As an offshore financial centre, Hong Kong has many winds in its favor: its finance-friendly environment, its sophisticated legal framework, its position within China, and to some degree the recent constricting measures of European and American financial regulators, have combined to make this city highly attractive to new businesses and funds.
Crucially, since 2006 Hong Kong has completely exempted funds investing in stocks and futures from paying tax once they have offshore status. With the remit for that status set to expand and the path to full internationalization of the RMB now in view, there will be a strong draw for mainland investment houses to issue their first PE funds in Hong Kong, and over the next decade the city is likely to become one of the largest centers of funds in the world.
The government’s determination to make life easier for funds and businesses goes a long way, but getting offshore status still takes some work. It is especially important that the structure of the company is planned at an early stage, before it starts doing business in Hong Kong.
Offshore status can only be granted to companies whose decision making body is not based in Hong Kong, so one of the key decisions that a company must take is whether or not to set up a Hong Kong subsidiary and, if so, what decision making powers it should have. Fortunately, under Hong Kong law, an offshore company can still have local infrastructure as long as its ‘central nervous system’ is located elsewhere.
Hong Kong may already be the ideal place to do business.
