Technological products business consideration

January 14th, 2013
  1. A good product / service is time-based, therefore, marketing and sale effort should be done well before the release of a product. Which means one should know their clients (literally) before starting a project. A technological product will be out-dated if it is not released on time. We have seen situation in which developers spent all of their time in product development, and did not spent enough time on marketing and sale.
  2. Consider the “freemium” model to test the market . Provide limited service for free, and charge for premium / value-added services.
  3. If you develop mobile apps, consider using multi-platform frameworks such as PhoneGap. Always be prepared to develop for different OS and screen sizes, or even a web-based interface for the desktop computers.
  4. Product release cycle should be shorten to test the market acceptability of different features.

Sample IRD questions for “Offshore Tax Credit” consideration for a Hong Kong company

November 2nd, 2012

Sample 1:

I hereby give you notice under section 51(3) of the Inland Revenue Ordinance that you are required to produce to me within the offices of the Commissioner within 21 days from the date of this letter the following further information to support your Profits Tax Return for the Year of Assessment 2005/06 :-

  1. An organization chart and details of the Company’s establishments in Hong Kong and overseas. This should include the location and size of the office, the number of employees and their respective name, post title, duties and remuneration package.
  2. A detailed description of the functions carried out by the Company in order to earn the commission income. For each of the activities identified, specify the name of the responsible person and the place where such activity was performed. This analysis should include:
    1. how the buyer/supplier was contacted;
    2. how the price of the goods was negotiated;
    3. how the sales/ purchase contract was prepared and signed;
    4. how the sales/ purchase order was processed;
    5. how the goods was stored and delivered to the buyer.
  3. A copy of the service agreement with each of the commission payers.
  4. In respect of each commission payer, details of the following:
    1. the name and address of the payer, and its relationship with the Company, its directors and shareholders;
    2. the type of goods being purchased/ sold;
    3. the name and address of the corresponding buyer/ supplier; and
    4. the basis of computing the commission.
  5. Details of the largest amount of the commission earned during the year ended 31 December 2005 and analysis of each step of the significant activities carried out by the Company in earning the income, into the place of the service and the name of the responsible person.
  6. A full indexed set of documents for the transaction described in 5. above, including:
    1. correspondence of negotiation with the buyer or supplier;
    2. the sales/purchase contract and orders subsequently effected;
    3. a travel schedule of each of the responsible persons, showing (for each trip) the date of departure from Hong Kong, the place and purpose of each visit and the period of stay in that country;
    4. documents executed by the Company on behalf of the commission payer;
    5. the invoice/ debit notes issued by the Company to the commission payer in respect of the services rendered;
    6. the basis of computation; and
    7. the banking and shipping documents.
  7. The reasons that the commission so earned is not chargeable to Hong Kong Profits Tax.

If you fail to comply with this notice, I shall take legal action

Sample 2:

I hereby give you notice under section 51(3) of the Inland Revenue Ordinance that you are required to produce to me within the offices of the Commissioner within 21 days from the date of this letter the following further information to support your Profits Tax Return for the Years of Assessment 2005/06, 2006/07 and 2007/08 :-

  1. Advise how the Company carried out the trading transactions.
  2. Your comment and reasons that trading profit has an ex-Hong Kong source.
  3. For the largest sales transaction in terms of sales value with the largest customer in the year of assessment 2007/08, provide a full indexed set of documents in chronological order, including sales and purchase agreements, purchase and sales orders, order confirmation, correspondence by way of letters, facsimile transmission, emails, invoices, letter of credit and shipping and insurance documents etc.
  4. For the transaction selected above
    1. details of the nature, quantity and value of the products purchased and sold as well as the parties involved;
    2. clear and full version of each document with a brief description of the nature of the document and the parties concerned;
    3. the routing of documents (i.e. the sender and recipient of the documents). By reference to the documents, describe thoroughly how, where and by whom the purchase and sales activities were performed, from negotiations with buyers and suppliers, conclusion of contracts, issue and receipt of sales and purchase orders, confirmation and acceptance of the orders, arrangement of finance, inspection, delivery of goods to final

