Page 9 - The South China Business Journal

CHoosing tHe rigHt business struCture
Chinese Mainland enterprises can establish several types of legal entities in Hong Kong, depending on their
operational needs.

Structure Typical Use Case Advantages Limitations

Private limited company Full operations Limited liability, tax Compliance obligations
efficiency

Branch office Extension of the Chinese Easier setup Parent liable for debts
Mainland parent

Representative office Market research Simple presence Cannot generate
revenue

Private limited company Step 5: Open a corporate bank account
The most common vehicle for foreign and Chinese Banks typically conduct due diligence on beneficial
Mainland investors is a private limited company. ownership and corporate structure.

Key requirements include:
tax fraMeworK and finanCial
? At least one director advantages
? At least one shareholder
? Company secretary Hong Kong¡¯s tax system is widely viewed as one of
? Registered office in Hong Kong the most business-friendly globally.

step-by-step CoMpany Key features:

inCorporation proCess ? Territorial taxation principle
? No VAT or sales tax
For Chinese Mainland enterprises entering Hong ? No capital gains tax
Kong, the incorporation process is relatively ? No withholding tax on dividends or interest
efficient and can often be completed within ? No tax on dividends received
several days.
The corporate profits tax currently applies only to
Step 1: Select a company name income sourced in Hong Kong.
Names must be approved by the Companies Registry. Profits tax rates

Step 2: Prepare incorporation documents
Tax Category Rate
Required documents typically include:

? Incorporation form First HK$ 2 million 8.25%
? Articles of association profits
? Director and shareholder identification documents
? Registered office details
Remaining profits 16.5%
Step 3: Submit application to Companies
Registry
Important considerations
Applications may be submitted electronically
through the e-Registry system. Chinese Mainland enterprises must carefully assess:

Step 4: Obtain a Business Registration ? Source of income rules
Certificate ? Transfer pricing compliance
? Tax residency risk
Companies must register with the Inland Revenue
Department (IRD).

SOUTH CHINA BUSINESS JOURNAL 6