Establishing A Hong Kong Trust
Trusts have many applications and advantages – the protection and preservation of assets, tax planning, succession planning or simply avoiding the expense and delay of obtaining probate under a will. They also provide a high degree of confidentiality.
Hong Kong’s trust law regime was based primarily on English common law, which was supplemented by the Trustee Ordinance (Cap 29) and the Perpetuities and Accumulation Ordinance (Cap 257), enacted in 1934 and 1970 respectively. With the introduction of the Trust Law (Amendment) Ordinance 2013, however, Hong Kong comprehensively modernised its trust law to make it a much more competitive and attractive proposition for trusts.
The major changes brought in by the Trust Law (Amendment) Ordinance 2013 were to:
- Abolish the rule against perpetuity and the rule against accumulations for all new non-charitable trusts, enabling settlors to set up perpetual trusts in Hong Kong.
- Protect against forced heirship rules by providing that the transfer of movable property held on trust should not be affected by foreign laws of inheritance.
- Provide that a trust will not be invalidated because the settlor has retained the power of investment or asset management functions.
- Provide a clear statement of the standard of care to be expected from a trustee.
- Limit the use of trustees’ exemption clause to enhance the protection for beneficiaries.
- Enhance the default powers of trustees to facilitate the effective administration of trusts by providing powers to:
- appoint agents, nominees and custodians;
- insure the trust property against risks of loss or damage caused by any event;
- receive remuneration under specific circumstances if they act in a professional capacity; and
- make investments with less restriction.
Placing the shares of an offshore company within a trust can offer substantial tax and non-tax related advantages,which will accrue both on death, and during the lifetime of the trust settlor. These advantages may be summarised as follows:
- Inheritance tax: On death, the inheritance tax which would normally be assessed on the value of the shares would generally be eradicated.
- Lifetime tax savings: Substantial income and capital gains tax advantages may accrue to a settlor as a result of transferring assets into trust.
- Asset protection: Assets placed into trust are generally beyond the reach of creditors who might arise as a result of financial difficulties, divorce proceedings, litigation etc.
- Avoidance of probate: Assets in trust can be passed on to the next generation without the disruption, delays, costs and loss of confidentiality associated with the probate procedure when assets are bequeathed by will.
- Continuity: Trusts provide a means whereby assets can continue to be administered in accordance with the wishes of the settlor after death, such as to protect minors, infirm, weak or spendthrift beneficiaries.
- Retaining investment powers: Hong Kong trust law allows the settlor to retain substantial investment powers over trust assets, without affecting the validity of the trust.
Fees for drafting the trust deed and for the provision of trustee services will be quoted on a case-by-case basis.
Hong Kong Companies And The Advantages:
1.) British legal system as background
2.) Very low tax rate (around 16,5% on net profit)
3.) Tax exempt for income not incurred in HK
4.) Beneficiary owner’s identity can be hidden from public company record by using Nominee service
5.) No restriction in fund transfer to and from most part of the world
6.) Close to and with excellent relationship with Mainland China
7.) Being international centre of information exchange and transportation hub
8.) Enjoy convenience of international banking system;
|Type of entity:||Private Limited|
|Shelf company availability:||Yes|
|Our time to establish a new company:||10 days (+time for the certification)|
|Double taxation treaty access||Details|
|Share capital or equivalent|
|Minimum paid up:||1 HK$|
|Usual authorized:||10,000 HK$|
|Shareholders and Directors|
|Minimum number:||One minimum Details|
|Local residency required:||No|
|Publicly accessible records:||Yes|
|Required:||Yes (may be a corporate body)|
|Local or qualified:||Local residency or local incorporated|
|Requirement to prepare:||Yes|
|Requirement to file accounts:||Yes|
|Publicly accessible accounts:||No|
|Registered office||Yes, must be maintened in Hong Kong|
|Restrictions on trading||Yes Details|
|Language of legislation and Corporate documents||Chinese and English|
|Change in domicile permitted:||No|
– Minimum 1 Shareholder and Director is required;
– Directors and Shareholders could be same person
– No nationality restriction for shareholders and directors
– Minimum subscribed share capital is HK$ 1
– Registered address in Hong Kong
– One company secretary and should either be Hong Kong resident or Hong Kong limited company
– Company name should not be same at those already in company register and can be only English or only Chinese name or English plus Chinese name
Corporate shareholder and director is allowed:
1.) Certificate of Incorporation of corporate
2.) Memorandum and Articles of corporate
3.) Minutes of Directors approving taking up shares/directorship in the HK Company and authorization of signatory
Bank account in Hong Kong can open:
– Individual of any nationality
– Hong Kong registered company
– Offshore registered company
Documents and Certificates:
– Certificate of Incorporation (CI)
– Business Registration Certificate
– Copies of shareholders, directors etc registration documents (Original is kept in government for public search.)
