Currency: Hong Kong dollar (HK$)
Population: 7.3 m (93.6% Chinese)
Language: Chinese & English
GDP $412 b USD (2015)
Hong Kong (officially the Hong Kong Special Administrative Region of the People’s Republic of China) is an autonomous territory on the Pearl River Delta of East Asia. In 214 BC, Qin Shi Huang, the first emperor of a centralized China, conquered the Baiyue tribes in Jiaozhi (modern-day Liangguang region and Vietnam) and incorporated the area of Hong Kong into his imperial China for the first time. After the First Opium War (1839–42), Hong Kong became a British colony with the perpetual cession of Hong Kong Island, followed by the Kowloon Peninsula in 1860 and a 99-year lease of the New Territories from 1898. In 1997 the Sino-British Joint Declaration transferred the sovereignty of Hong Kong to China (when it became a special administrative region with a high degree of autonomy and British common law).
Hong Kong is the world’s third largest financial centre and is characterized by low taxation and free trade. The Hong Kong Stock Exchange is the seventh largest in the world and raises 22 percent of worldwide IPO capital. Hong Kong is also Asia’s largest asset management centre with a combined fund management business worth HK$17.4tn.
Hong Kong has an independent taxation system and as such the taxation system in the People’s Republic of China is not applicable to Hong Kong. Hong Kong is unique as it taxes income based on source and disregards residence. This means only profits sourced in Hong Kong are taxable whereas other worldwide income is not taxable. In addition, the tax rate is fixed at a low 15% for individuals and 16.5% for companies. With no turnover tax (e.g. Value-Added Tax and Goods and Services Tax) Hong Kong is ideal for profit shifting and conducting re-invoicing activities.
"You’d be stupid not to try to cut your tax bill and those that don’t are stupid in business"
- Bono: U2