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Hong Kong Remains Foreign Firms' Favourite Asian Base

by Mary Swire, Tax-News.com, Hong Kong

03 October 2007


Hong Kong continues to be one of the most preferred locations for overseas firms managing their operations in the Asia Pacific rgion, thanks in part to its low and simple taxes, and proximity to mainland China.

New figures have shown that 60.4% of the 6,440 Hong Kong firms representing overseas parent companies are regional offices or headquarters - an all time high according to Mike Rowse, Director-General of Investment Promotion at Invest Hong Kong, the government's investment promotion agency.

"For us at Invest Hong Kong, there is no better advertisement for our city than companies which do their due diligence and select Hong Kong as their primary office in the region," he commented upon the presentation of the annual survey of Mainland and overseas businesses in Hong Kong.

"Since the handover in 1997, the number of regional headquarters and regional offices has increased 55%. It's certainly silenced a lot of the critics who predicted the demise of Hong Kong a decade ago," Rowse added.

The survey found that there were several key favourable factors affecting the choice of Hong Kong as a location for regional headquarters and local offices, including: a low and simple tax system; free flow of information; absence of exchange controls; corruption-free government; good communication, transport and other infrastructure; free port status; geographical location; availability of business services and professional support services; rule of law and independent judiciary; and political stability and security. Unfavourable factors for Hong Kong included the availability and cost of residential and business accommodation.

The survey also revealed that headquarters, regional and local offices together employ almost 346,000 people in Hong Kong, accounting for around one in 10 of the working population.

At the start of June, there were 1,246 regional headquarters, 2,644 regional offices and 2,550 local offices in Hong Kong representing their overseas parent companies, up 1.5%, 1% and 1.6% on a year earlier.

The US topped the list of countries/territories with regional headquarters (298), followed by Japan (232) and the UK (124). The major lines of business of regional headquarters were wholesale, retail and import/export trades; business services excluding information technology, and transport and related services. They employed 131,347 people in Hong Kong.

The Mainland topped the list of countries/territories with local offices (480), followed by Japan (431) and the US (394). The major line of business of local offices were wholesale, retail and import/export trades; finance and banking; and business services excluding information technology. They employed 119,476 people in Hong Kong.

Meanwhile, the inflow of foreign direct investment into Hong Kong also soared more than 30% on a year earlier, to US$27.1 billion for the first half of this year.

A comprehensive report in our Intelligence Report series looking at offshore and onshore corporate structures and their tax implications is available in the Lowtax Library at http://www.lowtaxlibrary.com/asp/subs_reports.asp and a description of the report can be seen at http://www.lowtaxlibrary.com/asp/description_report7.asp

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