignty, Hong Kong had established extensive trade and investment ties with the mainland, which now enable it to serve as a point of entry for investment flowing into the mainland. At the end of 2007, there were 3.46 million people employed full-time, with the unemployment rate averaging 4.1% for the fourth straight year of decline.

Hong Kong’s economy is dominated by the service sector, which accounts for over 90% of its GDP, while industry constitutes 9%. Inflation was at 2.5% in 2007. Hong Kong’s largest export markets are mainland China, the United States, and Japan.

As of 2009, Hong Kong is the fifth most expensive city for expatriates, behind Tokyo, Osaka, Moscow, and Geneva. In 2008, Hong Kong was ranked sixth, and in 2007, it was ranked fifth. In 2009, Hong Kong was ranked third in the Ease of Doing Business Index.

WHY CHOOSE HONG KONG WHEN STARTING A BUSINESS?

Hong Kong is a Special Administrative Region of the People’s Republic of China that is governed by the Basic Law of the Hong Kong Special Administrative Region of the People’s Republic of China (1990) (Basic Law) which forms a mini constitution for Hong Kong. Under the Basic Law, Hong Kong enjoys a high degree of autonomy except in relation to matters such as defence and foreign affairs. It has its own executive, legislative and independent judicial power, including that of final adjudication. Socialist systems and policies will not be practised in Hong Kong for a period of 50 years commencing in 1997 under the principle of “one country two systems”.

Hong Kong is an attractive place to do business and a leading international trading and service hub as well as a high value-added manufacturing base. It is one of the freest economies in the world and a gateway to investment in China.

The Hong Kong government practises an open and liberal investment policy and actively encourages inward investment. Generally, there are no tariffs or regulatory measures adversely affecting international trade. Hong Kong’s continuing success is largely due to a simple tax structure, low rates of tax, excellent infrastructure and the government’s firm commitment to free trade and free enterprise.

Hong Kong companies must have their annual statutory financial statements audited. Only a member of the Hong Kong Institute of Certified Public Accountants with a practicing certificate may act as an auditor. Hong Kong Financial Reporting Standard are fully converged with IFRS issued by the International Accounting Standards Board.

Hong Kong companies are required to prepare audited accounts under the company laws. Also, a copy of the audited financial statements is to be furnished with Inland Revenue Department together with Profits Tax Return. The audited financial statements are not available to the public or to the foreign authorities except those of a listed company.

All companies must also prepare and file an annual return which gives details of the current directors and of the shareholders who have held shares in the company at any time during the year.

Hong Kong offers the following advantages and opportunities to investors:

During the last 20 years, Hong Kong’s economy has nearly trebled in size with GDP growing in real terms at an average annual rate of 4.4%. Over the same period, Hong Kong’s per capita GDP has doubled, giving an annual average growth rate of 3.3% in real terms.

Hong Kong is characterized by a high degree of internationalization, business-friendly environment, open and fair competition, free flow of information, well-established and comprehensive financial network, superb network of transport and telecommunications infrastructure, sophisticated support services and a well-educated work force complemented by a pool of efficient entrepreneurs.

It also has a substantial amount of foreign exchange reserves, a fully convertible and stable currency, no exchange controls and a simple tax system with tax being levied at a low rate.

The Hong Kong Companies Ordinance has many similarities to the British Companies Acts. There are an excellent range of professional services available as Hong Kong serves as the major business centre for the whole of the Far East. This is unlikely to change in the foreseeable future.

There is no tax on capital gains. Interest income and dividend income is also tax free. There are no withholding taxes. The local currency is the Hong Kong Dollar which is freely interchangeable but has a pegged exchange rate against the US Dollar. There are no exchange controls.

One of the major advantages of utilising a Hong Kong company is that there is no immediate suggestion that the company is a tax avoidance vehicle as Hong Kong is major trading entity in its own right. Hong Kong is one of the world’s largest importers and also one of the world’s largest exporters. The vast majority of the 50,000 Hong Kong companies incorporated annually are local trading companies doing real business in the region.

Placing an order for the formation of a company

The legal system of Hong Kong is based on English Common Law supplemented by locally enacted Ordinances. It is generally allowed to enact and enforce its own laws. The Hong Kong Companies Ordinance has many similarities to the British Companies Acts.

The formation of a Hong Kong International Business Company can take place by using an order form which can be provided by the Registry Agent.

You can also buy a ready-made company from the list available. A ready-made company normally has an open configuration (its directors are not yet appointed and the shares are not yet issued). Therefore the final configuration of a shelf company is made at a later stage.

The Registry Agent will check the name availability of the company (whether there is no company under such name already). In Hong Kong the law requires that all financial service providers know the identity of their client so the actual contact details must be indicated at the Registry Agent.   This information remains confidential.

