Hong Kong has a simple tax system and a relatively low tax rate compared to other jurisdictions. In recent years, Hong Kong has been under pressure to keep up with the international developments, particularly the BEPS Project. The government has started to develop and expand its treaty network with other countries while also committing to BEPS standards including the automatic exchange of information (AEOI) under the common reporting standard (CRS) regime to enhance tax transparency and combat cross-border tax evasion.
At the end of June 2016, the government enacted another new law which provides a legal framework for implementing AEOI and will be effective from January 1 2017. As a result of the legal framework "financial institutions in Hong Kong should now seriously assess the extent of impact of the AEOI on their business and implement their AEOI program as soon as practicable," said Tracy Ho, head of tax at EY.
To attract multinational and mainland Chinese enterprises to establish corporate treasury centres (CTCs) in Hong Kong, the government has recently enacted a new law removing the unbalanced tax treatment of interest income and expense that CTCs faced earlier. This law allows tax deductions for interest paid by a Hong Kong CTC to its overseas associated corporations under certain conditions. Furthermore, the new law grants tax incentives to CTCs in the form of a 50% concessionary rate for qualifying profits.
One of the impacts from BEPS is that multinationals globally are busy substantiating and populating their regional holding companies in view of closing the gap between their tax structure and the substance or value creation focus of BEPS. Many multinationals have taken action to do the same with their Hong Kong holding companies, especially those with existing business operations in northern regions of Asia, including China, Korea and Japan. "There has been a lot of structuring work as companies are moving people into Hong Kong in order to substantiate business under BEPS developments," said Daniel Chan, head of tax at DLA Piper.
Taxpayers need to think internationally, said Sarah Chan, tax and business advisory services leader at Deloitte. They should not just focus on the tax issues in one jurisdiction, as tax issues are becoming more sophisticated and globalised.
She mentioned, for example, the impact the UK's referendum vote to leave the EU could have on Hong Kong companies from a tax angle. Firstly, companies need to revisit group structures if the UK is being used as a holding company for their EU operations. Secondly, it is possible that the vote could affect moving people between the UK and EU. Companies need to consider the associated tax costs and possible permanent establishment risk. Lastly, companies should revisit their business models in light of possible changes in VAT and customs duty. Companies need to consider if their supply chain model need any changes.
Ernst & Young
22/F, CITIC Tower
1 Tim Mei Avenue
Tel: +852 2846 9888
Asia-Pacific Tax Leader
Tel: +852 2849 9338
Hong Kong and Macau Tax Leader
Tel: +852 2629 3228
Business Tax Services
Asia-Pacific Business Tax Services Leader
Tel: +852 2846 9065
Greater China Business Tax Services Leader
Chee Weng Lee
Tel: +852 2629 3803
Asia-Pacific Tax Performance Advisory Leader
Tel: +852 2629 3318
Asia-Pacific Financial Services Tax Leader
Tel: +852 2849 9568
Asia Pacific Financial Services Business Tax Services Leader
Tel: +852 2849 9228
Asia Pacific Financial Services International Tax Services Leader
Tel: +852 2629 3988
People Advisory Services
Greater China People Advisory Services Leader
Tel: +852 2629 3876
Global Compliance and Reporting
Tel: +852 2629 3089
Tel: +852 2629 3588
International Tax Services
Asia-Pacific International Tax Services Leader
Tel: +852 2629 3882
Greater China Transaction Tax Leader
Tel: +852 2629 3228
Asia-Pacific Transfer Pricing Leader
Tel: +852 2629 3098
Tel: +852 2629 3938
KPMG China has around 10,000 professionals working in 17 offices: Beijing, Beijing Zhongguancun, Chengdu, Chongqing, Foshan, Fuzhou, Guangzhou, Hangzhou, Nanjing, Qingdao, Shanghai, Shenyang, Shenzhen, Tianjin, Xiamen, Hong Kong SAR and Macau SAR. With a single management structure across all these offices, KPMG China can deploy experienced professionals efficiently, wherever our client is located.
Our tax professionals are equipped with strong technical knowledge and industry specific business understanding to help organisations and individuals realise tax efficiencies while meeting the highest standards of compliance.
KPMG is at the forefront of public debate on tax policy and other related matters that affect the wider business community. We are dedicated to partnering with our clients to deliver long-lasting value through our team of people who think beyond the present and beyond borders.
