Hong Kong

Advantages

• Hong Kong is ranked third financial center in the world after New York and London; it is open both for local and international companies which operate outside Hong Kong.
• The companies of Hong Kong use various tax benefits.
• There is no capital gains tax, value-added tax (VAT), corporate tax in Hong Kong.
• There is the territorial principle of taxation, according to which the income, derived from sources outside Hong Kong, isn’t taxed.

Legal system

The legal system of Hong Kong is based on the English common law. The basic corporative legislation is the Companies Act of 1965 (The Companies Ordinance) with amendments of 1997, principles of the Companies Act are based on the legislation of Great Britain. The basic documents that regulate activity of the companies are as follows:

• Tax law (Inland Revenue Ordinance);
• Limited Liability Partnerships Law (The Limited Partnerships Ordinance);
• Partnerships Law (Partnership Ordinance).

Setting up a private limited liability company

Firstly, it is necessary to create the Articles of association and Memorandum, to fill in and sign special forms, with information of the given founders, directors and secretaries of the company. The name of company must contain at the end the words “Limited” or “Ltd”. Constituent instruments and forms hand for registration in the Register of the Companies of Hong Kong.

Founders become shareholders of the company after incorporation. The Articles of Association should contain the basic structure of the company, its name, the objects of activity, the size of statutory capital, quantity of shares and other relevant information.

As soon as the Register of the Companies will give out the certificate of incorporation, the company should receive the certificate of incorporation in the Department of tax inspectorate.

Statutory capital

There are no particular regulations regarding a minimum amount of statutory or paid-up capital in Hong Kong. The companies are usually registered with statutory capital at the rate HKD 10,000 divided into 10,000 shares of HKD 1 each.

Shares

It is not authorized to issue the bearer shares and the no-par-value shares.

Currency control

No

Accountability

All companies have to submit the financial account annually to Department of tax inspectorate, regardless of whether they had any activities or not during this period. In the latter, prepares and renders so-called “the negative declaration” or the zero account, which is not certified by the auditor.

Taxation

Hong Kong has the lowest tax rates in all of Asia and it is one of the lowest all over the world. The general rate of the profit tax is 16,5 %. The taxation in Hong Kong is carried out by a territorial principle: the incomes received outside Hong Kong aren’t taxed. There is no capital gains tax, there is no value-added tax, no tax from dividends and percent.

Percent and dividends aren't taxed. Property tax has been abolished in 2006.

Income tax is charged on a progressive scale ranging from 2% to 17% or the standard rate of 15% on net income.

Permissible activities

All kinds of activities, except those that are banned by law or subject to licensing (insurance, banking, financially-credit and other activities).

Agreements on double taxation avoidance

Hong Kong had concluded 34 Double Tax Treaties.

There is also an agreement of air communication between the Government of the Russian Federation and the Government of Special administrative area Hong Kong of the Chinese National Republic, which had been signed in 1999 but hadn't been ratified because the Law № 101-FZ “About the international contracts of the Russian Federation” didn't assume ratification of contract between the State and the special area of the State, which is Hong Kong in the Chinese National Republic.

Air service was carried out between Hong Kong and Russia on the basis of the special agreement with the result that airlines are subject to a double taxation. Following amendments to the Law “About the international contracts of the Russian Federation’, where the new version says that the Russian Federation can conclude the international contracts not only with the States, but also with other formations having the right to conclude the international contract, the ratification of the agreement became possible. The State Duma has passed the law on the 5^th of May 2010, N 73-FZ "About Agreement ratification about air communication between the Government of the Russian Federation and the Government of Special administrative area Hong Kong of the Chinese National Republic" (It is adopted by Russian Federation on the 16^th of April,2010).

The fact of adopting a new law has allowed airlines to avoid the double taxation and has a positive impact on transport costs.