Changes to Documentary Requirements relating to Listed Issuers and Other Minor Rule Amendments


The Stock Exchange of Hong Kong Limited (“Stock Exchange”) has on 1 February 2019 published the consultation conclusions on proposed changes to documentary requirements relating to listed issuers and other minor Rule amendments which was issued on November 2017.


The consultation responses were broadly in favour of the consultation proposals, where the amendment of Listing Rules will come into effect on 1 March 2019.

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Hong Kong 2019-20 Budget Highlights


On 27 February 2019, the HKSAR Government has announced its 2019-20 Annual Budget. Various one-off measures have been announced and we have enclosed a summary for your information.



Total Government Revenue and Total Government Expenditure for 2019-20 are estimated to be $626.1 Billion and $607.8 Billion respectively.
GDP Growth Forecast for 2019 is 2-3%. Headline Inflation rate Forecast and Underlying Inflation rate Forecast are both 2.5%.

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Highlights of 2018/19 Hong Kong Budget






GDP Growth of 2018 Forecast will be 3-4%. Headline Inflation of 2018 will be 2.2%, while Underlying Inflation of 2018 will be 2.5%.

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The new regime on keeping of Significant Controllers Registers


A new regime will be introduced to require all Hong Kong incorporated companies to keep “Significant Controllers Registers (SCR)”. This amendment will come into operation on 1 March 2018


To enhance transparency of corporate beneficial ownership in order to fulfill Hong Kong’s international obligations, the Companies Ordinance (Cap. 622) is amended to require a company incorporated in Hong Kong to obtain and maintain up-to-date beneficial ownership information by way of keeping a Significant Controllers Register. The Register should be open for inspection by law enforcement officers upon demand.

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What makes Hong Kong an attractive trust jurisdiction?


Over the years, we, Fung Yu CPA and Harris Corporate Solutions, have been working closely with entrepreneurs from various countries to build up their businesses.


We witnessed their ups and downs, and we have always wanted to give them the best solutions in different stages of life.


Attributed to the strong technical backgrounds (tax, audit & assurance, business consultancy) from both arms of our group; CPA firm and corporate services, starting from 2017 Spring, we have taken further steps in developing our personalized wealth planning services by broadening our range of services, such as immigration services, Hong Kong and overseas property agency and management services, etc. As requested by many of our existing clients, we started our private family trust services to complete our scope to cater our clients’ needs containing wealth creation, wealth preservation and wealth succession.

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HKSAR Chief Executive's 2017 Policy Address


Following the appointment of the new Chief Executive, the HKSAR government has announced on 11 October 2017 the first series of proposed new policies.  From vision turn to a plan for implementation, this policy address shows us how she would implement her governing belief for Hong Kong in the forthcoming years of her reign.  In this article, we would like to introduce to you the forthcoming policy changes of Hong Kong and how these changes affecting the businesses we are operating in Hong Kong, Mainland China and all trading partners around the world.



With new perspectives and assuming new roles, the current-term Government outlines its vision on various policy areas in this Policy Address, and puts forward new approaches and innovative measures to resolve economic and livelihood issues of concern to the community, with a view to charting Hong Kong’s future development with the people.

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China’s Free Trade Zones: 2016 assessment


Background & goals

In 2013, the Chinese government appointed Shanghai as the leading Free Trade Zone (FTZ) in PRC followed by other FTZ in Tianjin, Fujian and Guangdong in 2015. The concept of establishing an attractive zone with special attributes is not new in China and allows the Chinese leadership to monitor the benefits and risks in practice and then determine the feasibility of its expansion nationwide. Concretely, the FTZ philosophy translates into the liberalization of four pillars namely trade, investment, financial and government administration aiming at improving China’s competitiveness and attractiveness.

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New route for Private Equity funds investing in China


Recently, the State Administration of Foreign Exchange (“SAFE”) issued the Notice on Issues Concerning the Implementation of Pilot Foreign-Invested Enterprise Foreign Exchange Capital Settlement Management Reforms in Several Regions (“Circular 36”), calling for foreign-invested enterprises to “voluntarily implement foreign exchange settlement pilot programs” in 16 different regions, including Tianjin Binhai New Area, Shenyang Economic Zone, Nansha (Guangzhou), Hengqin (Zhuhai) and Qianhai (Shenzhen).

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New China France Double Tax Agreement


The new China – France Double Tax Agreement (DTA) was signed on 26 November 2013 and should take effect from as early as 1 January 2015. It will replace the aging 1984 PRC-France tax treaty. For companies doing business both in China and France this is an important agreement to understand to ensure correct calculations of China Corporate Taxes.

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Implementation of the New Trademark Law of the PRC


The amendment of the Trademark Law was passed through legislation on Aug 30, 2013 and came into effect on May 1, 2014. Understanding the impact of Chinese trademark laws is of relevance to anybody planning on setting up a company in China. Please find detailed below the seven main points that we have picked and summarized as a description and interpretation of the main amendments:

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A decade of European Business in China Confidence Survey findings and analysis


The European Chamber of Commerce in China just released the result of its 10th annual major survey “European Business in China Confidence Survey” and it has marked the decade of a wonderful initiative and a quality business survey. In a territory of few figures, the survey offers a realistic picture of a very discrete indicator: European entrepreneurs and top managers’ state of mind in China. 552 companies from various sectors responded to the survey. Amongst them, 64% of the respondents that participated in the 2013’s Edition, making the comparisons more reliable. Every company considering incorporating in China, establishing a company in the PRC or setting up a WFOE should consider these results.

