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Incorporate Hong Kong Holding Company for China Businesses – Its Advantages
Many Foreign Businesses Find Investing in China is Difficult Compared to Hong Kong
What if someone told you that you could invest in China easily? Would you believe them? Unlikely, right? Because foreign investors find it challenging to invest in China directly. But, where there’s a will, there’s always a way. In this case, the approach is legal, of course. Ever since China’s economy flourished, every foreign investor has expressed their interest in investing in China. China’s economy prospered ever since economic reforms were introduced in 1978. Due to its massive population, China can afford to become the world’s largest exporter and second-largest importer of goods. Hence, it has built a substantial image of a superpower. Incorporating a Hong Kong Holding Company has an array of advantages.
The Gateway to China
The best possible way to invest in China is setting up a Hong Kong holding company. Having a Hong Kong holding company will facilitate investment in China. Hong Kong is somewhat known as the gateway for foreign investors to China and vice versa. Hong Kong’s close quarters with Mainland China and its status as a special administrative region makes it an optimal choice for investors to set up a holding company in Hong Kong. Hong Kong’s stable economy, transparent legal and developed financial system.
Hong Kong has come a long way in simplifying and facilitating the business environment. As a vital financial hub in Asia and a trading port of all kinds, commerce is part and parcel of Hong Kong’s development. Hence, Hong Kong is currently at fourth place ranking as the easiest place to do business. Facilitating business ensures many businesses continue to choose Hong Kong to incorporate their company or holding company.
Hong Kong Holding Company
A holding company is a company that enjoys the benefits of owning assets without actively participating in day-to-day business operations. With a Hong Kong holding company, a corporate business structure is enhanced because of its reliable base to invest in China. Foreign company groups having a Hong Kong holding company may have some flexibility when it comes to selling their China investment. It is important to be aware of how China regulates selling to ensure smooth transactions.
Hong Kong practices tax on income and profit sourced in Hong Kong. If profits or income is earned outside of Hong Kong, it will not be taxed. Even if there is a profit, profit tax in Hong Kong is relatively low. It also subjects companies to a two-tier profit tax to encourage investments from SMEs. With widened double tax treaties and the recent conclusion of a double tax treaty with China, businesses in Hong Kong enjoy further tax exemption where appropriate.
Should an investor needs to re-allocate profits from a foreign enterprise, an offshore holding company can be the solution. It bypasses the need to remit to a parent company to invest elsewhere afterwards. Funds pooled in the offshore holding company will enjoy a lower transaction tax. For Hong Kong holding companies with investments in China, it can handle Renminbi denominated banking, including receiving dividends and other fees from China-based entities. Thus, enabling the holding company to assume profit pooling functions.