This year’s tax sweeteners of the proposed budget sees a return of the Waiver of Business Registration Fees from 1 April 2019 to 31 March 2020 and a one-off reduction of profits tax and salaries tax for the year of assessment 2018/19. Like the years before, the tax payable will be reduced by 75%, subject to a ceiling of HKD20,000 per case. The tax reduction is estimated to benefit 140,000 businesses and 1.91 million individual taxpayers.

Our article series of '10 things to learn about...' heads into the tax season addressing accounting, annual audit and tax compliance.

Our article series of '10 things to learn about...' continues with questions about visas in Hong Kong. From Visa schemes that are available and the difference between Employment visa and Investment visa and others, to the criteria and requirements for a visa application, getting Permanent Residency, and what happens if you lose your job or resign. 

Our article series of '10 things to learn about...' starts, naturally, with questions about forming a company in Hong Kong to start a business. If you have asked yourself what options you have to start a business entity, which might be best for you, what you need to be compliant and getting a bank account, read on.

In today’s social and digital marketing age where influencers, KOL and affiliates drive significant volumes of sales and have therefore become an integral part of a company’s marketing strategy, tax compliance and reporting for engaging companies becomes ever more complex. When a company engages the services of local persons who are not its own employees, such as consultants and freelancers, including social and digital marketing persons, the company has additional tax reporting obligations with regard to payments to those persons. 

Following the dismissal of the appeal in QT v Director of Immigration in Hong Kong’s Court of Final Appeal (FACV No. 1 of 2018), the Immigration Department reviewed its policies to include civil partnership and unions celebrated between same- or opposite-sex couples outside of Hong Kong as an eligibility condition to apply for a Dependant Visa. The revised policy has now been issued and is applicable to a same-sex civil partnership, same-sex civil union, same-sex marriage, opposite-sex civil partnership or opposite-sex civil union entered into by an applicant and the partner in accordance with the local law in force of the place of celebration and with such status being legally and officially recognised by the local authorities of the place of celebration. This also applies to applicant for a Dependant Visa of permanent residents. 

The trade marks of many companies represent a large part of the value of the company. For some companies the goodwill on trade marks outweighs any other asset class. They the signs and brand that help your customers identify your products and services, and to distinguish them from a competitor’s products and services.

Despite ongoing media and industry groups’ pressure, even mitigation by the Hong Kong Monetary Authority, opening a bank account in Hong Kong can still be a challenge particularly for entrepreneurs and start-ups. However, the situations has slightly calmed down compared to a few years back

The supporting documents to a bank account application should be well prepared, but adjusted to the situation. After all, this is not a pitch to investors, this is about the ins and outs of a company’s daily financial dealings.

A permanent establishment is created by business activity that is sufficient for a corporation to be viewed as having a stable and ongoing presence in a foreign country. If the activity results in revenues in the jurisdiction of the permanent establishment, corporate taxes may be imposed on taxable income of such revenues.  As the term implies, a permanent establishment will be triggered by a company’s activities that reflect ongoing and persistent revenue creation, rather than occasional or isolated business efforts.

Hong Kong’s latest bid to welcome qualified talents to the city to aid the economic development promises professionals in the city’s pillar industries an advantage applying for a visa. Hong Kong has drawn up a Talent List of eleven specified professions it seeks to attract. Professionals from these areas will gain additional 30 bonus points towards their application under the QMAS (Quality Migrant Admission Scheme). Under QMAS, applicants are not required to have secured a job offer in Hong Kong before applying. The initial visa period may be up to 24 months. 

Transfer pricing is one of the most important issues in international taxation and thus sits high on the OECD’s Base Erosion and Profit Shifting (BEPS) Action Plan. Transfer pricing, among other measures, have been used by multinationals to shift taxable income from high to low tax countries as part of aggressive tax planning schemes. The recent push by the G20 towards international tax cooperation and harmonization initiatives led by the OECD’s BEPS Action aim for greater transparency and promote the ‘substance over form’ principle. 