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Reform in Chinese Companies Registration


Industrial and Commercial Reforms in Full Swing Nationwide


Pilot programs for commercial registration reforms in Mainland China are currently under way in several important cities and regions, including:


Zhongguancun, Beijing, the Shanghai Free Trade Zone, Chongqing, Shanxi (Taiyuan), Zhejiang (Hangzhou, Fuyang), Jiangsu (Nanjing), Hubei (Changsha), Hunan (Chenzhou, Guiyang County), Fujian (Xiamen, Fuzhou, Jinjiang, Pingtan Comprehensive Experimental Zone), and Guangdong (Shenzhen, Zhuhai, Guangzhou, Shunde District of Foshan, Dongguan). Furthermore, these reforms are to be launched nationwide in March 2014. With these reforms, industrial and commercial authorities have relaxed regulations on China incorporated companies, particularly in terms of registered capital requirements.  The changes in regulations may impact set up of companies in China as well as registration rules for forming WFOE and other companies in China.

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HKSAR Government 2016/17 Budget


The Financial Secretary announced on 24 February 2016 the proposed 2016/17 Government Budget: you will find below the highlights of the legislative proposal regarding taxes and other business-related financial initiatives.


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Shanghai: Pilot Program Transition Rules of Replacing Business Tax with VAT


Announcement of 2012 Pilot Program on Business Tax

Reformation to VAT and the Policy of Shanghai as a Pilot Site


The Ministry of Finance and the State Administration of Taxation of the PRC promulgated the “Pilot Program on Business Tax Transforming to VAT”, together with the “Implementation of Pilot Measures of Business Tax Transforming to VAT on Transportation Industries and Certain Modern Service Industries”, the “Regulations on Related Matters of Pilot Measures of Business Tax Transforming to VAT on Transportation Industries and Certain Modern Service Industries” and the “Regulations on Transitional Policy of Pilot Measures of Business Tax Transforming to VAT on Transportation Industries and Certain Modern Service Industries”, which specifies that with effect from 1 January 2012, the Pilot Program on Business Tax Transforming to VAT will be implemented in the transportation and certain modern service industries in Shanghai. 

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Hong Kong New Companies Ordinance


Hong Kong New Companies Ordinance


The compliance environment for companies in Hong Kong has undergone a fundamental change by the introduction of the new Companies Ordinance (“new CO”) that become effective on 3 March 2014. The new CO is applicable to all business in Hong Kong including sole proprietorship, private limited companies, public companies and companies limited by guarantee. Set up of new companies now follows the new rules and this makes company formation in Hong Kong easier. Hong Kong Company Secretaries, including those of Listed Companies, need to be fully aware of the ordinance.


We would like to take this opportunity to highlight some of the major changes as follows:

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Record Keeping and Retention Rules for BVI Companies


New Record Keeping and

Retention Obligations for BVI Companies


Following the enactment of the Mutual Legal Assistance (Tax Matters) (Amendment) Act 2012 (the “ new Act” ) by the Legislature of the Virgin Islands in November 2012, changes were made to the record keeping and retention obligations for British Virgin Islands (BVI) companies. These new rules need to be considered by those who have already, or are intending to, set up a company in the British Virgin Islands. Ensuring that rules regarding company formation and operation are correctly followed is one of the roles of your company set up service provider.


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Investing in Qianhai Special Zone


Located in the western port area of Shenzhen, at the east of the Pearl River Delta and backed by the Great South Mountain and the Small South Mountain, the Shenzhen Qianhai Bay Bonded Port Zone (“Bonded Port Zone” or “Zone”) is an important part of the Shenzhen Qianhai-Hong Kong Modern Service Industry Cooperation Area. The Priority Pilot Policy for Finance Reform in Qianhai, promulgated by the State Council, proposed that the Pilot Policies more specialized than those already applied in other Special Economic Zone should be implemented in the Shenzhen Qianhai-Hong Kong Modern Service Industry Cooperation Area in order to:


  • Develop a modern service industry development zone dedicated to innovation;
  • Create a pilot area for closer cooperation between Hong Kong and mainland China;
  • Create the conditions of an industrial upgrading of the Pearl River Delta region.
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In summary, the main changes to the Listing Rules include:


  • revising the declaration and undertaking by directors and supervisors in the form set out in Appendix 5B, 5H or 5I to include an undertaking to inform the Exchange of the director’s or supervisor’s contact information, to grant the Exchange with the power to gather information from supervisors and to align the Main Board Rules and the GEM Rules in relation to directors and supervisors’ obligations;
  • streamlining listed issuers’ filing requirements in respect of an issue of new securities;
  • removing the filing requirements for (i) documents that are submitted to the Exchange for record only and (ii) documents whose contents are already disclosed to the public; and
  • other minor Rule amendments and housekeeping Rule amendments.


Listed issuers are reminded that the revised Monthly Return (FF301M/FF301G) and the revised Next Day Disclosure Return (FF304M/FF304G) will take place on 1 March 2019.  Existing directors and supervisors of listed issuers are also reminded that they should submit their contact details (as required under the amended Rules 3.20 and 19A.07A (or GEM Rules 5.13A  and 25.04A) to the Exchange as soon as possible and in any event no later than 31 March 2019.


The revised monthly return, the revised next day disclosure return and the contact details form are available at:


The Consultation Conclusions and copies of submissions are available on the HKEX website at:


The amendments to the Listing Rules are available at:



  • Reduce salaries tax and tax under personal assessment for Year of Assessment 2018-19 by 75%, subject to a ceiling of $20,000
  • Reduce profits tax for Year of Assessment 2018-19 by 75%, subject to a ceiling of $20,000
  • Waive rates for 4 quarters of 2019-20, subject to a ceiling of $1,500 per quarter for each rateable property
  • Provide an extra 1 month allowance to recipients under Social Security Allowance Scheme; similar arrangements will apply to Working Family Allowance and Work Incentive Transport Subsidy
  • Provide a one-off additional $1,000 worth of Elderly Health Care Vouchers, and increase the accumulation limit of vouchers to $8,000
  • Provide a one-off grant of $2,500 to each student in need
  • Pay the examination fees for school candidates sitting for the 2020 Hong Kong DSE Examination



