The Future Economy of Hong Kong
25 July 2022
2022 marks an important milestone for Hong Kong as it celebrates the 25th anniversary of the establishment of the Hong Kong Special Administrative Region (HKSAR). Here Amie Cheung, Principal at AGA Hong Kong accounting firm Lawrence Cheung CPA Company updates us on the future of the region.
The year 2022 marks an important milestone for Hong Kong as we celebrate the 25th anniversary of the establishment of the Hong Kong Special Administrative Region (HKSAR).
Chinese President Xi Jinping, in a keynote speech at the inauguration ceremony of the sixth government of HKSAR, laid out the future for Hong Kong spelling out Beijing's commitment to the unique governing formula that allows Hong Kong to maintain its own capitalist system. "One country, two systems is a good system, there is no reason to change it, and it must be adhered to for a long time!" he declared.
President Xi's assurances enhanced the confidence of the Hong Kong society and international community in the stability and long-term adherence to the “one country, two systems". This principle would continue to support the city as one of the world's premier international financial centres, and continue to be central to Hong Kong's future and to the continued opening up of China's capital market.
With the assurance from President Xi, there is strong belief that the existing advantages of Hong Kong would continue to exist even beyond 2047:
1. Simple taxation system
- No estate duty
- No capital gains tax
- No tax on dividends
- No sales tax or VAT
- No interest tax
- No annual net worth taxes and no accumulated earnings taxes on companies which retain earnings rather than distribute them
2. Low tax rates
Only three direct taxes are imposed:
(a) Profits tax
Hong Kong’s tax rates are amongst the lowest in the region (e.g. compared with 25% in China and 17% in Singapore).
(b) Salaries tax
Charged at progressive rates from 2% to 17% or standard rate of 15% whichever is lower, which is also among the lowest in the region (e.g. 22% in Singapore).
(c) Property tax: 15%
3. Full ownership of business
A foreigner is eligible for 100% ownership rights of a company incorporated and based in Hong Kong and the law does not impose local residency requirements. This allows a foreigner to be the sole director and shareholder. A physical address is unnecessary to operate within the jurisdiction, which means you can run the business from anywhere in the world.
4. No foreign exchange control
Hong Kong is free from any foreign exchange controls, there are no restrictions on capital flows in and out of the city.
5. Gateway to China
China is now the world's second largest economy and international investment in China is still rising. Hong Kong’s proximity to, and close and unique relationship with, mainland China, has made it the dominant gateway to mainland China for business. It is the best place to capture China opportunities.
Hong Kong has a long standing and important role as a “bridge” and “window” linking mainland China with the rest of the world. Situated at the heart of the Asia Pacific region, Hong Kong is able to both capitalise on the strengths of mainland China and engage with the rest of the world. Its prime location has made it an important international financial, shipping and trade centre and an aviation hub, linking up mainland China and the global marketplace. The city plays a significant role in China’s dealings with the outside world in many spheres, including trade, logistics and transportation and capital flow.
7. Largest global offshore renminbi business hub
As the world's largest offshore RMB business hub, Hong Kong's banks handle about 75% of global offshore RMB payments. As China's economy continues to expand and develop, the demand for offshore using, holding and investing of RMB by mainland or foreign enterprises, financial or other institutions is expected to substantially increase. This further strengthens the status of Hong Kong as an important offshore RMB and international financial centre.
8. Multicultural talent pool
Hong Kong is home to a diverse talent pool, equipped with the skills and knowledge to drive business in Hong Kong and beyond. The workforce in Hong Kong is among the most qualified and productive in Asia and this highly skilled and educated workforce is one of the strongest advantages the city can offer to foreign investors.
With liberal immigration policies, a vibrant cosmopolitan lifestyle and abundant opportunities for career advancement, Hong Kong offers attractive prospects for professionals and experts from around the world. Various talent admission schemes are in place to attract talent and drive Hong Kong’s development as a high value-added and diversified economy.
About Lawrence Cheung CPA Company:
Founded in 1978, Lawrence Cheung C.P.A. Company Limited (LCCPA) is a professional accounting firm registered under the Professional Accountants Ordinance with the Hong Kong Institute of Certified Public Accountants.
Now LCCPA is a leading firm of certified public accountants ("CPA") and business advisers providing an integrated range of services with a commitment to excel in all practice areas. Our portfolio of clients is diverse ranging from SMEs, regulated entities under Securities and Futures Ordinance to multi-national corporations.
With more than 40 staff members, including 5 Certified Public Accountants (Practising) and 8 Qualified Public Accountants our directors are ex-Big-four accountants with extensive experience of audits of both Hong Kong and overseas private and listed companies, taxation, business advisory, computer consultancy, merger and acquisition, company secretary, risk management, initial public floatation, corporate and group restructuring exercises.