HONG KONG SPECIAL ADMINISTRATIVE REGIONHONG KONG SPECIAL

ADMINISTRATIVE REGION

HKSAR

Group Members

ARCHIT JAIN ST20023148

KURNIKA GUPTA ST20015634

NIKHIL CHATURVEDI ST20028708

YUSUF ALI ST20028751

Today’s Menu

History & Features of Hong Kong

PESTEL factors

The Cultural environment

Setting up a new business in Hong Kong

Imports, Exports and Trade Barriers

Tax structure

Foreign Direct Investment (FDI)

Key sectors attracting foreign investment

Why Hong Kong?

History & Main Features Of Hong Kong

Hong Kong is positioned at the mouth of the Pearl River Delta on the coast of southern China.

Hong Kong was formed in the year 1842 and became a part of British colony. Handed back by the British in the year 1997.

The population of Hong Kong was 7.072 million in 2011 out of which 95% are Chinese & rest 5% percent are non-ethnic Chinese.

Hong Kong acts as a supply chain connection between China & Rest of the World.

Currency of Hong Kong is HK Dollar ($).

1 HK$ = 0.08 £ (United Kingdom Pound)

= 0.12 $ (United States of America)

Consistent growth since past 2 decades with GDP reaching

$243.7 billion in 2011

EXTERNAL ENVIRONMENT

PESTEL ANALYSIS

Political section on Hong Kong provides inputs about the political system, key figures in the country, and governance indicators.

Economic section on Hong Kong outlines the economic story of the country to provide a balanced assessment on core macro-economic issues.

Social section on Hong Kong enables understanding of customer demographics through the income distribution, rural-urban segmentation and centre of affluence, healthcare and educational scenario in the country.

Contd..

Technological section on Hong Kong provides strategic inputs on information communications and technology, technological laws and policies, technological gaps, patents data and relevant laws.

Legal section on Hong Kong provides information about the legal structure, corporate laws, business set-up procedures and the tax regime.

Environmental section provides information on environmental policies in Hong Kong and the performance in terms of important environmental indicators.

POLITICAL RELATIONSHIP

Favourable political relationships:

Foster stable business environments

Increase international cooperation in many areas

Lead to increase business opportunities and lower risk

CULTURAL ENVIRONMENT

LANGUAGE

The official languages in Hong Kong are Chinese and English blending cultures of East and West

Every well-educated person in Hong Kong must command Cantonese, Putonghua and English fluently

CUSTOM

The local Chinese are mainly living with the traditional Chinese principle

The Hong Kong spirit means hard working, facing new challenges, high degree of adaptability and globalization.

In weekends, people of Hong Kong like family gathering or yum cha, doing exercise, watching television, etc.

RELIGION

Hong Kong people are very religious. Different religions like Buddhism, Taoism, Protestant, Catholic, Muslim, Jew, Hindus and Sikh prevail.

Buddhism is followed by about 90% of the total population

Traditionally, because of its early role in fishing, many Hong Kongers believe in Tin Hau, the protector of seafarers.

Christmas and Easter are still stipulated as official holidays.

EDUCATION

The education system has been maintained in Hong Kong nowadays, which is quite British with local properties

At the higher education levels, both British and American systems do exist

The University of Hong Kong, the oldest institution of tertiary education, has traditionally been based on the British model

Setting up a new business

PROCEDURE:

Step 1:  Application for Establishment

Step 2: Forward the application to MOFCOM-

 

Step 3:  Application for Registration

CONSIDERATIONS FOR FOREIGN INVESTORS

Foreigners are free to be the sole directors and shareholders of a Hong Kong company.

There are no local resident requirements.

Although their is no requirement to be physically present at the time of company registration, physical presence may be required for the purpose of opening a bank account, depending on the bank chosen.

CAPITAL REQUIREMENTS

The minimum registered capital of a limited liability company is Rmb30,000 while that of a joint-stock limited company is Rmb5 million.

The minimum registered capital of a foreign or JV bank is Rmb300 million worth of freely convertible currencies

The minimum registered capital of a JV international freight forwarding agency is US$1 million; 

 

IMPORT & EXPORT

Trade Benefits

Hong Kong is a major international financial centre

It features a free trade economy with low taxation

Lesser intervention of the government

HK is a full time member of WTO and Asia Pacific Economic Cooperation forum

The government has signed a CEPA, a free trade agreement with China.

The corner stone of HK’s free trade approach is a strong and credible multilateral trading system.

Procedure for Import-Export

Cash in Advance

Documentary Credit

Documents against Payment

Open Account

Hong Kong Export Commodities

Electrical machinery and appliances

Textiles and apparel

Footwear

Watches and clocks

Toys and Plastics

Export Partners

China 48.5%

US 12.8%

Japan 4.3%

EU 8.0%

Hong Kong Imports Commodities

Raw materials and semi – manufactures

Consumer goods

Capital goods

Food stuffs

Fuel

Imports Partners

China 46.6%

Japan 9.8%

Singapore 6.4%

Taiwan 6.4%

Source: http://bso.hktdc.com/bso/BrokerServlet

Source: http://hong-kong-economy-research.hktdc.com/business-news/article/Market-Environment/Economic-and-Trade-Information-on-Hong-Kong/etihk/en/1/1X000000/1X09OVUL.htm

TAX STRUCTURE

PERSONAL INCOME TAX RATE

NET CHARGEBLE INCOME (HKD)

RATE

0-40,000 2%

41,001-80,000 7%

80,001-120,000 12%

ABOVE 120,001 17%

TAXATION

The principal sources of revenue to the Hong Kong Government (apart from revenue from the sale of government land) are:

Salaries tax;

Profits tax;

Property tax; and

Stamp duty.

