Plan for Hong Kong taxation impact using Hong Kong limited company to own China business

Hong Kong income tax may be divided into three categories, namely profits tax, salaries tax and property tax. If a person’s income does not fall within one of these three categories, the income is exempt from Hong Kong income tax.

Income tax is only charged on income derived from Hong Kong, that is, only Hong Kong source income is subject to Hong Kong income tax. The nationality, domicile or residence of a person is not relevant in determining whether an income is taxable in Hong Kong.

One of characteristics of Hong Kong taxation is that there is no capital gain tax on the profit or gain made from the disposal or sale of a capital asset. Yet the person needs to prove that he does not carry on a trade or business in Hong Kong. The profits or gain made from the sale of an asset is of a capital nature instead of a trading nature.

Hong Kong does not impose any tax on dividend income. In general there is no profit remittance tax on income remitted to overseas recipients.

The standard rate of an individual income tax is 16% for 2007/08 and 15% for 2008/09.

The standard rate of a corporation income tax is 17.5% for 2007/08 and 16.5% for 2008/09.

Hong Kong has a direct assessment system. Income tax is payable upon tax assessment and demand note on a yearly basis. Compared to midland China, income tax is levied on a monthly or quarterly basis. The employers in China need to deduct employees’ individual income tax at source.

China & Hong Kong Tax planning

Do you know that some parts of your commercial building can claim accelerated depreciation allowance if the structure is well designed to incorporate tax planning elements?

Do you know how to structure your Greater China regional employment so that you can legally separate your income into Hong Kong and China source; and, subject to Hong Kong salaries tax and China individual income tax respectively?

Do you know the tax benefits using a Hong Kong limited company to own Hong Kong property?

We have much experience in helping our clients for working on tax efficient business transactions and infrastructure. Please talk to us to see if we can add value to your business.

Know more about Hong Kong profits tax, salaries tax and property tax

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