Claiming “Offshore Tax Credit” for a Hong Kong company

November 2nd, 2012

A Hong Kong company that does not derive income in Hong Kong is not required to pay tax to the Hong Kong government, even if it has a profit.  To claim the offshore tax credit:

  1. Make sure your company does not have any clients in Hong Kong , and does not derive any income here
  2. *Very Important* Inform your accountant your intention to claim the foreign tax credit.
  3. Gather proof that no income is derived in Hong Kong. We have heard that it is harder for an Internet company to prove.
  4. Upon receiving the offshore tax credit application, the tax department may issue the company a letter with questions. You will need to answer the questions.

Note that the offshore tax credit is granted on a case by case basis. There is no model answer for the tax department’s questions. If the government grants the credit, the company does not have to pay tax to the government. But still, it will need to do the accounting, audit, and tax filing every year. If the government does not grant the credit, then the company will have to pay tax.

More information can be found here:

http://www.ird.gov.hk/eng/paf/bus_pft_tsp.htm

http://www.ird.gov.hk/eng/pol/dta.htm

Hong Kong company accounting, audit, and tax filing cost range

November 2nd, 2012

Any Hong Kong company that has conducted business must file audited account to the Inland Revenue Department. The first one should be filed 18 months after incorporation, and the subsequent ones are filed every 12 months. The cost of the accounting, audit, and tax filing depends on the number of transactions the company had monthly, the nature of the business, and the turn over. Here are some examples of the cost:

  1. A Hong Kong company that holds a property and receives monthly rent from the property: HKD $3,500 - HKD $5,000
  2. A Hong Kong trading company that buys goods from Asian countries and sell to European countries: HKD $7,000 - HKD $10,000
  3. A Hong Kong trading company that trades by containers as well as sells on the Internet: HKD $12,000
  4. A Hong Kong company that has several stock trading accounts and conducts day trading using the accounts: HKD $26,000
  5. A Hong Kong company that has several stock accounts in different countries and conducted 12 million computerized transactions during the year: HKD $200,000

So the cost varies a lot. For a more precise quotation, the accountant will need to review the bank account statements of the company. If you have more questions about Hong Kong company accounting, audit, and tax filing, please contact us: info@jinetic.com

Preparing for the bank meeting

October 25th, 2012
  1. Who must go to the bank?
    1. If there is only one director, the only director must go to the bank to open the bank account
    2. If there are more than one director, then at least two of the directors must to go the bank
    3. If a director is also a shareholder and owns more than 10% ownership of the company, he will also need to go.
    4. Anyone (such as a shareholder, beneficiary or an authorized person) who wants to be a signatory of the bank account must also go.
    5. The directors and authorized signatories must be able to speak either English, Cantonese, or Mandarin. No translator is allowed to be present during the bank interview.
  2. What documents are required?
    1. Directors’ and shareholders’ original identity documents such as Hong Kong Permanent ID Card or Passport. If the Hong Kong ID Card is not permanent (ID number beginning with the letter “R”), then a passport must be used.
    2. Directors’ and shareholders’ original residential proofs. Examples of residential proofs are phone bills, electricity bills, bank statements that must have the names and addresses and must be issued within 3 months.
    3. Directors’ and shareholders’ business proofs. Examples of business proofs are financial statements, bank statements, invoices, agreements, way bills, web sites, audited accounts of their previous or existing businesses. If this is their first business, their CVs, previous or existing employment contracts, school transcripts and graduation certificates.
    4. If the original document cannot be provided, then the notarized copy of the document must be provided
    5. The original company documents
    6. The documents must be either in Chinese or English. Otherwise the documents must be translated into either Chinese or English.
  3. What type of bank accounts?
    1. Business banking account
    2. Personal banking account
      1. If you want to open a personal bank account, please make sure you bring your ID and residential proof. You can let the business banking manager know and he will arrange opening the personal account for you. Anyone can open a personal bank account in Hong Kong.
  4. What are the fees?
    1. Account opening fee
    2. Monthly minimum balance fee
    3. Counter service and online service fee
  5. What additional services needed?
    1. Company credit card
      1. Hong Kong PayPal account is the only PayPal account that can withdraw to a Hong Kong bank account, and opening a Hong Kong PayPal account requires a credit card with a Hong Kong billing address.
      2. For the HSBC company credit card, at least HKD $30,000 deposit is required to secure a card with HKD $30,000 of credit.
    2. L/C account
    3. Life insurance
    4. Investment services

