Earlier Entry into China

The signing of the Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA) in 2003 and six supplements since that time made doing business in China even more favourable for companies incorporated in Hong Kong. CEPA aims to strengthen trade and investment cooperation between China and Hong Kong and promote joint development of the two sides through progressively reducing or eliminating tariffs and non-tariff barriers on substantially all the trade in goods between the two sides; progressively achieving liberalisation of trade in services through the reduction or elimination of substantially all discriminatory measures; and promoting trade and investment facilitation.

Hong Kong Intermediaries

Hong Kong companies are often used as intermediate holding vehicles for investments in China for a variety of reasons. Chinese authorities are familiar with Hong Kong entities. There is also a system of China Appointed Attesting Officers in Hong Kong to provide certifications of Hong Kong companies that make it easier and faster for Hong Kong companies to establish China entities. Foreign companies would often have to resort to legalising and authenticating corporate documents, which is often an expensive and time-consuming exercise.

Hong Kong companies also benefit from the Double Tax Arrangement with China whereby the withholding tax of 10% on dividends repatriated to a foreign shareholder is reduced to 5% for a Hong Kong company. Furthermore, where a Hong Kong intermediate is used, it is possible to avoid the 10% withholding tax on capital gains imposed on disposal of a foreign invested enterprise.