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Doing Business with HK
Home ›  Trade and Commerce  ›  Doing Business with HK

Location

Global Services Centre

International Corporate Base

Legal system

Free Trade & Free Market

Taxation

Society

Gateway to China

Further information


Location

The Hong Kong Special Administrative Region (SAR) of the People’s Republic of China lies on the Southern coast of China at 22° 15 North latitude and 114° 10 East Longitude. Local time is 8 hrs ahead of GMT and 2 ½ hrs IST. The SAR is composed of Hong Kong Island, Kowloon, the New Territories, and numerous outlying islands, occupying a total area of approximately 1100 sq kms. Hong Kong Island, the economic heart of Hong Kong Special Administrative Region, comprises only 7% of the land area (80 sqkm); Kowloon (47 sqkms) is a densely populated peninsula. The New Territories and the outlying islands occupy 91% of Hong Kong’s land area.


Global Services Centre

Hong Kong was the world's 11th largest exporter of commercial services in 2004. Civil aviation, shipping, travel and tourism, trade-related services, and various financial and banking services are the main components of trade in services. The prices of many services are among the lowest in the world.

 

Hong Kong draws more than 90 per cent of its GDP from the service sector. - services ranging from air transport and shipping to contract manufacturing and software designing. Exports of services gained growth momentum aimd robust inbound tourism and thriving offshore trade. Indeed, the four pillar economic sectors of Hong Kong are trade and logistics, tourism, financial services


International Corporate Base

Based on a government survey, as of June 2011, a total of 3,752 overseas companies had regional operations in Hong Kong, representing an increase of 3.1% from the previous year. Of these companies, 81% are responsible for business in the Chinese mainland, confirming Hong Kong’s role as a gateway to the mainland. These companies came from diverse countries and sectors. The US had the largest number of RHQs/ROs in Hong Kong (22%) followed by Japan (17%), the UK (9%) and the mainland (7%).


Legal System

Hong Kong has a liberal investment regime. Hong Kong law is based on the British Common Law System. The Court of Final Appeal, established on July 1, 1997 is the ultimate arbiter of the development of the common law in Hong Kong.


Free Trade & Free Market

Hong Kong advocates and practices free trade — a free and liberal investment regime, the absence of trade barriers, no discrimination against overseas investors, freedom of capital movement, well established rule of law, transparent regulations, and low and predictable taxation.


Taxation

 

Low tax regime

Hong Kong taxes are among the lowest in the world, and the tax regime is simple and predictable. The corporate profits tax rate is 16%. The salaries tax rate is 15 %. No tax is paid by firms or individuals on foreign-sourced income of any kind, and there is no estate duty tax on non-Hong Kong assets. Tax returns are short and easy to complete. Basically, only company profits, salaries and property rental income are taxable. Hong Kong does not tax dividends or bank interest. There is no capital gains tax, VAT or sales tax.

 

The basis of assessment

Liability to Salaries Tax is based on the actual income of the year of assessment, but an initial charge is made for a Provisional Salaries Tax first. That is, the taxpayer will pay an estimated tax first (based on expected income for that tax year) and then at the end of the tax year will receive a follow-up bill for any additional tax owed. Income tax is not deducted from regular employee pay-cheques, which has to be paid by the employees at the year-end.

 

Salaries tax computation

The Inland Revenue department has developed a simple Salaries Tax Computation Program to help one calculate an individual's own Salaries Tax liability. If assessment year is selected, and information on marital status, income, number of dependants are given, the web page provides the salaries tax liability.

 

For further information, please visit: http://www.ird.gov.hk


Society

Hong Kong's population was about 7.1 million as in June 2011. The population density is 6,540 people per square kilometer. Hong Kong has a large foreign population of about 523 880. The top three nationalities come from the Indonesia (156, 319) Philippines (144,463), and the Thailand (28,067). Chinese and English are the two official languages in Hong Kong. Ninety Five percent of the population speaks Cantonese, the southern Chinese dialect. English is spoken and understood by many people in Hong Kong and is used by the government and in courts. Increasingly, more Hong Kong people are also speaking Mandarin Chinese, the official language of Mainland China.


Gateway to China

Hong Kong is so far the most important entrepôt of the Chinese mainland. If re-exports to and from the Chinese mainland are included, about 15% of the mainland's foreign trade was handled via Hong Kong in 2010. The figure will be higher if transhipment of goods to and from the mainland via Hong Kong is also included. According to the HKSAR government statistics, in 2010, 62% of re-exports were of China origin and 53% were destined for the Chinese mainland. According to China's Customs statistics, Hong Kong is the third largest trading partner of the Chinese mainland after the US and Japan, accounting for 7.8% of its total trade in 2010.

 

Hong Kong is the largest source of overseas direct investment in the Chinese mainland. By the end of 2010, among all the overseas-funded projects approved in the Chinese Mainland, 45.4% were tied to Hong Kong interests. Cumulative utilized capital inflow from Hong Kong amounted to US$456.3 billion, accounting for 42.3% of the national total.

 

The Chinese mainland, on the other hand, is the leading investor in Hong Kong. According to the HKSAR Census and Statistics Department, the mainland's cumulative direct investment in Hong Kong was US$339 billion or 36.4% of Hong Kong’s total stock of inward direct investment at the end of 2009.

 

As of January 2011, there were seven licensed banks and six representative offices, incorporated in Chinese mainland, operating in Hong Kong. Big lenders including the Bank of China, Industrial and Commercial Bank of China, Agricultural Bank of China and China Construction Bank have opened their branch operations in Hong Kong. Some other mainland commercial banks such as the Shenzhen Development Bank, China Everbright Bank and Shanghai Pudong Development Bank have representative offices in Hong Kong.

 

Hong Kong is also a key offshore capital-raising centre for Chinese enterprises. As of December 2010, 592 mainland companies were listed in Hong Kong, comprising H-share, red-chip and private companies with total market capitalization of US$11.9 trillion, or 57% of the market total. For the past 10 years, mainland companies have raised more than $1.7 trillion (US$226 billion) via stock offerings in Hong Kong.


Further information

Invest Hong Kong: www.investhk.gov.hk

Hong Kong Trade Development Council: www.hktdc.com

HKSAR Immigration Department: www.immd.gov.hk



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