It comes to no surprise that you would often see the label “made in China” on a lot of the name brands we purchase. China has been known to have one of the cheapest labor costs in the world, and for the vast number of their workforce. This has allowed companies to earn a lot more, and not deal with strict production laws that govern their country of origin. If you are interested in China market entry , one idea could be through Hong Kong.
Why Hong Kong?
Hong Kong is called the “world’s freest economy” for good reasons; one of them being minimal taxes. It is mainly for this reason that a lot of companies have been setting up their offshore ventures there. They have absolutely no sales tax, no capital gains tax, and no value added tax. They only ask for small salary and profit tax and this is obviously an advantage to offshore tax planning . What happens now is that instead of paying so many taxes, you get a lot more money instead to improve your business and possibly attracting highly trained employees through an attractive salary (one that you can afford to give because of the small taxes!). The tax laws of Hong Kong make China market entry more tempting than it already is.
What should I consider?
Just because Hong Kong has minimal taxes doesn’t mean that it’s ok to push offshore tax planning aside. It’s still important since you still have to deal with it and taxes still affect your income. If you are thinking about China market entry, it’s a good idea to check tax advisory services every once in a while. If there are any changes, offshore tax planning is always going to help you adjust.