  • Waive the business registration fees for 2019-20
  • Regularise the Technology Voucher Programme and double the funding ceiling for enterprises to $400,000
  • Inject $1 billion into the Dedicated Fund on Branding, Upgrading and Domestic Sales, extend its geographical scope and increase the funding ceiling for enterprises
  • Extend the application period of the special concessionary measures under the SME Financing Guarantee Scheme to end June 2020
  • Expand the networks of Free Trade Agreement, Investment Promotion and Protection Agreement, and Comprehensive Avoidance of Double Taxation Agreement
  • Expand the Economic and Trade Of­fice network to strengthen external promotion and assist Hong Kong enterprises in exploring new business opportunities



  • Public Housing: estimated production for the next 5 years is about 100,400 units
  • Private Housing: annual production of private residential units in the next 5 years is estimated to be about 18,800 units on average
  • 2019-20 Land Sale Programme includes 7 commercial/hotel sites, capable of providing about 814,600 square meters of floor area
  • Set aside $2 billion to support NGOs in constructing transitional housing
  • Set aside $22 billion to implement the first batch of government projects under the “single site, multiple use” initiative



  1.  Financial Services Industry
  • Issue the first batch of government green bonds
  • Consider establishing a limited partnership regime and introducing tax arrangement to attract private equity funds to set up and operate in Hong Kong
  • Broaden the distribution network of local fund products
  • Provide tax concessions for marine insurance
  • Promote the use of Faster Payment System for payment of government fees and charges
  • Issue virtual bank licences
  • Establish the Academy of Finance
  • Provide seed capital for the Financial Reporting Council


  1.  Tourism
  • Support the continued implementation of the Development Blueprint for Hong Kong’s Tourism Industry


  1.  Innovation and Technology
  • Set aside $5.5 billion for the development of Cyberport 5
  • Set aside $16 billion for universities to enhance or refurbish campus facilities, in particular those for R&D
  • Inject $20 billion into the Research Endowment Fund of the Research Grants Council
  • Establish two innovative clusters in the Science Park focusing on “A.I. and robotic technologies” and “healthcare technologies”
  • Launch the $2 billion Re-industrialisation Funding Scheme
  • Allocate $800 million to support R&D work and the realisation of R&D results by universities, key laboratories and engineering research centres


  1.  Creative Industries
  • Inject $1 billion into the Film Development Fund


  1.  Professional Services
  • Allocate $150 million to support the development of an online international dispute resolution platform by NGOs


  1.  Construction Industry
  • Promote the digitisation of works supervision system and implement Construction 2.0
  • Upgrade the Project Cost Management Office under the Development Bureau


  1.  International Transportation Centre
  • Consider introducing tax and related measures to attract ship finance companies
  • Provide a 50% profits tax concession to marine insurance businesses



  1. Healthcare
  • Earmark $10 billion as a Public Healthcare Stabilisation Fund
  • Earmark $5 billion to expedite the upgrading and acquisition of medical equipment
  • Provide over $700 million additional recurrent funding for the Hospital Authority
  • Allocate $1.2 billion to establish the Hong Kong Genome Institute


  1.  Arts and Culture
  • Hosting large-scale world-class arts programmes and strengthening district arts activities
  • Support the digital conversion of film copies, film heritage and the operation of art groups


  1.  Sports
  • Inject $250 million into the Hong Kong Athletes Fund


  1.  Building the City
  • Earmark $6 billion for the enhancement of waterfront
  • Allocate $600 million to refurbish 240 public toilets by phases


  1.  Environmental protection
  • Provide $1 billion for government departments to install renewable energy facilities


  1.  Smart City
  • Develop a geospatial data sharing platform and 3D digital maps of the whole territory
  • Assign and auction spectrums by batches to prepare for the development of 5G



  • Allocate $20 billion to purchase 60 properties for providing over 130 welfare facilities
  • Allocate $1.36 billion to provide 500 residential care places and 300 subsidised day care places for the elderly
  • Allocate $1.298 billion to enhance services for toddlers, children and youths



  • Allocate $500 million to implement the IT Innovation Lab in aided secondary school to help students to build IT foundation
  • Allocate $200 million to expand the Apprenticeship Scheme for the Construction Industry


  • Reduce profits tax by 75%, subject to a ceiling of HK$30,000
  • Reduce salaries tax and tax under personal assessment by 75%, subject to a ceiling of HK$30,000
  • Increase the basic and additional child allowances
  • Increase allowance for maintaining a dependent parent or grandparent 
  • Increase deduction ceiling for elderly residential care expenses
  • Introduce a personal disability allowance
  • Widening the tax bands for salaries tax  
  • Increasing the number of tax bands from four to five



  1. Innovation and Technology

Focusing on 4 areas: biotechnology, artificial intelligence (A.I.), smart city and financial technologies by injecting more than HK$50 billion in these areas


  1. Financial Services Industry
  • Launch a Pilot Bond Grant Scheme
  • Launch a Green Bond Issuance Programme
  • Launch a Faster Payment System


  1. Tourism
  • To broaden markets and attract high value-added overnight visitors, develop education and tourism projects and enhance the Pilot Information Technology Development Matching Fund Scheme for Travel Agent.


