AicA | Alliance of Inter-Continental Accountants

Global member - Hong Kong

Hong Kong

Geography

Strategic Location - Hong Kong is geographically located at the southern part of China with the renowned deepwater harbours, with its total area of about 1 104 square kilometres covering Hong Kong Island, Kowloon and the New Territories and numerous small islands. It locates in the middle of the Asia-Pacific region and requires less than 10 hours of air travelling to other major cities in the region.

Population

The population in Hong Kong reached approximately 7.10 million.

Language

Official: English
Dialect: Cantonese native language

Legal system

Well established English common law system - Pursuant to the Joint Declaration signed by China and United Kingdom in 1984, China has proposed to apply the principle of “one country, two systems” to Hong Kong. China’s socialist economic system will not be imposed on Hong Kong and that Hong Kong will enjoy a high degree of autonomy in all matters except foreign and defenses affairs for the next 50 years up to the year 2047. The legal system of Hong Kong is based on the rule of law and the independence of the Judiciary.

Economic system

Hong Kong’s economic strengths include the following:

World's Freest Economy - Hong Kong follows free trade policy with no tariffs on importation or exportation of goods. With the high degree of entry and exit and no restrictions on investments inward or outward, it increases the competitiveness in world’s market.

Gateway to Mainland China - The Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA) promotes easier access to China markets for Hong Kong made-products, and also reduced tariffs or even imposed zero import tariffs for exports from Hong Kong to China. With the zero import tariffs, therefore, Hong Kong becomes the key gateway to the China which attracts foreign investors to have partnered with Hong Kong companies to manage their businesses in the China.

Hong Kong is Asia’s top financial city and ranked 3rd in the world - Hong Kong has a mature and active foreign exchange market links with financial centres overseas enable foreign exchange dealing to continue 24 hours a day around the world. The stock market is one of the world’s largest in terms of market capitalization and is also the third largest stock market in Asia.

No. 1 Location for Regional Operations in Asia - As at 1 June 2011, there were 1,340 regional headquarters and 2,412 regional offices in Hong Kong of companies incorporated outside Hong Kong. The United States topped the list of countries followed by Japan, United Kingdom and Mainland China.

Tax system

Low and simple taxation system - The corporate tax rate fluctuated between 16% to 17.5% during the year 1997 to 2012. The current profits tax rate is 16.5% and the maximum tax rate for salaries tax is 17%.

Taxes are charged in Hong Kong on income or profits that are regarded as having a Hong Kong source (referred to as the "territorial source principle") rather than on the basis of residence. There is no distinction made between residents and non-residents. A resident may therefore derive profits from abroad without suffering tax; conversely, a non-resident may suffer tax on profits arising in Hong Kong.

Direct tax in Hong Kong includes profits tax, salaries tax and property tax. Indirect tax in Hong Kong includes stamp duty, which is payable in respect of certain kinds of documents primarily relating to the sale or lease of immovable property in Hong Kong and the transfer of Hong Kong stock. There is no value added tax (VAT), capital gains tax and withholding tax on dividends.

In the beginning of 2010, Hong Kong is actively seeking to build its Comprehensive Agreements For The Avoidance Of Double Taxation (“CDTAs”) networks. The current CDTAs network includes Austria (effective from 1 April 2012), Belgium (effective from 1 April 2004), Brunei (effective from 1 April 2011), Czech (effective from 1 April 2013), France (effective from 1 April 2012), Hungary (effective from 1 April 2012), Indonesia (subject to ratification), Ireland (effective from 1 April 2012), Japan (effective from 1 April 2012), Kuwait (subject to ratification), Liechtenstein (effective from 1 April 2012), Luxembourg (effective from 1 April 2008), Mainland of China (effective from 1 April 1998), Malta (subject to ratification), Netherlands (effective from 1 April 2012), New Zealand (effective from 1 April 2012), Portugal (subject to ratification), Spain (effective from 1 April 2013), Switzerland (subject to ratification), Thailand (effective from 1 April 2006), United Kingdom (effective from 1 April 2011), Vietnam (effective from 1 April 2010).