Conducting a name search for a Hong Kong company

October 25th, 2012
  1. Go to http://www.icris.cr.gov.hk/csci/
  2. Select “Unregistered User
  3. In the new pop-up window, select “Accept and Login
  4. Select the “Search” drop-down menu, then select “Company Name
  5. Use “Left Partial Search ” to search for existing companies with names similar to your proposed company name
  6. *Very Important* - Use “Exact Name Search” to confirm the availability of the company name
  7. Note: Do not include sensitive words such as Guns, Weapons, Bank, etc in the company name. Also avoid using the following words in the company name: Octopus, International, Worldwide, Global, Finance. If the company name contains the word “Broker“, you will be required to provide appropriate license before opening the business banking account.

Starting a Money Exchange business in Hong Kong

July 13th, 2011

Any company that plans to conduct money exchange business in Hong Kong must register with the Joint Financial Intelligence Unit (JFIU): http://www.jfiu.gov.hk

We have also heard that as of today HSBC no longer opens bank accounts for companies that conduct money exchange. Both the Standard Chartered Bank and the Bank of China will open the bank accounts on a case by case basis.

英屬處女群島(BVI)有限公司註冊須知

July 9th, 2010
  • 在BVI有限公司成立之前, 公司董事及股東必須提供護照及住址証明正本. 如不能的話, 必須提供護照及住址証明的核証或公正影印本.
  • 不是所有公司或團體都願意跟BVI有限公司做生意的. 所以在成立BVI有限公司前,最好詢問供應商及客人是否願意和BVI有限公司做生意。
  • BVI有限公司無須註冊為非香港公司就可以在香港持有物業.
  • BVI有限公司是不能在香港營業及出租物業的. 但是可以把BVI有限公司在香港註冊為非香港公司. 當BVI有限公司註冊為非香港公司之後, 其運作及責任跟一間香港公司差不多. 非香港公司必須申請商業登記證才可以在香港營業, 而每年必須更新商業登記, 提交週年申報表, 核數, 報稅及交稅.
  • BVI有限公司是可以在香港開設銀行帳戶的. BVI有限公司在銀行開戶時必須提供以下文件:
    • 董事及股東的護照及住址証明正本. 如不能的話, 必須提供護照及住址証明的核証本或公正本;
    • 董事就職証明(Certificate of Incumbency);
    • 公司註冊証書(Certificate of Incorporation);
    • 公司章程(Memorandum and Articles of Association)
  • 如果要用BVI有限公司在銀行申請商務信用咭, 公司董事或股東必須在該銀行有私人帳戶, 而商務信用咭會連接到該私人帳戶.
  • 註冊BVI有限公司時, 我們將會提供一個在BVI的註冊地址. 但是這個BVI地址是不能作郵寄之用的. 在註冊公司時, 可以提供一個聯絡地址.除非你想我們為你收取信件, 否則是不用使用我們的聯絡地址服務. 香港的銀行亦可以郵寄文件到世界任何地方. 你可以用一個非香港或非BVI地址作為公司的聯絡地址
  • 公証BVI有限公司文件是比公証香港公司文件貴很多的.
  • 如果公司董事或股東是一名美國公民或永久居民, 公司董事必須簽署一份聲明,証明公司收入是合法的, 及公司的董事或股東會依從美國法律報稅.
  • BVI有限公司是可以在香港開設投資帳戶買賣香港股票. 但是這樣做的話, 該公司在香港會有收入, 可能會被稅局要求申請商業登記及交稅. 如果在香港買賣股票, 最好還是用私人名義. 如果BVI有限公司內其中一位董事或股東是美國或加拿大公民或永久居民, 銀行是不會開設投資帳戶的。
  • 我們的BVI有限公司註冊費用