  1. Trading and Logistics industry
  • Expand trade, investment and tax treaty networks to open up new markets
  • Redevelop the Air Mail Centre at the Hong Kong International Airport


  1. Business and Professional Services
  • Enhance the network of ETOs
  • To boost SMEs’ competitiveness
  • Assist local enterprises in seizing opportunities arising from the Belt and Road Initiative and Bay Area


  1. Construction Industry
  • Set up a Construction Innovation and Technology Fund


  1. Creative Industries
  • Inject funds into the CreateSmart Initiative



  • Provide an extra allowance to recipients of CSSA, Old Age Allowance, Old Age Living Allowance, Low-income Working Family Allowance and Work Incentive Transport Subsidy
  • Consider providing relief for low-income households not living in public housing and not receiving CSSA (the “N have-nots households”)
  • To effect the abolition of the MPF “offsetting” arrangement
  • Waive rates for 4 quarters of 2018-2019, subject to a ceiling of HK$2,500
  • To strengthen care for children and disadvantaged youth
  • To strengthen support for ethnic minorities
  • Provide a one-off grant of HK$2,000 to each student in need
  • Pay examination fees for candidates sitting for 2019 Hong Kong DSE Examination



  1. Healthcare
  • Increase funds to Hospital Authority so that it can employ all local medical graduates and enhance healthcare professional training
  • Improve facilities of Department of Health’s clinics, and upgrade healthcare teaching facilities
  • Provide a one-off additional elderly health care vouchers
  • Extend the Colorectal Cancer Screening Programme
  • Establish a fund to promote development of Chinese Medicine
  • Improve patient’s co-payment mechanism for purchasing drugs


  1. Arts and Culture
  • Set aside funds to improve and develop cultural facilities, and to support arts groups and artists
  • To strengthen promotion of Intangible Cultural Heritage of Hong Kong


  1. District Facilities
  • To improve facilities in 18 districts and inject fund to a Market Modernisation Programme


  1. Sports
  • Inject funds to support elite athletes, for training and hosting competitors, to encourage business sponsorship for large-scale sports events, and to encourage community participation



  • Strengthen support for teachers, kindergartens, integrated education and life-wide learning
  • Support the 10 publicly-funded post-secondary institutions
  • Enhance development of gifted students and increase the number of scholarships
  • Support students in need to participate in life-wide learning activities
  • Inject an additional fund to the Continuing Education Fund, and raise the subsidy ceiling
  • To support the work of the Youth Development Commission



  • Public Housing: estimated production for next five years is about 100,000 units
  • Private Housing: estimated production of first-hand residential property in next 3 to 4 years is about 97,000 units
  • 2018/2019 Land Sale Programme capable of providing about 530,000 square metres of floor area
  • Subsidize eligible projects to optimize the use of vacant government sites of school premises


For details, please refer to the following website:


If you would like to know more about our firm and our services, feel free to contact us at: 

A person has significant control over a company if one or more of the following 5 conditions are met:


  1. The person holds, directly or indirectly, more than 25% of the issued shares in the company or, if the company does not have a share capital, the person holds, directly or indirectly, a right to share in more than 25% of the capital or profits of the company.  
  2. The person holds, directly or indirectly, more than 25% of the voting rights of the company.
  3. The person holds, directly or indirectly, the right to appoint or remove a majority of the board of directors of the company.  
  4. The person has the right to exercise, or actually exercises, significant influence or control over the company.  
  5. The person has the right to exercise, or actually exercises, significant influence or control over the activities of a trust or a firm that is not a legal person, but whose trustees or members satisfy any of the first four conditions (in their capacity as such) in relation to the company.  


Directors of all Hong Kong companies are therefore required to take reasonable steps to ascertain their significant controllers.


Each Hong Kong company will also have to designate a representative to serve as a contact point for providing information about the SCR and related assistance to law enforcement officers. 


Failure to comply with the SCR obligations is a criminal offence, with both the company and every responsible person of the company liable for a fine of HK$25,000 and possible additional daily fines of HK$700.


This new regime is a positive move to ensure that there is adequate, accurate and timely information on the beneficial ownership and control of legal persons that can be obtained or accessed in a timely fashion by competent authorities.  Hong Kong is obliged to implement a credible regime to enhance transparency of beneficial ownership, so as to safeguard the integrity of our financial markets, and to ensure that our reputation as an international financial centre is reinforced by an open, trusted and competitive business environment.


For further details, please visit the following website: 


We will shortly contact our clients with existing Hong Kong companies about complying with the new SCR requirements.  In the meantime, please do not hesitate to contact us for any questions you may have.

What exactly is a Trust? According to the definition from The Hague Convention on the Law applicable to Trusts and their Recognition, 1987. ‘For the purposes of this Convention, the term ‘trust’ refers to the legal relationship created – inter vivos or on death – by a person, the settlor, when assets have been placed under the control of a trustee for the benefit of a beneficiary or for a specified purpose.’ As aforementioned, this fiduciary relationship consists of the following parties: –


  • Settlor: a settlor is a person who provides the assets to the trust.
  • Beneficiary: a beneficiary is a person who is entitled to have the distribution from the trust fund depends on the designated terms of the trust.
  • Trustee: a trustee has the legal ownership of the trust assets while it has the duty to control and administrate the trust assets for the benefit of the beneficiary as a whole and eventually distribute them in accordance with the terms of the trust.


For most clients, setting up a private trust allows them to address the following needs:


  • Succession planning: trust arrangement could provide flexibility on how to allocate the assets to your heirs or any of your loved ones according to your wishes.
  • Avoidance of probate: when a settlor transferred its assets to a trust, the assets are no longer owned by the settlor but the trustee. It minimizes the time to deal with those assets in the event of settlor’s death and it may avoid inheritance taxes.
  • Protection of assets: a trust may protect against any potential creditor claims
  • Confidentiality: trust is a personal arrangement between settlor and trustee. It is not required to have the trust publicized so the distribution within a trust is strictly protected.


There are many offshore financial centers that might offer different types of fiduciary services for high net worth clients (HNWC) to consider, but what makes Hong Kong more attractive than others?


