People who want to incorporate in Hong Kong for avoiding paying taxes are wrong. Hong Kong is not an offshore jurisdiction. The HK tax authorities require the real beneficiary of a company to provide answers to a list of questions for benefiting from the corporate tax exemption. If the person is unable to answer one of the questions, the company will have to pay the 15.6% corporate tax.
Benefits of incorporating a company in Hong Kong:
- 15.6% is a low corporate tax rate
- Hong Kong is allowed by all the major payment gateways so that you can be paid if you own a Hong Kong company.
- For EU residents, it can be useful to have a company that does not work under EU rules.
- The HK dollar is very stable against the US dollar.
- The HSBC bank is obviously a strength of Hong Kong.
- Law, forms, reports, authority websites are in English.
Disadvantages of incorporating a company in Hong Kong:
- Accounts have to be audited after one year from the first HK dollar of turnover which implies substantial additional costs.
- It is far away from the USA and Europe
- Tight policies in many domains. It is strongly advised to study the HK law before anything.
- The convictions by Justice courts in Hong Kong are usually tougher than in the western world. (example)
- Liquidation duration: 9 months