Due to the high tax burden on domestic companies, it is a significant expense for small businesses and individuals. Even if the company is not operating, it has no income and has to pay various taxes every month, such as business tax, stamp duty, etc. Even if the company goes bankrupt, it still has to pay cancellation fees. However, domestic companies engaged in international trade can achieve reasonable tax avoidance and profit growth by registering a Hong Kong company.

Mr. Li's company in Shenzhen mainly engages in the trade of imported electronic components from overseas, and then sells them to domestic ODM/OEM factories. Electronic components, as strong products in Europe, America, Japan, and South Korea, are purchased by domestic enterprises through imports, and many of them are second -, third -, or even fourth level agents. By the time the products arrive at Mr. Li's place, the product profits are already very low.

Previously, Mr. Li imported goods with a cost of 800000 US dollars and sold them to a domestic factory for 1.3 million US dollars, which required him to pay corporate income tax based on a profit of 500000 US dollars. After deducting various cost expenses, there was not much profit left. Later, Mr. Li registered a Hong Kong company through Hongyuan International Consulting and purchased the goods with a cost of 800000 yuan in the name of the Hong Kong company. He then sold them to Mr. Li's domestic company at a higher price of 1.2 million yuan, and ultimately sold them to customers for 1.3 million yuan. In this way, Mr. Li only needs to pay corporate income tax of 100000 yuan domestically, while the remaining 400000 yuan of profits will be successfully deposited into the Hong Kong company account. The 400000 retained profits can be offset with reasonable expenses according to Hong Kong tax laws, and the net profit after deducting expenses can be used to calculate the company's profits tax.

The main reason why Mr. Li was able to achieve reasonable tax avoidance in this process is that the taxation principles in Hong Kong and mainland China are different. Hong Kong adopts the principle of territorial origin for taxation, which means that only profits originating in Hong Kong are subject to taxation in Hong Kong, while profits originating from other places are not subject to profits tax in Hong Kong. According to Hong Kong tax regulations, offshore income of Hong Kong limited companies can be exempted from profits tax, which means that "businesses not operating locally and profits sourced from overseas" can apply for government exemption from profits tax.

Many companies like Mr. Li engaged in import and export trade may reduce their profits by tens of thousands or even millions annually due to their lack of understanding of the value and methods of reasonable tax avoidance by Hong Kong companies. Hongyuan International recommends that companies register Hong Kong companies as soon as possible and achieve reasonable tax avoidance and profit growth through the linkage between Hong Kong companies and mainland companies.

So how do mainland enterprises register Hong Kong companies? Next, Hongyuan International will take you on a look at the requirements and conditions for mainland enterprises to register a Hong Kong company.

The process of registering a company in Hong Kong

Finally, let's take a look at the process of registering a company in Hong Kong, as follows:

1. Firstly, we need you to confirm the Chinese and English names of the Hong Kong company. The Chinese name must end in "Limited Company" and the English name must end in "LIMITED";

2. After coming up with a name, it is necessary to search for it on the government website. If the company name contains sensitive words, it may result in the name not being approved. However, the Hong Kong government does not have high requirements for company names, and naming is relatively free, so it is generally approved;

3. After the name is confirmed, request and fill out the "Power of Attorney" and "Agreement" for registering the Hong Kong company, sign them, and fax or scan them together with a copy of your ID card to the secretarial service company;

4. The stamp duty charged by the Hong Kong Companies Registry is fully prepaid;

5. Sign the complete set of registered company documents and articles of association;

6. Submit a complete set of documents to the Hong Kong Companies Registry to apply for a company registration certificate;

7. Submit relevant documents to the Hong Kong Inland Revenue Department to apply for a business registration certificate;

8. Submit materials to Hong Kong printing agencies for production: stocks, articles of association, steel seals, circular seals, director's seals, and record books;

9. Obtain the complete set of information documents for Hong Kong company registration.

Through reasonable tax avoidance by Hong Kong companies, not only can mainland enterprises engaged in international trade achieve profit growth, but also owning Hong Kong companies can enjoy some subsidy policies for enterprises in Hong Kong, such as the Hong Kong BUD special foundation. The professionalism of registering a Hong Kong company and conducting tax planning is strong. Hongyuan International Consulting recommends that companies operate through professional secretarial service companies.

To learn more about Hong Kong company registration, please consult Hongyuan International.