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Offshore Status of Hong Kong Companies Simplified

A Hong Kong-based company can be set up legally without a physical office, allowing for remote operations. If all income is earned from outside Hong Kong, the company is not taxed in the region.

Offshore vs. Onshore Companies in Hong Kong

Offshore Companies

Onshore Companies

Must file audited financial statements and hold annual meetings.

Must file audited financial statements and hold annual meetings.

Eligible for tax exemptions on offshore income.

Limited tax exemptions.

No taxes on profits, capital gains, or overseas dividends.

16.5% corporate tax on profits, capital gains, and dividends.

Cannot trade with Hong Kong customers or operate within Hong Kong.

Can trade with Hong Kong customers and operate within Hong Kong.

Offshore companies are more flexible and cost-effective due to fewer regulations and lower operational costs. However, onshore companies have more legitimacy and easier access to the local market. The choice depends on your business needs and goals.

Determining Offshore Status

Can Woodburn help you?

Two tests determine if a company is taxed in Hong Kong:

  1. Contract Effected Test

  • Focuses on whether contracts are made in Hong Kong.

  • Considers negotiation, conclusion, and execution of contracts.

  • Other factors include shipping, order processing, procurement, storage, financing, and payment methods.

  1. Operations Test

  • Applies to non-trading and non-lending income sources.

  • Considers where the income originates and where profit-generating activities occur.

Requirements for Offshore Status

To qualify for offshore status, a company must:

  • Have no physical presence in Hong Kong.

  • Employ no local staff in Hong Kong.

  • Have no Hong Kong-based customers or suppliers.

  • Conduct all sales and purchase negotiations outside Hong Kong.

  • Avoid importing goods into Hong Kong.

  • Ensure all service agreements and invoices involve parties outside Hong Kong.

  • Conduct core business activities outside Hong Kong.

If these conditions are met, the tax authority will review the documentation to decide on the company's tax liability. Even after obtaining tax exemption, the company must still maintain annual accounting and audit reports and file tax returns in other jurisdictions.

Important Documentation for Offshore Status

  • Organizational Chart: Shows company presence in Hong Kong and overseas, including office locations, employee details, and responsibilities.

  • Travel Itinerary and Passports: Travel schedules and passport details of directors and key personnel.

  • Business Activities Description: Details of who conducted business activities and where they took place.

  • High-Income Documentation: Communication records, agreements, transaction records, and banking documents supporting income claims.

Annual Compliance for Offshore Companies

  • Business Registration Renewal: Renew annually or triennially, at least 1.5 months before expiration.

  • Accounting Bookkeeping: Keep records at the registered office for seven years.

  • Records Maintenance: Keep 10-year records of company details, members, meetings, and decisions.

  • Profit Tax Return: Submit profit tax returns to the IRD within one month of the issue date.

  • Annual Return: File an annual return to the Companies Registry within 42 days of the formation anniversary, signed by an authorized representative.

By following these guidelines, you can ensure your Hong Kong company remains compliant and enjoys the benefits of offshore status.


 

Woodburn Accountants & Advisors is one of China’s most trusted business setup advisory firms.


Woodburn Accountants & Advisors is specialized in inbound investment to China and Hong Kong. We focus on eliminating the complexities of corporate services and compliance administration. We help clients with services ranging from trademark registration and company incorporation to the full outsourcing solution for accounting, tax, and human resource services. Our advisory services can be tailor-made based on the companies’ objectives, goals and needs which vary depending on the stage they are at on their journey.

 

Talk to an expert


Schedule a 30-mins complimentary, no-obligation call to see how Woodburn can help you. Book a call with our Head of Business Advisory - Kristina Koehler-Coluccia.

Topics we can advise on include:

  • Company Registration

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  • Tax & Audit Services

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  • Switch to Woodburn

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Our calls are automatically scheduled via Zoom - or via Teams, WeChat or WhatsApp upon direct request. 

Our advisory calls are available from Monday-Friday from 8am to 5pm CEST and Wednesday until 9pm CEST.

 


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Woodburn Accountants & Advisors is one of China and Hong Kong’s
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