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Holding Company in Hong Kong

Updated: Feb 25

Guide to holding company regime

Holding Company in Hong Kong

Multinational corporations may decide to form a holding company for a number of reasons. For example, a holding company may be an efficient way to manage a group of subsidiaries in a particular region by centralizing financing, licensing and management activities. Holding companies can also provide tax efficiencies related to dividend withholding and capital gains taxes.

Selecting a suitable location for a holding company is a complex process – involving consideration of commercial, economic, logistical and operational requirements. The tax attributes of the location are also a relevant factor. How will holding company income and gains be taxed and what is the effective tax rate? Are there substance requirements? Are payments from the holding company subject to withholding tax? Does the location have an extensive network of tax treaties?

Pure Equity Holding Company

Pure equity holding companies are subject to a reduced economic substance requirements. The definition of a pure equity holding company refers to a company whose main function is to only hold company equity, and only earn dividends, disposal income, and income arising from the acquisition, holding or sale of such equity. The receipt of incidental interest income (such as interest received on dividend deposits) should not affect the taxpayer's status as a purely equity holding company.

The reduced economic substance requirements are:

• compliance with all applicable registration and filing requirements under the Companies Ordinance, the Limited Partnership Ordinance and the Business Registration Ordinance, etc.;

• carrying out certain economic activities (i.e. holding and managing its equity participation) in Hong Kong either by itself or by another entity; and

• having sufficient human resources and premises to carry out specific economic activities.

For example, a pure equity holding company has only one nominee director in Hong Kong, and holds and manages equity investments outside Hong Kong. In this example, although the company hired a service provider to handle the company registration and filing, it still did not meet the economic substance requirements.

Non-Pure Equity Holding Company

The economic substance requirements are:

• carrying out specified economic activities (i.e. making the necessary strategic decisions and managing and assuming the major risks of any asset it acquires, holds or disposes of) by itself or another entity in Hong Kong;

• employing sufficient number of eligible employees to carry out designated economic activities in Hong Kong; and

• Sufficient amount of operating expenses incurred in Hong Kong.

How Bestar can Help

Some general information about how Bestar can help holding companies in Hong Kong:

Services offered by Bestar for holding companies:

Bestar can offer a variety of services to holding companies in Hong

Kong, including:

  • Company formation and registration: Helping set up the holding company and ensuring it complies with all legal and regulatory requirements.

  • Accounting and bookkeeping: Maintaining accurate financial records, preparing financial statements, and complying with Hong Kong accounting standards.

  • Taxation: Advising on Hong Kong tax laws and regulations, filing tax returns, and minimizing tax liability.

  • Compliance: Keeping the holding company compliant with all relevant laws and regulations, including anti-money laundering (AML) and know your customer (KYC) rules.

  • Corporate secretarial services: Managing the administrative aspects of the holding company, such as meetings, board resolutions, and share registers.

  • Auditing: Conducting audits to ensure the financial statements are accurate and complete.

Specifics for holding companies:

Holding companies have unique needs and considerations, so experience in this area is important. Some of the specific services Bestar may offer include:

  • Structuring the holding company: Advising on the best structure for the holding company based on the company's goals and tax implications.

  • Managing subsidiaries: Providing accounting, tax, and compliance services for the holding company's subsidiaries.

  • Transfer pricing: Advising on transfer pricing policies to ensure compliance with regulations and minimize tax liability.

  • International tax planning: Helping the holding company structure its global operations in a tax-efficient manner.

Next steps:

To get more specific information about how Bestar can help your holding company in Hong Kong, you should contact us directly.

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