Requirements for the Registration of an IBC

  • Director: A minimum of two shareholders are required whose details appear on the public register. Corporate shareholders are permitted. Anonymity can be achieved by the use of nominee shareholders.
  • Secretary: A company must appoint a Company Secretary who can either be a person or a corporation. If the secretary is a person, he or she must be a Hong Kong resident. If the secretary is a corporation, the corporation must have a registered office or a place of business in Hong Kong. The secretary must be qualified in terms of the Hong Kong Companies Act. Persons qualified include chartered secretaries, lawyers and chartered accountants. The secretary may also be a director. The secretary’s particulars must be filed with the Registrar.
  • Shareholder: A minimum of two shareholders are required whose details appear on the public register. Corporate shareholders are permitted. Anonymity can be achieved by the use of nominee shareholders.
  • Shares & Capital: There are two types of share capital, one is authorised share capital and another is issued share capital. There is no limitation on the amounts of both types of share capitals. For most of the small private company, the authorised share capital is usually set at HK$10,000 divided into 10,000 shares of HK$1 each and the issued share capital is usually set at HK$1 divided into 1 share of HK$1 each. Shares must be held at the registered office.
  • Name of the Company: Private limited liability company names must end with the words “Private Limited” or “Private Sendirian” or an abbreviation of the same. The name of a company can be changed in about 14 days.
  • Company must have a registered office and a registered agent in Hong Kong.

Required Documents to register the company:

  • Notarized copy of your Passport.
  • Notarized Copy of utility bill for address verification less than 3 months old
  • Application documents.

When all the details are confirmed and the payment for the relevant fees received, the Registry Agent will prepare the Memorandum and the Article of Association of the new International Business Company. These will be filed with the Registry of International Business Companies in Hong Kong. There is no need to sign any statutory info, the initial
company formation documents are prepared and signed on your behalf by the Registered Agent always under the procedures set by the Hong Kong International Companies Act. The Registered agent will file the corporate documents of the company, will pay the applicable registration fees and arrange for the documents to be submitted to the Hong
Kong Registrar of companies for registration. All the relevant documents will be kept in the Registered Agents office.

Corporate documents of an IBC

  • Original Certificate of Incorporation
  • Original Business Registration Certificate
  • Original Memorandum & Articles of Association
  • Original Resolution of Founder Member’s appointing of First Director
  • Original Resolution of re-appointment of Director
  • Original Resolution of the First Director
  • Original Memorandum of the Sole Director in Lieu of Board Minutes
  • Original Instrument of Transfer
  • Original Sold & Bought Notice
  • Original consent to act as Director
  • Original Share Certificate
  • Apostille Bound set including the following:
    • True Copy of the Certificate of Incorporation
    • True Copy of the Business Registration Certificate
    • True Copy of the Resolution of Founder Member’s appointing of First Director - True Copy of Resolution of the First Director
    • True Copy of the Resolution of re-appointment of Director - True Copy of the Instrument of Transfer
    • True Copy of the Sold & Bought Notice
    • True Copy of the Memorandum & Articles of Association

Extra Documents:

  • Guarantee of Non-trading
  • Declaration of Trust
  • Nominee Directors Declaration
  • Memorandum of Sole Director
  • Affidavit
  • Company Seal

Hong Kong’s geographic location, convenient time zone, political and economic stability, common law legal system, educated, competent and accessible professionals, English speaking work force, up-to-date modern electronic communications and tax advantages makes doing business in Hong Kong easy, convenient, affordable and professional.

These attributes of Hong Kong provide the perfect balance, in relation to confidence, integrity and reliability in Hong Kong’s dynamic offshore service sector. That is why Hong Kong is often at the top of the list of places where new businesses can be started.

GENERAL OVERVIEW

Location

Hong Kong.

Time zone

GMT + 8 hours.

Population

7,003,700.

Capital

Hong Kong.

Airport(s)

Chek Lap Kok.

Language

Cantonese/English.

Currency

HK $.

Political system

Elected legislature.

International dialling code

+852.

Legal system

Common law.

Centre’s expertise

Everything.

TAX

Personal income tax

15% (max)

Corporate income tax

16.5%.

Exchange restrictions

None.

Tax treaties

PRC, Belgium, Thailand, Luxembourg.

SHARE CAPITAL

Permitted currencies

All.

Minimum authorised capital

US $1.

Minimum share issue

US $1.

TYPE OF ENTITY

Shelf companies

Yes.

Timescale for new entities

Six working days.

Incorporation fees

US $220.

Annual fees

US $346.

DIRECTORS

Minimum number

One.

Residency requirements

Nil.

Corporate directors

Yes (for private groups).

Meetings/frequency

Nil.

SHAREHOLDERS

Disclosure

Listed companies only.

Bearer shares

No.

Minimum number

Two.

Public share registry

No.

Meetings / frequency

One per year.

ACCOUNTS

Annual return

Yes.

Audit requirements

Yes.

OTHER

Registered office

In Hong Kong.

Domicile issues

Nil.

Company naming restrictions

Nil.