  • Perpetual Trusts permitted: there is no perpetuity period of a trust.
  • Legal System and Judiciary: since Hong Kong’s trust legislation is based on English trust law, with a judiciary experienced in trust law, Hong Kong has become an attractive trust jurisdiction by giving a high level of confidence in the legal framework.
  • English as the Business and Legal Language: the language used in commercial contracts and the legal system in Hong Kong is English.
  • International Financial Centre: Hong Kong is one of the major international financial centers and stock exchanges in the world. Also, Hong Kong is a party to a wide range of international Tax Treaties.
  • Comprehensive Investment Infrastructure: owing to the well support provided by different professionals in various areas, Hong Kong has become an ideal platform and vehicle for investment.
  • International Business and Investment Hub: Hong Kong is a hub of international business in Asia due to its central geographic location. The well-developed transportation network, airport and telecommunications network facilitate business activities.
  • Strong Anti-Corruption Laws: Hong Kong is a member of The Financial Action Task Force On Money Laundering (“FATF”) therefore Hong Kong fully subscribes to the FATF’s recommendations in combating money laundering and terrorist financing.


For these reasons, the demand of Hong Kong trust has been increasing steadily over the years.


To find out more about our private trust services, please contact us:

Economic Development

  • Capitalise on the opportunities arising from the national Belt and Road Initiative and the Guangdong-Hong Kong-Macao Bay Area development proactively and holistically. Enter into a full agreement on Hong Kong’s participation in the Belt and Road Initiative with the National Development and Reform Commission as soon as possible.
  • Provide tax relief to small and medium-sized enterprises: profits tax rate for the first $2 million of profits proposed to be lowered to 8.25%, and standard tax rate at 16.5% for profits exceeding that amount. Only one enterprise nominated by each business group is eligible for the lower tax rate.
  • Encourage research and development (R&D) investment by enterprises, propose to introduce a 300% tax deduction for the first $2 million eligible R&D expenditure, with the remainder at 200%.
  • Increase the total number of comprehensive avoidance of double taxation agreements to be signed with other tax jurisdictions to 50 in the next few years.
  • Further expand the network of our Economic and Trade Offices (ETOs) to strengthen external promotion. Set up a new ETO in Thailand as the third one within the Association of Southeast Asian Nations (ASEAN) countries.
  • Further enhance bilateral ties through signing a free trade agreement and an investment promotion and protection agreement with the ASEAN in November this year, and the Hong Kong and Macao Closer Economic Partnership Arrangement this year.
  • Demolish and redevelop the three government buildings next to the Hong Kong Convention and Exhibition Centre (HKCEC) in Wan Chai North into a new wing linking and integrating with the existing HKCEC to provide an additional 23 000m² of convention and exhibition facilities.
  • Boost development of the tourism industry, including the development of cultural, heritage, green and creative tourism, and opening up a diversified portfolio of visitor source markets with high yield visitors.
  • Allocate more resources to the Financial Services Development Council. The Government will take the lead to issue green bonds in the coming financial year to encourage investors to finance their green projects through Hong Kong capital markets.
  • Consider adding a wider range of investment products into the two-way mutual access mechanism, such as exchange-traded funds, and extending the Mainland-Hong Kong Bond Connect to cover Southbound Trading.
  • The Hong Kong Monetary Authority to launch the Faster Payment System next year to further promote development of more diversified and flexible payment products by the market for the benefit of customers and merchants.


Innovation and Technology

  • Promote the development of innovation and technology (IT) on all fronts to bring new economic drive and to improve people’s daily lives.
  • Besides the proposed tax concession, set aside no less than $10 billion as university research funding to encourage private companies to increase investment in R&D.
  • Kick-start the $500 million “Technology Talent Scheme” to train and pool technology talent; through the injection of $3 billion into the Research Endowment Fund, provide studentships for local students admitted to research postgraduate programmes funded by the University Grants Committee (UGC); and subsidise local enterprises on a matching basis for training their staff on advanced manufacturing technologies.
  • Jointly develop with Shenzhen the “Hong Kong-Shenzhen Innovation and Technology Park” at the Lok Ma Chau Loop, and through the Guangdong-Hong Kong-Macao Bay Area development and collaboration between Hong Kong and Shenzhen, develop an international IT hub in the Bay Area.
  • Deploy $2 billion under the Innovation and Technology Venture Fund Scheme to co-invest, on a matching basis, with venture capital funds in local technology start-ups.
  • Deploy $500 million to encourage government departments to make good use of technology to enhance service quality.

Smart City

  • Invest $700 million to take forward key infrastructure projects for Smart City development to provide an “eID” for all Hong Kong residents, launch a pilot “Multi-functional Smart Lampposts” scheme at selected urban locations, reform the development technology of e-Government and build a big data analytics platform.
  • Take the lead to provide telecommunications companies with financial incentives to encourage the extension of fibre-based network to rural and remote areas.
  • Continue to develop an intelligent transport system, including the installation of a new generation of on-street parking meters for payment of parking fees via remote payment using mobile applications and providing real-time information on vacant parking spaces.

Creative Industries

  • Propose to inject $1 billion into the CreateSmart Initiative (CSI) to strengthen support for the development of the design and creative industries.
  • Provide additional resources to the Hong Kong Design Centre to implement a series of measures to reinforce Hong Kong’s status as a city of design excellence in Asia.
  • Review the operation of the Film Development Fund to promote further development of the local film industry, and nurture more professionals for film production or post-production.
  • Explore possible measures with the relevant Mainland authorities to facilitate Hong Kong publishers to tap into the Mainland market.

Land and Housing

  • The newly established Task Force on Land Supply to examine the different land supply options, so as to draw up a comprehensive package of proposals and a visionary land supply strategy.

Building Safety

  • Launch “Operation Building Bright 2.0” with a funding of around $3 billion, and deploy another $2 billion to subsidise owners of old composite buildings to implement fire safety enhancement measures under the Fire Safety (Buildings) Ordinance.