Notes on BVI Company Incorporation

July 4th, 2010
  • Before BVI company incorporation, the directors’ and shareholders’ original passports and residential proofs must be provided. If not, the certified true copies or notarized copies of the documents must be provided.
  • Note that not all companies or organizations are willing to do business with BVI companies. Before forming a BVI company, you may want to ask your suppliers or clients whether they are willing to do business with a BVI company.
  • A BVI company can hold properties in Hong Kong without being registered as a non-Hong Kong company.
  • A BVI company by itself cannot conduct business or lease property in Hong Kong. By itself, it cannot subscribe to any services in Hong Kong (such as subscribing mobile phone service or courier service.) However, it can be registered in Hong Kong as a non-Hong Kong company. Once it has been registered, it can be operated as if it were a Hong Kong company, and a Hong Kong business registration will be issued to the BVI company. However, the company will need to file Annual Return and yearly audited financial report to the Hong Kong government, and pay tax in Hong Kong if there is any profit generated here.
  • A BVI company can open a bank account in Hong Kong. The following documents are required for the account opening:
    • the directors’ and shareholders’ original passports and residential proofs. If not, the certified true copies or notarized copies of the documents;
    • Certificate of Incumbency;
    • Certificate of Incorporation;
    • Memorandum and Articles of Association.
  • To obtain a commercial credit card for the BVI company, the commercial credit card will be required to link to a personal bank account in the same bank of the director or shareholder.
  • The BVI company will come with a registered office address in BVI, however, the address cannot be used for mailing purpose. There is no need to use our address as the Corresponding Address of the company unless you want us to receive mails for it. You may use a non-Hong Kong / non-BVI address as the Corresponding Address of the company.
  • The cost of legalizing the documents of a BVI company will be much higher than that of a Hong Kong company.
  • Directors or shareholders of a BVI company who are U.S. citizens or residents will be required to sign a form declaring that all incomes of the company is legal and that they will fulfill their tax filing obligation.
  • BVI companies can open investment bank accounts in Hong Kong to trade stocks. However, as profit may arise in Hong Kong, the BVI companies may be required to be registered as a non-Hong Kong company. Therefore, it is recommended to use a personal bank account to trade stocks in Hong Kong. The banks in Hong Kong are unlikely to open investment accounts to the companies in which U.S. or Canadian citizens or residents are shareholders or directors of the companies.
  • Our BVI Incorporation Pricing

Opening a Travel Agency in Hong Kong

February 2nd, 2010

The steps of using a Hong Kong limited company to set up a Travel Agency are as follow:

  1. The authorized capital should be set to at least HKD $500,000, so there will be an extra governmental fee of HKD $500 or more for the company registration;
  2. All the shares must be assigned, ie, paid-up capital should be at least HKD $500,000. The company will then have at least HKD $500,000 of asset at the time of incorporation;
  3. A letter issued by a Hong Kong CPA / lawyer certifying that HKD $500,000 has been deposited into the company’s bank account. Note that the money can be withdrawn after the TIC membership approval;
  4. If possible, check the company name with the Travel Agents Registry before company registration: +852 2807 1199;
  5. Leasing of an actual office in Hong Kong. While the company can do any business, the office can only operate the travel agency;
  6. If none of the directors have work permits to work in Hong Kong, the company must hire someone who can work legally here;
  7. Read the FAQs here:
    1. http://www.tar.gov.hk/eng/frequently/index.html
    2. http://www.tichk.org/public/website/en/member_service/membership/application/html
    3. http://www.tichk.org/public/website/en/forms/membership/application_info_english.pdf