How to Legally Avoid Taxes with a Hong Kong Company?

In China, many companies and individuals choose to register a company in Hong Kong. One of their main purposes is to avoid tax.

China domestic companies need to pay more taxes, which is a big expense for small businesses and individuals. Once the companies are registered, even if they do not operate and have no any income, they must pay a variety of different taxes every month, such as business tax, stamp tax, etc. Even if the companies bankrupt, they have to pay the cancellation fee, and they also need to pay stamp tax according to the companies’ registered capital. Therefore, it is necessary to open a Hong Kong company to avoid taxation. The tax avoidance here is reasonable tax avoidance, not tax evasion, so there is no legal risk.

How to avoid taxation after registering a Hong Kong company?

1. Use the Hong Kong bank account applied by a Hong Kong company. The business account of the Hong Kong company has no limitation of foreign exchange, and if there are no Hong Kong clients, you do not need to pay tax only by an application made by the company, because the policy of Hong Kong is "territorial source taxation".

2. If you have a company on the mainland, you can use the name of a Hong Kong company to talk about business. If the customer does not want a company in mainland China, then you can use a Hong Kong company account to receive remittances, so that there will be no business tax.

3. For export trade, you can use the Hong Kong company to get a cut of the discount, and this part also has no tax in the offshore company.

4. Usually there are many customers operating in this way: after registering a Hong Kong company, they receive orders from overseas by name of the Hong Kong company. Assuming that the order amount is USD100, 000 and if the amount to the domestic factory for production export is USD70, 000 you can ask customer to pay the money into your Hong Kong company account. Then we can pay the cost of USD70, 000 back to the domestic factory to complete the write-off and your Hong Kong company has already earned USD30, 000 in profits. As long as the profits earned by Hong Kong company do not come from Hong Kong's mainland, they can be reasonably tax-free and no need to pay profits tax to the Hong Kong Government.

5. The reasonable matter is to make reasonable tax avoidance through the loopholes in the national tax laws and regulations.

In practice, there are different tax avoidance methods for different objects of taxation. One of the basic methods is to use related transactions to take the form of transfer pricing, that is, affiliated companies implement products or non-products transfer in higher or lower than the normal market price to jointly obtain more profits. In this transfer, the transfer price of products is according to the wishes of both parties in order to pay less tax.

6. Operate through a Hong Kong company, and then make account by an accountant, to minimize the net profit, and pay less tax.

7. Apply for zero declaration directly, that is, zero declare goods for duty. In this way, less tax will be generated and the effect of reasonable tax avoidance will be achieved.

Reasonable tax avoidance is very important for a company, and according to the statement of an economist: Without tax avoidance, 95 percent of China's enterprises will go bankrupt. Thus it can be seen how important tax avoidance is. As long as use well of Hong Kong companies, and the different policies between China and Hong Kong, it is very simple to get a reasonable tax avoidance.

If any questions, welcome to contact TCBC.