8th Floor, Prince's Building 10 Chater Road
Central, Hong Kong Tel: +852 2522 6022
Fax: +852 2845 2588
23rd Floor, Hysan Place
500 Hennessy Road Causeway Bay, Hong Kong
Tel: +852 2522 6022
Fax: +852 2845 2588
Head of Tax, KPMG China
Khoon Ming Ho
Tel: +86 10 8508 7082
Head of Tax, Hong Kong
Tel: +852 2826 7165
Hong Kong Tax Leader for:
Tel: +852 2685 7457
Deal Advisory & M&A Tax
Tel: +852 2826 7166
Global Mobility Services
Tel: +852 2978 8941
US Corporate Tax
Tel: +852 2685 7806
Tel: +852 2143 8790
Tax Dispute Resolution & Controversy
Tel: +852 2143 8709
Financial Services Tax
Tel: + 852 2826 7166
Technology, Media & Telecommunication Tax
Tel: +852 2143 8525
Tel: +852 2685 7815
Infrastructure, Government & Healthcare Tax
Tel: +852 2143 8709
Tel: +852 2143 8790
|Corporate Income Tax||16.5%|
|Capital Gains Tax||0%|
|Net Operating Losses (years)|
|Royalties paid to individuals||4.5%||15%||A|
|Royalties from, for example, patents, know-how||4.95%||16.5%||A|
A This is a final tax applicable to persons not carrying on business in Hong Kong. The general withholding tax rate is 4.95% for payments to corporations. For payments to individuals (including unincorporated businesses), the general withholding tax rate is 4.5%. However, if a recipient of payments is an associate of the payer and if the intellectual property rights were previously owned by a Hong Kong taxpayer, a withholding tax rate of 16.5% applies to payments to corporations and, for payments to individuals (including unincorporated businesses), a 15% rate applies.
Steven Sieker is the tax leader of Baker & McKenzie in Hong Kong, which offers a full range of tax and legal areas including tax planning, global structuring, tax disputes, transfer pricing, M&A, employment-related taxes and stamp duty, as well as wealth management.
Sieker focuses on Hong Kong, Canadian and Asian regional tax advisory work, particularly tax and estate planning and tax litigation. He is also a member of the Society of Trust and Estate Practitioners. The Hong Kong-based tax team has four partners, one special counsel and nine associates.
The team has extensive experience in various aspects of taxation in Hong Kong and the Hong Kong office also serves as a base for the firm's China customs and indirect tax practice.
In May 2016, Li & Fung announced the sale of its Asia consumer and healthcare distribution business to DCH for $350 million. Baker's tax team worked on tax planning in connection to Li & Fung's restructuring. This major restructuring has enabled Li & Fung to spin off and/or sell two of its major divisions to enhance shareholder value. The announced strategy is to separate the group's core supply chain management business from its brand management and development business and consumer and healthcare distribution businesses. The deal is still ongoing and Richard Weisman, a senior tax partner, is involved in dealing with the issue.
Peter Charlton is the regional manager partner of Clifford Chance in Asia. He specialises in corporate finance, M&A, stock exchange matters, fund and investment management and real estate.
The firm's practice areas include capital markets, corporate, derivatives, finance, fund and investment management, joint ventures and strategic alliances, litigation and dispute resolution, private equity, project finance, regulatory investigations and restructuring and insolvency.
The firm's main clients come from the banking, consumer goods and retail, energy and resources, healthcare and life sciences, industrials, insurance, real estate, and TMT industries.
Deacons is the oldest law firm in Hong Kong and was established in 1851. It provides dedicated and innovative tax and legal services to international clients. Keith Cole leads the tax practice as a partner and has substantial experience in assisting various corporates and businesses regarding M&A, disposals, join ventures, commercial contracts, IT and intellectual property agreements and telecommunications.
Its tax practice comprises experienced lawyers and specialists with international backgrounds offering all aspects of solutions applying on complex tax issues related to income, transaction, property and behavioural taxes to local and foreign individuals and enterprises. The core tax series includes business and corporate tax planning, personal tax planning, real estate tax, tax investigations, and audits and disputes.
Deloitte's Hong Kong tax practice is led by Sarah Chin. She is a recognised tax adviser and also the national indirect tax and customs leader, providing combined solutions to the most complex VAT and customs issues.
Deloitte Hong Kong's key service areas include international and regional advisory competencies and industry focus on a multidisciplinary and multi-jurisdictional approach. The firm offers the full scope of services as well as various client programmes which present tailor-made tax strategies to adopt global economic challenges and fast-evolving regulatory atmosphere facing multinationals, state-owned enterprises and local corporations.
The tax firm provides full tax assistance to clients including business tax, international tax, transfer pricing, tax management consulting, M&A, research and development and government incentives, indirect tax, global employer services, business process solutions and more.
