A Hong Kong non-profit organisation also presented as a caritative company in Hong Kong obey to the following rules:
- Must be established for charitable purpose and for public benefit
- The charitable purposes being classified in four distinct areas, charitable nature for the benefit of the Hong Kong community, advancement of a religion, advancement of education and last but not least relief of poverty.
- It should be recognized by the Hong Kong Inland Revenue Department, the department will not consider as charitable purpose: encouragement of a particular sport, provision of playing field or scholarship for a particular industry or company, attainment of a political object.
In order to benefit from a tax exemption, the caritative company in Hong Kong should submit to the IRD an application with list of activities planned for the next 12 months as well as the draft incorporation statutory returns and the draft articles of association.
This long process, up to six months before COVID 19 disturbances, should satisfy the IRD with the below criteria:
- Precise and clear entity’s objectives
- Limiting the application of funds to its stated objectives
- Prohibiting distribution of funds/assets amongst its members
- Prohibiting directors from receiving remuneration and avoiding any conflicts of interests
- Specify another charity for the remaining assets if the caritative company in Hong Kong engage with a dissolution
It’s crucial for the Hong Kong non-profit organisation to not receive any donation before the section 88 tax exemption status has been granted.
The process to setup a caritative company in Hong Kong.
- Using a limited by guarantee company with at least two members, two directors, one company secretary and later on one auditor but first
- Prepare custom drafting of articles of association
- Obtain the IRD approval then register the limited by guarantee company, requesting the dispense of the world limited is also an option.
A nominee shareholder agreement is an additional layer of privacy to protect the ultimate beneficial owner of a company.
Because of the anti-money laundering rules and regulations, many countries organized public registers of beneficial owners and controllers of private companies. In such context a nominee shareholder could be proven ineffective in protecting the ultimate beneficial owner from public exposure.
But some countries, as Hong Kong, implemented a Significant Controllers Register which is NOT of public access, the only public exposure for the shareholders of a Hong Kong Company will remain the Company Registry accessible against payment.
The Hong Kong Significant Controllers Register is available to law enforcement and tax authorities and kept / maintained by the company secretary or a designated representative.
The use of nominee shareholder services in Hong Kong is efficient , in other countries , say UK, this is totally useless and will create additional questioning by Financial Institutions.
A nominee shareholder could be an individual or a corporate entity and the nominee shareholder agreement is basically a declaration of trust with an indemnify for the nominee.
Nominee shareholder services in Hong Kong are not trendy, this because of the additional burden when preparing a compliance report to open or to maintain the corporate bank account.
Nevertheless a nominee shareholder agreement will in Hong Kong protect the ultimate beneficial owners from unwanted public exposure and less to say its a necessity for residents in countries with high crime rates.
Few years ago the profession wasn’t regulated, now all the Hong Kong Services Providers must be licensed, they should hold a Hong Kong Trust or Corporate Services Provider license, in short a TCSP license.
To select of of the many Hong Kong Corporate Services Providers we would suggest to start eliminating the ones handling mostly public companies, their services are highly qualified but for a private company it is simply too much and often too costly.
Numerous CPA firms are offering Corporate Services in Hong Kong, often with low incorporation initial costs as such services are given mainly to attract clients for accounting and audit services. There is a potential issue with theses providers, the possibility to use another CPA services are limited so the clients are kept with a single provider and are loosing freedom and access to other services.
Also a CPA firm has a too often a low exposure to International constraints, a tendency to be self-centered to the Hong Kong situation with a lack of experience to protect the interest of a foreign national under an heavy tax pressure.
To select one of the Hong Kong Corporate Services Providers we suggest to go for an independent company, not to a firm willing to sell its own accounting and audit services but in contrary a firm offering a selection of CPA firms adapted to your needs and business model.
We would not also advise to work with a Corporate Services Provider in Hong Kong boosting on its website the thousands clients that are supposed to work with them. Thousands of clients also means thousands of risks and this could be adverse for your relations with banks and other business partners if one of their clients attract issues with adverse media or legal cases.
To select one of the many Hong Kong Corporate Services Providers our position is SMALL IS BEAUTIFUL, a small firm with personalized services and a limited exposure, a good team speaking your language and with experience.
If the Hong Kong Corporate Services Provider don’t start by asking some questions, don’t try to immediately understand whom you are and what are you needs, just go to the next one. Hong Kong is offering an important choice of very good providers working under TSCP license.