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Advantages of Hong Kong Companies
 
Hong Kong has been voted the freest economy in the world for the 16th consecutive year. Companies established here enjoy a simple and low tax system, minimum administrative procedures, free flow of capital and information, a solid banking system, the rule of law, fantastic infrastructure and communication tools -- combined with a dynamic and efficient workforce.

The Mainland of China is a huge market for business in the region. Hong Kong is strategically located at its gateway and is a convenient stepping stone for entering the Mainland market.
 
As China opens up to the world through its membership of the World Trade Organization, Hong Kong is both the natural conduit for Chinese exports towards the West and the obvious base for international companies taking part in opening up China's expanding economy. These foreign investors could either directly invest in China or invest through a wholly-owned Hong Kong subsidiary company. We have summarized below the main advantages of using a Hong Kong incorporated company to hold a China investment, such as a China incorporated company, rather than holding the investment directly by the foreign investor.
 
1. Reduce Risk Exposure
  As the investment in China is held by the Hong Kong incorporated company rather than by the foreign investor directly, there is no direct relationship between the foreign investor and the China investment. The foreign investor is therefore protected from any liabilities of the China investment as the Hong Kong incorporated company is a limited liability company, i.e. the foreign investors' liabilities is limited to the amount of share capital injected in the Hong Kong company and will not be personally liable.

2. Exchange Control
  There is no exchange control in Hong Kong. Funds can be freely remitted into and out of Hong Kong without any restriction.

3.
Low Tax Rate
  Hong Kong has the lowest tax rates among all the places in the world. Currently, the profits tax rate is 16.5% for incorporated businesses. There is no capital gain tax. Dividend income is also not subject to profits tax. Therefore, by setting up a Hong Kong company, the foreign investor can avail of himself of the low tax rates in Hong Kong and minimize his tax liabilities from the China investment through proper tax planning.
 
4.
Banking System
  Hong Kong has one of the best banking systems in the world. Almost every major international bank has its branch or representative office in Hong Kong. Foreign investors will therefore easily find a suitable banker to arrange for finance and credit facilities required. The well-established banking and communications systems in Hong Kong also facilitate international trading and funds transfers.

5.
Professionals
  We have in Hong Kong a pool of professional expertise trained in all facets of international business: a skilled local workforce, which is well educated, computer-literate, productive, disciplined, and highly trainable; in addition to a foreign expertise attracted by rich business opportunities and an international, cosmopolitan orientation, with English as the business language.
 
6.
Proximity to Mainland Chinese market
  CEPA opens up huge markets for Hong Kong goods and services, greatly enhancing the already close economic cooperation and integration between the Mainland and Hong Kong. In brief, the Mainland has applied zero import tariff for exports from Hong Kong meeting CEPA origin rules for goods and preferential market access for Hong Kong companies in 44 service sectors, including banking, logistics, legal, audiovisual, transport and mining.

This means that CEPA-qualified enterprises and individuals in Hong Kong, will have earlier and in some instances more privileges than will ultimately be available when doing business with the Mainland, following its accession to the World Trade Organisation (WTO).
 
Upon China's accession to the WTO, foreign companies will be given full trading and distribution rights. Hong Kong trading companies will thus be able to operate in the mainland and extend their mainland distribution services. The further opening up of the Mainland's markets will bring about more trading and business opportunities for Hong Kong. Hong Kong will also benefit from the more stable trade and economic relations between China and her trading partners that will result from her WTO accession.