The
SAR's non-discriminatory low tax regime makes
it an extremely attractive location for holding
companies to base their operations. Unusually
low tax rates and a range of generous tax deductible
allowances are further complemented by the complete
absence of certain types of taxation. The principal
fiscal advantages available to holding companies
are as follows:
Dividend
Income:
Dividend income received by a holding company
from a resident or non-resident subsidiary
is free of an assessment to profits tax. Branch
profits remitted to the parent company receive
the same fiscal exemption.
Capital
Gains: Capital gains made by a holding
company on the sale of shares in a resident
or non-resident subsidiary are free of an
assessment to capital gains tax since there
is no capital gains tax (and since in the
case of a non resident subsidiary the profits
arose outside the jurisdiction and therefore
are not taxable under the "territorial
principle"). Nor unlike other jurisdictions
are capital gains deemed trading income and
assessed to a profits tax.
Dividends Distributed: Dividends distributed
to shareholders are free of withholding taxes
as there are no withholding taxes in Hong
Kong.
The
Territorial Principle & Controlled Foreign
Company Legislation: Unlike other jurisdictions
Hong Kong does not have controlled foreign
company legislation under which the profits
of a non-resident subsidiary are taxed as
if they were the profits of the resident parent
company. Under the territorial principle income
whose source is deemed to be outside the territory
is exempt from tax in Hong Kong.
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