China's State Council announced plans to remove the work visa requirements for Hong Kong, Macau and Taiwan nationals to work in Mainland China

Under the interim arrangement, the Immigration Department will grant a party in a foreign legally recognised same-sex relationship with eligible sponsors permission to remain in Hong Kong for 12 months or in line with their sponsors' limit of stay, whichever is shorter, subject to a time limitation only without other conditions of stay. During this period, the concerned party may take up employment, establish or join in business or study in Hong Kong without the need for prior permission from the Department. This follows the judgement in the Court of Final Appeal in QT v Director of Immigration (FACV No. 1 of 2018) on July 4, 2018.

Entrepreneurship in Hong Kong is nothing new and forms the backbone of the economy. With more than 2,000 startups and an estimated value of USD3.2billion, Hong Kong is the 5th fastest growing startup ecosystem globally.

China’s draft amendments to Individual Income Tax (IIT) law, released for public consultation end of June, sets out significant changes to the current IIT system. Passing of the draft law would broaden the inclusion of non-domiciled individuals as tax residents in China.

Hong Kong is hailed internationally for its ease of doing business and economic freedom. While the overall compliance requirements may be less than in other jurisdiction, compliance is nonetheless as important. Navigating corporate compliance and tax requires local expertise despite its seeming simplicity to avoid non-compliance costs in fines or worse, the closure of a business.

China’s e-commerce sales are estimated to reach 600 billion USD in 2018, making up 20% of global e-commerce sales and surpassing the US market sales. The China e-commerce market is estimated to further grow to 956 billion USD by 2022. Market access in China, especially in the online space, is predominantly reserved for local enterprises. Taking part in the Chinese (social) e-commerce takes a different approach than in the US or Europe, but it is no longer a complete mystery. 

Does the first year MPF contribution exemption for foreigners still apply? What is the registration and contribution deadline? How do overseas pension contributions affect MPF? - Here is a quick reference guide to those questions. 

The Inland Revenue Department had issued the Employer's Return to Hong Kong based companies for employees salary reporting earlier in April. If a company received an Employer's Return, it is required to file a completed return, even if the company does not, at this point, have any employees. 

The Inland Revenue Department issued profits tax returns for the year of assessment 2017-18 to companies registered in Hong Kong on 3rd April. This year's budget included a proposal for a one-off reduction of 75% of profits tax for 2017-18, subject to a ceiling of $30,000 which will be effective upon enactment of the relevant legislation. The IRD will automatically factor this reduction into the tax assessment.

Hong Kong’s higher than expected budget surplus of HKD138 billion (approx. USD18 billion) versus last year’s forecast of HKD16.3 billion should not come as a huge surprise. This year's budget includes a one-off reduction of tax by 75% up to a ceiling of HKD30,000.

Hong Kong is required to meet its obligations under the Financial Action Task Force’s (FATF) Recommendations and amendment the Companies Ordinance to comply with its obligations introducing the requirement for Hong Kong Companies to maintain a Register of Persons with Significant Control. The Register serves to comply with the FATF Recommendation to provide for transparency in the beneficial ownership of companies.

The Base Erosion and Profit Shifting (BEPS) project addresses gaps in international taxation rules and different tax treatments among jurisdictions. A major issue BEPS aims to tackle is taxation based on the economic activity rather than mere legal structure by harmonizing transfer pricing rules to close taxation gaps and eliminate mismatched arrangements that allow the exploitation by multinationals. This is particularly relevant for hard-to-value intangibles such as Intellectual Property.

Chief Executive Carrie Lam introduced the idea of a two-tiered profits tax regime in her election manifesto. The proposal sees a reduced profits tax rate of 8.25% for the first HKD 2million (USD257,000) profits. Thereafter, the standard rate of 16.5% applies.

Both, the Common Reporting Standard (CRS) and Base Erosion and Profit Shifting (BEPS) Actions, are part of the OECD’s and its member countries’ initiative to achieve greater global tax transparency and justice. Although, CRS and BEPS have different audiences, they are complimentary. BEPS recommends the development and implementation of national Controlled Foreign Corporation (CFC) Rules (Action 3). CFC Rules generally aim to pull the income of overseas corporation with no economic substance under domestic taxation, often including certain deeming provisions that regards attributable income as distributed. The existence of a CFC is frequently linked to tax residence of control and management. Is the Financial Account Information Reporting under CRS disclosing Controlled Foreign Companies/Corporations?

