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No tax in Hong Kong - Offshore operation tax exemption - Trading Business

Background
  1. Mr. A originally buying from China and selling to France using his own French company as the middle trading firm (F Ltd);
  2. Trading profit of Euro 100,000 is subject to French tax rate – can be as high as 40% ;
  3. Mr. A controls the business remotely – no need to maintain operation base in China or France.
New arrangement
  1. Mr. A setup a Hong Kong company, H Ltd;
  2. H Ltd becomes the middle trading company – buying from China and selling to France;
  3. Goods still shipping directly from China to France;
  4. Selling and purchase at same price as before;
  5. Location of operation – Mr. A still operating the business – without maintaining operating office in Hong Kong, China and France.
Benefit
  1. Profit of Euro 100,000 will be profit of H Ltd;
  2. As H Ltd maintains only register address in Hong Kong, but not operating office. And also fulfilling offshore operation test, Hong Kong tax department (Inland Revenue Department) (IRD) approves the “non-HK source” application;
  3. There is saving of 40% in profits tax.
Important : Overall Tax Position

Mr. A still needs to fulfill personal income tax filing to French government – in order to assess overall tax saving scenario.

Important : Offshore operation tax exemption in HK

H Ltd should fulfill operation test, which include below :

  1. No operation office maintaining in HK (this is different from register address);
  2. No staff hired and working in HK;
  3. No customers / clients from HK;
  4. No suppliers from HK;
  5. Income contract not negotiated or concluded in HK;
  6. Goods not entering HK
    • trans-shipment is fine;
    • maintaining continuous cargo stock in HK is not fine.

See also :

FAQs > Hong Kong Company - Private Limited Company > Tax Filing > 1st tax filing request Service in Hong Kong > Accounting Audit and Taxation > Tax Exemption > Process Offshore Operation Tax Exemption Success Story > No tax in Hong Kong - Offshore operation tax exemption - Service providing business

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AbacusHKCPA - Certified Public Accountants base in Hong Kong (HK) - ACCA, HKICPA, providing services of

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