Care for the Elderly and Underprivileged, Improving People’s Livelihood

  • Set up a $1 billion Fund to promote gerontechnology and subsidise elderly service units to trial use and procure technology products.
  • Allocate an additional $447 million to extend the Short-term Food Assistance Service for three years to 2020-21, and at the same time conduct a comprehensive review of the initiative.

Labour Rights

  • Mitigate the impact of the abolition of the arrangement for “offsetting” severance payment/long service payment with Mandatory Provident Fund contribution on enterprises, particularly micro, small and medium enterprises by increasing Government’s financial commitment. Put forward a proposal that addresses the interests of the labour and business sectors in the coming months.


  • Discuss with the education sector on effective utilisation of the remaining $1.4 billion recurrent funding while measures under the $3.6 billion new education resources started to be implemented in September this year.
  • Inject $400 million into the Partnership Fund for the Disadvantaged, including $200 million for implementing after-school learning and support programmes, which will benefit some 130 000 grassroot children.

For details, please refer to the full content of “Policy address 2017”. (

Our Comment

We entrust our business partners and clients would be most concerned about tax relief to small and medium-sized companies: profits tax rate for the first HK$ 2,000,000 of profits is proposed to be lowered to 8.25%, and standard tax rate of 16.5% continue to apply for profits exceeding that amount. This relief is applicable for only one company nominated by each business group.

Planning for small & medium size-business group

A business group may be interpreted as group companies from ultimate holding company down to subsidiaries at lowest hierarchy of shareholding.

This new policy means an instant saving of HK$165,000 (16,5% – 8.25%) on each year of assessment for the first HK$2miilion profits arising from Hong Kong sourced income for a small & medium group of companies. And now businesses should have more room to conduct appropriate tax planning at the group level. As a practitioner, we mostly concerned about what further details will be announced by the government to prevent abuse or misinterpretation. So it is yet to see how new detail ruling and interpretation will be announced by government.

In short, the main features of FTZ lie in terms of business registration easing, no VAT charged for trading within the FTZ, more broadly fewer restrictions coupled with various incentives through preferential policies.


With just over a year after their inception, shadows still persist and FTZ attractiveness seems to be mixed so far. The government set a timeline of three to five years to make them mature so there is still room for improvement and adjustments. According to a survey conducted by the American Chamber of commerce in 2015 in Shanghai, a lot of respondents are still waiting for a clearer picture in terms of requirements and benefits. For example, a policy states that there is no minimum capital required to setup a new business while in practice a minimum amount is actually recommended by certain local industry and commercial administrative bureau in order to get their approval.


The lack of understanding also arises from the fact that the policies are often too general and leave room for interpretation or uncertainty. Given our deep understanding of local policies, we are confident we can help you to get the most out of the policies while avoiding misinterpretation risks.



Not surprisingly, all FTZ are located on the eastern coastal area widely known to receive a large amount of China’s inbound FDI

and each one of them possess at least one major harbor. The map below pinpoints their locations:


Shanghai Pilot FTZ

Inception Date: 29 September 2013 

Development Goals: 

  • Trade facilitation through regulation.
  • Financial innova- tion through capital account convertibility and liberalization.

Area Covered and Industries to Benefit:

  1. Waigaoqiao FTZ Bonded Area
    • Free trade, export processing, logistics warehousing, displaying and trading.
  2. Lujiazui Financial Area
    • Finance, insurance, securities, Multinationals HQ, futures markets.
  3. Jinqiao Export Processing Zone
    • Advanced & auto- mobile manufacturing, ecological industries, modern home appliances and biomedicine.
  4. Zhangjiang High Tech Park Integrated circuit
    • software and biomedicine
  5. Total 120.72


Tianjin Pilot FTZ

Inception Date: 21 April 2015 

Development Goals: 

Coordinating development of Beijing-Tianjin-Hebei region.

Easing trade, facilitating investment, and high-tech industries.

Area Covered and Industries to Benefit:


  1. Tianjin Airport Area
    • Telecommunications, biological, optoelectrical, advanced manufacturing industries, civil aviation, new energy and materials industries, airport-based logistics industry.
  2. Binhai CBD area
    • FinTech, cross-border e-commerce, cultural, media and creative industries.
  3. Tianjin Port Dongjiang area
    • Container terminal port handling, container logistics processing, trading, leisure and tourism.
  4. Total 119.9


Fujian Pilot FTZ

Inception Date: 21 April 2015 

Development Goals: 

  • Leverage the proximity with Taiwan.
  • Promote free-flowing of goods, services, capital and person.

Area Covered and Industries to Benefit:

  1. Fuzhou area
    • Advanced manufacturing base, plat- form for the Maritime Silk Road.
  2. Pingtan area
    • Port logistics, electronics industry, R&D headquarters, marine industry, high-end light manufacturing industry.
  3. Xiamen area
    • new high-tech R&D, airport-based industries, international trade related services, financial services, cruise economy, building the cross-Strait economic and trade cooperation.
  4. Total 118.04


Guangdong Pilot

Inception Date: 21 April 2015

Development Goals: 

  • Leverage proximity with HK and Macau through a deeper cooperation.
  • Creating an international, market-oriented and regulated business environment.

Area Covered and Industries to Benefit:

  1. Nansha Area of Guangzhou including Nansha Bonded port
    • Shipping industry, logistics, financial industry, international trade & high tech manufacturing.
  2. Qianhai-Shekou Area of Shenzhen
    • Financial industry, modern logistics, and information & technology services.
  3. Hengqin Area of Zhuhai
    • Tourism industry, finance services, cultural and educational industry, high tech industries.
  4. Total 116.2 sq km


View from the ground

According to the survey mentioned above aiming at capturing a snapshot on how things are perceived and dealt with on the ground, almost 73% of respondents believe that the Shanghai FTZ offered no tangible benefits and around 48% hasn’t noticed any change for their business. Around 45% pointed out a lack of information to clearly understand how the FTZ works and said they believed China’s regulatory environment favored local companies. Now let’s have a look at some of the most recurrent questions arising from our clients when it comes to grasp the FTZ framework and how to benefit from it.