On 7th June 2017, Hong Kong joined the Organisation for Economic Co-operation and Development (OECD) Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Dase Erosion and Profit Shifting (BEPS). The BEPS Project is the brainchild of the OECD and the G20 and is a series of 15 Action Plans aimed at preventing tax avoidance caused by base erosion and profit shifting by multinationals. 

Although Hong Kong is very business-friendly and constantly ranked among the top countries for its ease of doing business, when it comes to HR and payroll compliance, most foreign owned companies and start-up businesses find employer and employee compliance burdensome.

The Hong Kong Monetary Authority (HKMA) has been reviewing the anti-money laundering and counter-financing of terrorism (AML/CFT) regulatory requirements for banks, including the address verification requirements stipulated in the current AML Guideline and concluded to remove the address verification requirements. As a result, banks are only required to collect address information of customers and/or beneficial owners for bank account openings without the need to collect documentary evidence for AML/CFT purpose.

Personal Investment Companies (PICs) that fall within the definition of an Investment Entity are reporting Financial Institutions (FIs) under the OECD’s Common Reporting Standard (CRS). As such, these PICs are subject to the same reporting standards that a bank or other financial institution is. 

Reporting FIs are required to register through IRD's AEOI portal by 3rd October 2017.

Hong Kong's Court of Appeal ruled that the rejection of the Dependant Visa application of the lesbian partner of a Hong Kong Employment Visa holder is indirect discrimination and ordered the Immigration Department to come to an agreement with the applicant.

China is considered today to be ‘The Wild-West’ when it comes to Intellectual Property (IP) Rights. IP infringements occur on a daily basis and IP piracy and squatting is a common problem. Enforcement claims by foreign brands against infringements in China against the misuse of their trademarks and IP (Intellectual Property) continue to often be unsuccessful.

However, it seems that a shift in trademark policy is starting to happen in China. China’s Intellectual Property Office declared its intention to implement an IP strategy to develop China into an IP powerhouse. 

The Common Reporting Standard (CRS) reporting date for financial institutions is fast approaching and financial institutions are starting to implement the reporting information collection. This affects existing account holders and persons and companies wishing to open new bank accounts alike who are presented with an additional form to complete. As with FATCA reporting forms, the account holder or applicant is often left with no explanation what the form is for and how it is to be completed. 

The OECD is closing Common Reporting Standard (CRS) loopholes targeting schemes and avoidance products designed to frustrate or circumvent the purpose of CRS. This includes pension schemes and insurance products established to avoid CRS reporting, as well as residence- and citizen-by-investment programs.

Ahead of the 2018 FATF mutual evaluation of Hong Kong to comply with international transparency standards, Hong Kong is implementing the statutory requirement for companies to maintain up-to-date beneficial owner information in accordance with FATF recommendations. 

Hong Kong has legislated the requirement to keep a register of “persons with significant control” for Hong Kong companies in the Companies (Amendment) Bill 2017 which will come into effect on 01 March 2018.

The Common Reporting Standard (CRS) and Automatic Exchange of Financial Account Information (AEOI) subject overseas tax residents to the periodical exchange of financial account information to the jurisdiction of their tax residence. Bankers are generally not tax experts, let alone in foreign tax laws, but are increasingly being tasked with the identification of any reportable accounts based on the tax residency of an account holder. Overseas tax authorities, via the exchange of financial account information, may suddenly come into possession of information that is not subject to their jurisdiction.

Celebrating the 20th anniversary of the establishment of the Hong Kong Special Administrative Region (SAR) Encore Professional Services Limited is assisting global businesses with the incorporation of Hong Kong companies for HKD $2,000* during a promotional period from 20th June to 20th July 2017.

The Hong Kong government has identified 72 prospective AEOI partners, comprising of all Member States of the EU, Hong Kong's tax treaty partners which have committed to AEOI and other jurisdictions which have expressed interest to the OECD in exchanging information with Hong Kong and is proposing to include these in the list of reportable jurisdictions with effect of July 2017 as prospective AEOI partners. Furthermore, Hong Kong has indicated a possible departure of its initial approach by considering joining the Multilateral Convention on the Mutual Administrative Assistance in Tax Matters.

The redefined approach would result in the IRD storing financial account information collected from financial institutions from July 2017 and exchanging them with these prospective countries once a CAA is in force. The AEOI partner would, regardless of the CAA signing date, then be able to receive financial account information dating back to 2017.