Hong Kong & Singapore

and their territorial tax system

How can they be used in Russia

Globalserve SeminarNovember 2013

By Phani Schiza Antoniou

One of the major financial and banking centres in the world Sound legal system Highly reputable- stable jurisdictionBoosting economyFinancial stability Good communication infrastructure English widely spokenThe gate to China mainland

FACTS about Hong Kong

Company Type: Limited Liability Company Governing legislation: Hong kong company registry is the governing authority and companies are registered under the Hong Kong Ordinance 1984, which is similar to Anglo saxon system. But new legislation is in place as from 2014 Information published: Names of officers appear at public registry but nominee officers can be used to preserve confidentiality Accounts : audited financial statements must be prepared and filed but information is not publicly accessibleSecretary: Local secretary compulsoryCapital : in any currency and no minimumRegistered agent needed Minimum shareholders and directors: 1Time for registration : 10 days

Hong Kong company main characteristics

Equity : shares will have no par value and it is the shareholders who will determine its price. Also there will be no need to proceed with increase of capital at premium and maintain separately share premium reserve. Now all capital raised will be issued capital No requirement for authorised capital approval. Easier to reduce capital by special resolution; no need to apply to court.Bearer shares not allowed and if issued in past must be converted into registered shares

Directors need to issue credibility declaration that the company can repay its obligations within the period of 12 months . Likewise credibility declaration is needed to be issued by directors in case of buyouts or entrance of new shareholders in the company . Increased responsibility for the director the declarations are not correct. If statements were issued without having the facts to base on, 2 years imprisonment

Major changes introduced in Hong Kong companies as a result of the new legislation

enacted in 2014

Registrar’s rights increase with respect to documentation required for filing of changesShare transfer must be filed at the Registrar within two months; if not notice must be sent to provide explanations; high fines Article 140. director cannot issue shares without directors’ resolution Capital tax is abolishedShareholders’ meetings can be done via teleconference Corporate Documents : No need to register Memorandum. Just file the articles No sealDirector alone can sign and represent the co. if it is two directors then one director together with the secretary can represent the company

Major changes introduced in Hong Kong companies as a result of the new legislation

enacted in 2014

Corporate director is still allowed but at least one must be physical person. Have 6 months after the law is enacted to make the adjustments need under the new lawTransactions in which the directors have an interest, it must be announced and the transaction to be approved by the shareholdersDirectors details and addresses are registered at the public registry but this information is not open to public but creditors can ask for the information through legal actionIncreased responsibility of secretary Financial reforming. Not audited financial statements for small companies

Major changes introduced in Hong Kong companies as a result of the new legislation

enacted in 2014

Companies registered in Hong Kong are not taxable provided no transaction is carried out in Hong Kong . If this is not the case the tax rate is 16.5% on profits madeA company will be liable for tax if:

It has its own premises in Hong Kong and employs staffIf company is partly or wholly managed on Hong Kong territory If its client base is in Hong KongIf its suppliers are in Hong Kong If merchandise for sale is stocked in Hong Kong

If none of the above, we apply for offshore tax exemption

Tax system in Hong Kong

It should be noted that Hong Kong is a special administrative area and it is permissible to conduct business in China without being subject to tax Tax Declarations: the Hong Kong tax authorities will send out a form entitled ‘Tax Return’ 18 months to the day after the registration of the company . Then it’s the moment to apply for offshore status and supply audited set of accounts Hong Kong Double Tax Treaty with Russia is of limited scope just for the aviationNo need for DTT in the past but since 2010 Hong Kong has signed 28 DTT and exchange of information

Tax system in Hong Kong

Ideal for Trading companies and services companies as they are not black listed like the classical offshore Principal agent schemeAsset protection as the last company in a structure, although it is more expensive than the alternative classical offshore Cannot be used as financing or holding or for royalties with respect to Russia because there is no Double tax treaty with Russia

Uses of Hong Kong companies

One of the major financial and banking centres in the world Sound legal system Highly reputable- stable jurisdictionBoosting economyFinancial stability Good communication infrastructure English widely spoken – highly educated personelThe gate to Far EastCommon law jurisdiction

Facts about Singapore

Company Type: Limited Liability Company (Pte) Governing legislation:Singapore Companies Act 1963 Information published: Names of directors and shareholders appear at public registry but nominee officers can be used to preserve confidentiality Accounts : financial statements must be prepared and filed. Audit financial statements required above minimum conditionsDirector. Minimum 1 and at least one to be from SingaporeSecretary: Local secretary compulsoryCapital : No minimum capitalRegistered agent needed Minimum shareholders and directors: 1Time for registration : 10 days

Singapore company main characteristics

On profits earned in territory upto SGD 100000 tax free for the first three years. From 100000-300000 tax rate at 8.5% Above SGD 300000 tax rate at 17%Condition for above is to be tax resident and not to have more than 20 shareholdersOn profits earned overseas companies are exempt from all taxes earned overseas as well as profits for financial securitiesProfit earned overseas but introduced in Singapore is taxedDividends distributed to shareholders are not taxed if company was taxed before

Tax system in Singapore

Tax declarations: Every year companies must provide following documents to IRAS:Estimate of taxable income EC1 within 3 months from year endDeclaration of taxes on cos’s income Form C by 30/11 together with Financial statements Declaration of income directly online on IRAs websiteDouble tax treaty with Russia:

WHT 5* /10% if minimum 15% shareholding WHT 7.5% on interest and royalties

Good for holding company in Russia but not for financing or royalty, Becase of the 7.35% WHT on interest it falls behind the other holding jurisdictions

Tax system in Singapore