Professionals at Deloitte tax have experience advising private and corporate clients across a wide range of industries, and focus on financial services, consumer and industrial products, energy and resources, travel and hospitality, and retail and distribution.
DLA Piper's Hong Kong and China tax offerings are a fully integrated team directed by Daniel Chan, who is head of tax in Asia. The Hong Kong and China teams are composed of five partners and 16 tax specialists altogether. The team provides a "one shop service" with its global network system, providing smooth coordination across multiple jurisdictions with candid knowledge of both local and international considerations.
The team provides a wide range of international and domestic tax matters from corporate and individual tax planning to dispute resolution. The team members are highly experienced in advising M&A transactions including post-acquisition integration, supply-chain management, business process reviews, distribution, retail and after sales services.
The particular industries that the firm mainly advises are financial services, manufacturing and automotive, TMT, online and digital markets.
The tax practice of EY in Hong Kong is headed by Tracy Ho and has 36 partners and 349 professionals. In the past 12 months, the firm has bolstered its tax team with three new hires and the promotions of Robin Choi and Jim Sitko to partnership. EY Hong Kong provides integrated services, engaging with other departments in the area ranging from supply-chain optimisation and process improvement to financial accounting and reporting. The firm comprises leaders in each service line, including business tax, indirect tax, international tax, transaction tax, and tax-related matters associated with human capital, compliance and reporting.
EY's tax team focuses on financial services, computers and digital, fast-moving consumer goods (FMCG), technology and media, manufacturing, and healthcare.
The firm conducted BEPS and Chinese tax training for nearly 100 senior officers, such as senior inspectors of the Hong Kong tax authorities (IRD), to update the organisation on the latest developments in tax outside Hong Kong and the possible impact on the administration and implementation of the rules and tax law in Hong Kong.
Grant Thornton provides seamless services for both China and Hong Kong, comprising 23 offices, 200 partners and more than 4,000 professionals serving a fully-integrated approach to the China-wide market.
The firm offers specialised tax services including tax advisory and compliance, corporate business and tax solutions, transaction tax, tax certification audits, personal tax, transfer pricing, company incorporations, alterations and deregistration and outsourcing services. The firm assists hundreds of multinational companies, public companies, state-owned enterprises and private companies.
Khoon Ming Ho oversees the China and Hong Kong tax and transfer pricing teams at KPMG. The tax team in Hong Kong includes 14 partners specialising in different tax disciplines. One notable partner is Michael Olesnickym, a special adviser covering both China and Hong Kong, focusing on all aspects of corporate taxation including advisory, financial services and stamp duty.
The tax team comprising tax accountants, lawyers and former tax officials is equipped with technical and practical knowledge with a deep understanding of the region, which helps organisations and private clients to meet high standards of compliance across all major industries.
KPMG in Hong Kong was engaged to provide assistance with developing and designing an operational framework under the US Qualified Intermediary (QI) and FATCA regimes for a leading securities brokerage firm in Hong Kong. This project was important to the client not only because it is the first QI application for the group worldwide, but because of the significant impact to the Chinese customers of the client in terms of potential reduction in withholding tax for their US investments.
The project included complex analysis on the QI withholding obligations of each counter-party for the securities buy/sell arrangements involving the client and other local and/or overseas group entities. QI and FATCA reporting was completed in June 2015 while the QI policies and procedures review was completed in August 2015.
Michael Lorenz heads Lorenz & Partners Hong Kong. It is a German-speaking firm headquartered in Bangkok with two more offices located in Frankfurt and Ho Chi Minh City.
Two partners and four fee earners advise in international and German taxation for clients in Germany, Hong Kong and mainland China.
The firm has substantial experience in corporate and personal taxation matters and advises large clients and their employees in South East Asia.
Lorenz & Partners advised on various tax structuring, M&A transactions and tax disputes about onshore and offshore profits in the past year.
PwC's tax practice in Hong Kong, under the leadership of Reynold Hung, boasts around 60 partners and directors and more than 370 other fee earners. There were more than 150 new hires in the firm from May 2015 to May 2016.
In the past year, the tax practice continued to act for many clients on a vast array of projects and transactions in different industries and specialities: retail and consumer products, financial services, technology, media and telecommunications (TMT), industrial products, transportation and logistics, real estate, transfer pricing, international tax and structuring, field audit and tax investigation, national tax policy services, tax technology and more.
The firm assisted many multinational and Hong Kong corporations on inbound investments into China as well as Chinese enterprises on outbound investments including M&A and structuring.