|HONG KONG COMPANY FORMATION||HK$|
|1. Incorporation of the company, taxes and the initial opening fees||10000|
|2. Service opening expense||5000|
|3. Annual corporate secretary expense (obligatory)||1000|
|4. Annual company’s address in Hong Kong expense (obligatory)||1000|
|5. Opening of a bank account in Hong Kong||3360|
|The amount that should be paid to a new bank account, it stays in the bank and can be used later on as company’s money.***||5000***|
|6. Legal certification of all documents needed for opening a bank account||3115|
|7. Courier mail||1000|
|a.) Nominated stock holder / annually||2000|
|b.) Nominated director / annually||2000|
|c.) Power of Attorney||3000|
|d.) Legal certification of all documents||3500|
|9. State tax expenses||6600|
|a.) Business registration expense (the first year is included in the inc. costs)|
|b.) Annual tax return submission|
|10. Registered agent’s fee||2000|
|a.) Annual corporate secretary expense (obligatory)|
|b.) Annual company’s address in Hong Kong fee (obligatory)|
|11. Accounting and auditing (for small companies)||7000|
|12. Change of name||4000+dhl|
|13. Company de-registration||6000|
*** Amount of HK$ 5000,- is not an opening expense because the company can freely use this money for its own expenses. It is a deposit paid to a new bank account of the company in Hong Kong. This money is at the client’s free disposal as soon as the account is fully operational.
Companies registered in Hong Kong can be exempt from all taxes only if they don’t have any turnover with other Hong Kong companies. In order to open a bank account in Hong Kong or China, the client’s presence is necessary. Also, all beneficial owners/shareholders, holding more than 10% of company shares, are required to visit a HK bank branch and provide certified passport copy and a proof of address.
Opening procedure lasts approximately 30-45 days.
In order to start with the company opening procedure please provide us with:
1. name of the company (2-3 names of your choice)
2. passport copy (of all directors and shareholders)
3. utility bill for confirmation purpose
4. cash and capital contribution (in percent for each shareholder)
5. payment to the EURO COMMERCE LLC bank account
Company name should not be same as those already in company register and can be:
– Only English name
– Only Chinese name
* For practical reason, we don’t suggest using only Chinese name. English name is useful for daily use, including banking transaction.
– English plus Chinese name
* In daily use, quoting only English name is enough.
A name that is similar to or identical to an existing company. A name that constitutes a criminal offence or is otherwise contrary to the public interest. A name that implies royal or government patronage.
Building society, Chamber of Commerce, co-operative, imperial, Kaifong, mass transit, municipal, royal, savings, tourist association, trust, trustee, underground railway, bank, insurance, assurance, reinsurance, fund management, asset management and investment fund. Name of the company must end with Limited or Ltd.
Hong Kong adopts a territorial source principle of taxation
Only profits which have a source in Hong Kong are taxable here. Profits sourced elsewhere are not subject to Hong Kong Profits Tax
There are three distinct and separate headings under which tax is levied :
– Corporations, partnerships, and sole proprietorship who carrying on a trade, professional or business in Hong Kong are subject to profits on profits which are generated from sources within Hong Kong;
– Only profits which arise in Hong Kong, or are derived from Hong Kong, are subject to profits tax;
– Currently, profits tax rate is 16.5%.
– Property tax is levied on the owners of real estate which is situated in Hong Kong.
Shareholders and Directors
The minimum number of directors and shareholders is one, who may be a natural person or a body corporate. They may be the same person or legal entity of any nationality, and need not be resident or incorporated in Hong Kong.
Restrictions on Trading
Cannot undertake banking or insurance activities or solicit funds from or sell its shares to the Public.
Hong Kong has Double Taxation Avoidance Agreements with next countries
Belgium, Denmark, Finland, Germany, Luxembourgh, Netherlands, Norway, Singapore, Sri Lanka, Thailand, United Kingdom of Great Britain and Northern Ireland, United States of America and Vietnam.
China – Corporate and Personal Income Tax. Belgium,Thailand – dividends, interest and royalties. Other Countries – for shipping and aviation