How to set up a business in the FTZ?

The best way to proceed for foreign parties wishing to set up within the FTZ would be to proceed as follows:


For a new business:

(1)  Checking to what category the business belongs to: allowed, restricted or forbidden?

(2)  Carrying out feasibility studies, getting familiar with general policies and preferential treatment, performing advanced due diligence either in-house or outsourced (recommended).

(3)  Discussing and negotiating with regulators (along with professionals recommended).


For an existing business:

For company already registered outside the zone, a legitimate question might arise: should I open a branch within the FTZ or create a new entity within it? A company that sets up a branch within the FTZ might not be eligible to the preferential policies. For instance, it will be harder for the branch to get customs codes, the 10 digit code companies register with China customs in order to benefit from newly liberalized trading policies.


RMB cash pooling: another FTZ comparative advantage

Transferring money to overseas branch from China in order to conduct day to day operations abroad is a recurrent question. In the past few years, it has been possible for some businesses to transfer money abroad for working capital purposes but under strict requirements. For instance, multinationals could benefit from cross-border auto-sweeping between the parent company and their related subsidiaries.


The FTZ makes it now much easier for companies to conduct cross-border RMB cash pooling compared to outside of the zone. On top of that, even SMEs (in theory) are eligible to this service allowing them to reduce their operating cost and manage more efficiently their liquidity.


What to expect on RMB convertibility and capital account openness fronts? Although highly awaited, it doesn’t seem to be a priority for the policymakers at the moment especially in light of the recent developments namely capital outflows and RMB selling pressure. These two delayed but on-going projects will eventually, when completed, increase confidence and willingness to invest in China.



Better to wait or to step in now?

FTZ are still at their early stages so there is room for improvement. Before China, other countries have been promoted FTZ such as Brazil, Japan and South Korea to name a few. The main difference between these FTZ and the one in China lies in the financial openness and liberalization. One potential implication could be that a certain level of financial reforms is actually needed as a prerequisite in order to enable the FTZ to reach its full potential.


That being said, we do think opportunities currently exist within the FTZ. In addition, some factors such as but not limited to, the type of products or services sold, domestic or international market targeted and the limited space available to store bulky goods, should be carefully considered before making any decision. Lastly, opportunities also derive from indirect needs of companies already established in terms of non-core business needs such as accounting, HR, Audit and so on. In other words, these are opportunities for third party players to fill the gap. Firms should therefore not only think about FTZ in terms of preferential policies but also in terms of potential spillover effects.




Article 4 of Circular 36 stipulates that foreign-invested enterprises which primarily engage in investment can transfer directly their share capital into the bank account of the investee company accounts.


The document further clarifies that the foreign exchange capital account shall be temporary suspended as stipulated under “Notice of the General Affairs Department of the State Administration of Foreign Exchange on the Relevant Operating Issues Concerning the Improvement of the Administration of Payment and Settlement of Foreign Exchange Capital of Foreign-Invested Enterprises” (“Circular 142”) in the 16 pilot scheme areas.


For overseas Private Equity funds (“foreign PE firm”), this means that the gateway to Chinese equity investment projects have opened once again. Under Circular 142 issued by the SAFE in 2008, foreign-invested enterprises were not allowed to use renminbi capital settlement proceeds for domestic equity investments, blocking nearly all routes for foreign PE firm to legally invest in China. Under this newly issued Circular 36, new channel for equity investment in China is reopened again.



3 Channels for Foreign PE Investment


The first route for entry was the “foreign-invested venture capital enterprise” established by the former Ministry of Foreign Trade (current Ministry of Commerce) in 2002 with the issuance of the “Foreign-Invested Venture Capital Enterprise Management Regulations”. In fact, under the framework of Circular 142, the capital settlement channel of such enterprises was quite accessible.


Our understanding is that with the issuance of Circular 142, SAFE General Office clarifies with various SAFE Branch Offices in Shenzhen, Shanghai and other regions that once the project (or scope of business) of the foreign-invested venture capital enterprises been approved by the Ministry of Commerce, capital can be directly remitted into PRC.


However, in practice, not many foreign PE firm would adopt this route. The reasoning is that under Circular 142, the requirements for project approval are very demanding and requires that invested enterprises be start-up high tech company. The NDRC has a series of financial criteria in place for such enterprises, such as the ratio of research and development costs etc.


The second route is in the form of “foreign investment companies” as established in the Ministry of Commerce’s 2004 “Provisions on Foreign Investment in Investment Companies”. However, the document’s threshold for investors is also very high and requires the investor of at least ten Chinese foreign-invested enterprises.


The third route is in the form of “foreign-invested equity investment enterprises” which are currently limited to regional pilot programs. In late 2010, Shanghai released the “Implementation Approaches on Pilot Work for Municipal Foreign-Invested Equity Investment Enterprises”. Early 2013, Shenzhen also released the “Interim Measures on Carrying Out the Pilot Work for Shenzhen Foreign-Invested Equity Investment Enterprises” and initially established a management system.


Previously, this route was primarily for QFLP pilot programs but with a comparatively small investment amount, complicated approval procedures and other issues. This approach has never been popular. However, experts predict that with the expansion of pilot programs and relaxation of capital settlements under Circular 36, it may become the “main channel” for foreign PE firm investing into China.


Fung, Yu & Co CPA Limited services

Read more about our Accounting and Tax services as well as our Human Resource Outsourcing capabilities.

The new DTA provides benefits but also brings in challenges and questions for investors and entrepreneurs. It is based on the OECD model even though many of its parts are custom-made to support the specificities of both French and Chinese tax systems.