SALARY TAX

There is no capital gains tax, no dividend tax and no inheritance tax in Hong Kong.

Hong Kong follows a territorial principle of taxation. Individuals are taxed only on income that has been “earned in Hong Kong”.

PROFITS TAX

An individual carrying on trade, profession or business in HK is chargeable to profits tax

Profits sourced outside HK are not taxed in HK even if remitted to HK

The rate of profit tax is 16.5% for corporations and 15% for taxpayers other than corporations

PROPERTY TAX

Property tax is charged at the rate of 15% of net assessable value of any land or buildings in HK

Corporations carrying on business in HK can elect to be exempted from property tax

STAMP DUTY

Leases of property not exceeding one year - 0.25% of the total rent payable over the term of the lease

Leases of property exceeding one year but not exceeding three years - 0.5% of the average yearly rent

TAXABLE BENEFITS

Accommodation and housing allowances

Meal allowance

Education benefits for children

Company gifted car

Transport allowance

Holiday journey allowances

Share rewards and share options

THE TAX SYSTEM

Low rate optional flat tax of 16% on personal income

No Pay-as-you-Earn in HK

Corporate income tax is at a flat rate of 17.5%

No payroll taxes in HK

No death tax in HK

HK budget has a budget surplus and a very little government debt

TAX SYSTEM GOOD?YES..HERE’S WHY

Low level of taxation and public spending

Simplicity

Economic prosperity

Low, flat rates of tax

Generous allowances

Scheduler structure

Corporate profits and dividends

FOREIGN DIRECT INVESTMENT(FDI)

FDI IN HONG KONG

FDI flows in HK exceeded US$83 billion in 2011, an all time high (World Investment Report, 2012)

FDI stock remained stable at US$1.14 trillion in 2012 as compared to US$1.09 trillion in 2010

Globally, HK ranked 4th in FDI inflows after the US, CHINA and BELGIUM respectively

LAW & POLICY

The Hong Kong government encourages foreign investment

It plays an important part in building Hong Kong as an international financial centre

It supports a free market economy and adopts a low interference policy.

There is no investment approval procedure directed specifically towards foreign investors.

Contd..

Hong Kong’s economy scored 89.9%, making it the freest economy in the world.(Index of Economic Freedom, 2012)

The two exchanges, namely, the Stock Exchange of Hong Kong Limited & the Futures Exchange of Hong Kong Limited are currently owned and operated by Hong Kong Exchanges and Clearing Limited (HKEx)

ATTRACTING THE FOREIGN INVESTMENT

Factors that have been identified are:

Rule of law and protection of property rights;

Free flow of information;

Low taxation and a simple tax system;

A corruption-free government;

Absence of exchange control; and

Effective communication, transport and other infrastructure.

Source: UNCTAD; for further information on data and methodology, see www.unctad.org/diae.

INDUSTRIES IN HONG KONG

KEY INDUSTRIES OF HONG KONG

Four Key Industries in Hong Kong are:

Financial services,

Trading and logistics,

Tourism, and

Professional and producer services

The Four Key Industries in the Hong Kong economy generated value added of HK$1,113.1 billion and employed 1 703 600 persons in 2011.

The share of the total value added of these industries in Gross Domestic Product (GDP) was 58.5% in 2011, higher than that of 57.8% in 2006.

FEATURES

The trading and logistics services industry is the largest among the Four Key Industries, in terms of both value added and employment

Being an important global business hub, professional services and other producer services in Hong Kong together generated value added of HK$235.9 billion and provided jobs for 469 400 persons in 2011.

Contd..

Value added & Employment in key industries

http://www.censtatd.gov.hk/hkstat/sub/sp80.jsp?productCode=FA100099

DEVELOPING INDUSTRIES

Emerging industries are:

Cultural and creative industries,

Medical services,

Education services,

Innovation and technology,

Testing and certification services and,

Environmental industries,

These industries have been identified as enjoying advantages for further development.

Value added and Employment in developing industries

http://www.censtatd.gov.hk/hkstat/sub/sp80.jsp?productCode=FA100099

WHY HONG KONG??

Strategically located for business in Asia

Low and simple tax regime

International, transparent and efficient

World-class business infrastructure

Easy recruitment of skilled staff

Government support for companies

Contd..

The world’s freest economy

The world’s most competitive economy

The world’s most services-oriented economy

The world’s second highest per capita holding of foreign exchange reserves

The second largest source of FDI in Asia after Japan

The second largest recipient of FDI in Asia after China

Contd..

< http://www.youtube.com/watch?v=d9m_ILu7rH0 >

THANK YOU!!