Hong Kong’s consistent 25-year run as the world’s most liberal economy can be attributed to a combination of tax incentives and a favorable tax structure. These factors have created a growth- and innovation-friendly environment, establishing the city as a highly desirable location for businesses pursuing success.
This article describes the tax incentives for corporate setup in Hong Kong and highlights the compelling reasons for investors to choose the city as their business destination.
Hong Kong’s Tax Incentives for Establishing a Business
Hong Kong provides a variety of incentives to businesses, including tax cuts, low corporate taxes, tax holidays, exemptions, and credits.
Reduceda Corporate Tax Rates:
Hong Kong enforces a corporate tax reduction, reducing the statutory corporate tax rate from 16.5% to 8.25% for eligible corporations. Moreover, this tax reduction is available to both domestic and foreign businesses with a maximum taxable income of HK$2 million.
Deduction for Capital Investments:
Businesses in Hong Kong can deduct machinery-related capital expenditures from their profits tax, thereby reducing their tax liability. This deduction represents up to sixty percent of the cost of the apparatus and can be claimed over a two-year period. This deduction is available to any business that acquires equipment for profit-generating purposes. Eligibility is determined by a company’s assessable profits, also known as its taxable income.
Tax exemption for businesses:
Small- and medium-sized enterprises (SMEs) are eligible for a tax holiday in Hong Kong if their registration period exceeds five years. The initial HKD 2 million in assessable profits of eligible businesses for each of their first five assessment years are exempt from profits tax if they satisfy certain criteria.
To qualify for this incentive, a company must meet certain requirements, such as having been incorporated and conducting business in Hong Kong for at least two years and not being a subsidiary of another company.
Not subject to Value-Added Tax:
Hong Kong, unlike many other nations, does not have a value-added tax (VAT) system, sparing businesses from additional taxes on products and services. This absence of VAT significantly reduces the cost of conducting business.
Double Taxation Agreements:
Hong Kong has double taxation treaties in place with 56 countries, including significant trading partners and investment destinations. The purpose of these treaties is to prevent double taxation of income earned by individuals or companies in both countries. They identify the principal taxing right for particular types of income and provide help through tax credits or exemptions to prevent double taxation.
The United States and Hong Kong, for instance, have a double taxation treaty that clarifies the taxing jurisdiction over a subsidiary’s profits, thereby preventing double taxation and guaranteeing a fair tax framework.
FTAs: Free Trade Agreements
Hong Kong has signed FTAs with several countries and regions, such as mainland of China, ASEAN countries, Australia, New Zealand, Chile, and the European Free Trade Association (EFTA). These agreements aim to eliminate or reduce tariffs on products and services, improve market access, and provide businesses with trade-related benefits.
The ASEAN-Hong Kong FTA, for instance, eliminates tariffs on imported and exported products and facilitates greater market access for services, thereby promoting industry-wide competitiveness.
Establishing a Company in Hong Kong with Iris International
Iris International provides comprehensive support for setting up an business in Hong Kong, including assistance with company registration, obtaining of required licenses and permits, and tax registration.
Company Formation: Iris International facilitates the registration of companies with the Hong Kong Companies Registry, including the preparation and filing of essential documents such as the note and the articles of association, as well as the business plan and director names.
Registration Certificate for Businesses: The organization facilitates the acquisition of the business registration certificate by submitting the necessary documents, such as the business plan, identities of the company’s directors, and financial statements.
Commercial License: Iris International handles the paperwork required to obtain a trading license, ensuring compliance with necessary requirements such as the submission of a business plan and a list of directors.
Registration for Tax: We provide foreign companies seeking tax registration in Hong Kong with expert assistance. The process entails submitting the necessary documents to the Inland Revenue Department, such as the business plan, the identities of the directors, and essential financial information and records.
By utilizing the services of Iris International, businesses can effortlessly navigate the process of establishing and operating a business in Hong Kong, maximizing the city’s numerous tax incentives and favorable business environment.
EN 
VI