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Why Hong Kong is an ideal place for offshore company formation

Offshore profit is not taxable by the Hong Kong authority. In other words, the corporate tax rate can be as low as 0%. Apart from this reason, we’d like to talk about 5 other reasons why Hong Kong is a perfect place for company formation.

1. World’s No. 1 freest economy for 25 years.

According to the 2019 Index of Economic Freedom [1], Hong Kong has ranked No. 1 as the world’s freest economy. Hong Kong has achieved this top ranking for 25 years consecutively. The report is produced by the US-based Heritage Foundation and it is mainly based on 3 categories, i.e., trade freedom, monetary freedom and government integrity. Apart from the low tax system, the “free market principle” captures many foreigners to register their companies in Hong Kong.

2. E-Commerce hub under the Belt and Road program of China.

According to the United Nations Trade and Development E-commerce report, Hong Kong ranks 15th globally for its capacity to support e-commerce business in 2018. While Hong Kong is yet to be the top city in this field, the city is likely to become the regional e-commerce hub under the Chinese “Belt and Road program”. There will be more cross-border trading. At the same time, there is also a huge potential growth in e-commerce area. This explains again why Hong Kong is an attractive place for foreigners to register their companies in this vibrant city.

3. HK ranks No. 1 for corporate governance in Asia.

In the latest CG Watch published in December 2018, Hong Kong ranked No.1 for corporate governance in Asia. Corporate governance is the system by which companies are controlled and operated. Good corporate governance promotes responsible decision making. It upholds ethical behavior and encourages communication with different stakeholder groups. In general, it improves reputation of a company by enhancing accountability and transparency. The well-regulated system in Hong Kong demonstrates why foreigners always choose Hong Kong for company formation.

4. Top 3 Global Financial Centre

Hong Kong remains in the top 3 at the latest Global Financial Center Index. The city is only behind New York and London. It is also one of the easiest gateways to enter into China’s market. In the past decade, Mainland entrepreneurs have captured more than a quarter of IPO investment from the Hong Kong capital market. Not only is Hong Kong the largest offshore Renminbi business center, it acts as the global financial hub for China. The city connects China with the world via different stock and bond investment schemes. By end of 2018, more than two-thousand Mainland China Enterprises are already listed in the HK stock market. This explains why Hong Kong is always the magnet for offshore company formation.

5. Top 5 easiest place for business in the world

The World Bank has released the report for the easiest places for business operation. Hong Kong ranks no. 4 in the world. The report is based on 10 categories. The report analyses how easy it is to start a business, enforce contracts, trade across borders, pay taxes, resolve insolvency, protect minority investors, obtain credit, register property, access to electricity, dealing with construction permits. Most importantly, offshore profit is not taxable by the Hong Kong authority. It further explains why Hong Kong is probably the best place for offshore company formation.

References

[1] The Heritage Foundation. (n.d.). Country Rankings: World & Global Economy Rankings on Economic Freedom. Retrieved July 6, 2019, from https://www.heritage.org/index/ranking