Demonstrating Tax Substance for Your Enterprise after Entering Hong Kong


What is the best way to reach and take advantage of the huge Chinese market? The first step is incorporating a company in Hong Kong.

Hong Kong is considered the gateway to the mainland China. Once your enterprise is registered and in operation, you have to move to the next step of demonstrating tax substance. Hong Kong administration is always committed to supporting enterprises that meet their tax obligations to expand to the neighboring markets easily.

To advance its business-oriented agenda, Hong Kong enters into special agreements that aim at helping investors reach markets beyond its borders. Tax substance is the demonstration that a company is meeting all its tax requirements and assisting others to remain compliant. Here are three ways that you can demonstrate tax substance for your Hong Kong enterprise.

Ensure that most of the meetings are done in Hong Kong

Though Hong Kong administration allows investors to establish whether they want to hold their business abroad to enjoy 0% tax, it encourages investors to do most of the transactions locally. You should consider holding board meetings in Hong Kong to spur a chain of events. Holding board meetings in Hong Kong means that local hotels and other businesses will have clients to attend to and increase their sales. Ultimately, all the enterprises will pay taxes  to the IRD (Internal Revenue Department) to grow the tax base.

Make sure that the company maintains an operational office

Maintaining a local office with bills such as power, rent, and salaries mean that your business is helping to spur growth in multiple sectors. The employees will ultimately make their tax payments, and the business will keep the Hong Kong economy growing from strength to strength. You can go beyond this point by forging partnerships with neighboring enterprises and even holding joint meetings.

Ensure to meet all the tax obligations of the business

In addition to ensuring that most transactions are based in Hong Kong, it is also crucial that businesses meet all tax obligations. This is one of the items that IRD checks with a lot of emphasis when a business applies for a tax resident certificate. The target should be identifying all the tax obligations and ensuring they are met on time. Remember that the books of accounts should be done carefully to ensure that IRD can inspect them anytime.