In a nutshell, the main aspects of the new DTA are:

  • A lower levels of dividends withholding China income tax;
  • A clarification of the two taxation approaches under domestic laws, especially regarding capital gains, and a stricter application of the permanent establishment provisions;
  • The Introduction of major anti-avoidance provisions in line with the push of tax policy in both countries over the last few years.


In this newsletter, we will first explore the benefits and the challenges created by the new DTA. We will then see how it could impact your business in China and in what extent using Hong Kong, home of many existing WFOE’s holding vehicles, is still recommended or not.


Benefits and clarifications

Reduced withholding income tax rate on dividends

The withholding income tax rate on dividends is reduced from 10% to 5% if the corporate beneficial owners directly hold at least 25% of the company paying the dividends. However, the withholding income tax rates remains at 10% on interest and royalties. On that last aspect, Hong Kong keeps a decisive advantage with a lower rate of 5%.


Updated capital gain tax on the disposal of shares

Similar to the previous treaty, the source country can tax capital gains on companies investing in real estate companies. The innovation of the new treaty lays on the definition of real-estate investments company which is broadened and now covers any company deriving more than 50% of its value, directly or indirectly, from immovable properties located in the source country and holded at any time during the 36-month period preceding the disposal;

The definition of non-real-estate company is also broadened and a company is included in the scope if at least 25% of the company is owned, directly or indirectly, during a 12-month period preceding the disposal.

If the definition is finally clarified, French non-resident taxpayers still may be subject to a 45% tax on capital gains, withheld at source upon the disposal. This regime is still way less favorable than the one applicable to French corporate taxpayers. Conversely, capital gains realized by French corporate shareholders on the disposal of shares in Chinese companies will be taxable in China at the rate of 25%, pursuant to PRC’s tax laws.


Permanent Establishment and business profits

Consistent with China’s new or updated tax treaties in recent years, clearer definition of Permanent Establishment is included in the treaty and provides welcoming certainty to French investors conducting business in China.

The changes include:

  • The time threshold for a building site, construction, assembly or installation project to constitute a permanent establishment is extended from 6 to 12 months; The time threshold for constituting a services related Permanent Establishment is changed from 6 months to 183 days within any 12-month period;
  • The exclusion of supervision services in connection with the sale or lease of machinery or equipment from constituting a permanent establishment in the current protocol is removed;


Treaty application to partnership or other similar entities

The new treaty clarifies the fiscal treatment of income, profits or gains derived through partnerships. The tricky part was to determine who should be entitled to the tax treaty benefits: the partnership subject to tax or the residing partners.

Both Chinese and French tax systems are “quasi-transparent” on partnership’s treatment. In France, taxable income lies with the partnership but tax liabilities are settled by the partners. Chinese partnerships experience a similar issue but while this is the first tax treaty tackling partnership issue signed by China, France has experience dealing with the topic before signing tax treaty with the United Kingdom, the United States of America and Japan.

The 3 criterias laying down tax liabilities of partnerships are determined by:

  • the source of profits;
  • the state in which the partnership is settled; and
  • whether the income is treated as being that of the partnership or the partners.


For instance, if China sourced income arises from a French partnership, the treaty benefits may be granted either to the French partnership, if it is a taxable person under the French tax laws, or to the French resident partners, if they are treated as the taxable persons under the French tax law.

By the same token, if China sourced income arises from a Chinese partnership where there are French resident partners, the treaty benefits would not be applicable if either France or China views the Chinese partnership as non-transparent.


The anti-avoidance and improved exchange of information challenge

Based on the very new OECD model, the new treaty deals with anti-avoidance limitation on benefits clauses and with improved Exchange of Information. The practical applications are:

  • The new treaty’s benefits will not apply to cases where one of the main purposes of an arrangement is to take advantage of the terms of the Double Tax
  • Agreement (i.e. treaty shopping);
  • These anti-avoidance measures are further supported by the latest version of the Exchange of Information between China and France which will be improved from solely what is ‘necessary’ to administering domestic tax law, to what is ‘foreseeably relevant’;
  • Targeting the same direction, a Memorandum of Understanding on Bilateral Cooperation is included in the new treaty and creates the conditions of a future assistance in the collection of taxes.


Under the new treaty, the old tax sparing clause is abolished. It used to give  foreign tax credit in respect of China sourced passive income regardless of actual Chinese tax paid but the treatment of past passive income is allowed for a limited period to ease the change of legislation.


Conclusive Observations and why Hong Kong still has a role to play


Taxation wise, clarifications are always welcomed and the new treaty between France and China follows the OECD approach trying to define further what future global taxation cooperation should be. It replaces an aging treaty and clarifies the structure surrounding inbound and outbound investment for both countries. Practically though, what will change for entrepreneurs, managers, accountants, tax practitioners… and how will it impact Hong Kong, traditional gateway to/from China?


One of the main goal of the treaty is to improve exchange of fiscal information and improve the mutual tax collection between the two countries. It means Chinese and French tax authorities are willing to work closer together for clarification and limitation of abusive behavior. Neither China nor France alone are fiscally easy to deal with, so it is going the right way.


Hong Kong still has a role to play. One of the symbolic arrangement of the new treaty is the reduction of the withholding tax on dividends from 10 to 5% similar to what is already set up for years with Hong Kong. Does it means passing by Hong Kong has no interest anymore? Possibly not, a couple of precisions need to be done here:

  • It is still more beneficial to pass by Hong Kong for interests and royalties as French Corporates are still subject to 10% withholding tax in the new treaty against 5% for Hong Kong ones;
  • Hong Kong jurisdiction is based on a fully bilingual system and using a Hong Kong vehicle still eases the process of setting up a WFOE; Disposal of the Hong Kong vehicle instead of the WFOE is fiscally advantageous. Hong Kong is a gateway but also a good way out from China;
  • For Global companies using Hong Kong as a hub for Asian operations is way more flexible than using a French company. Money and assets can be easily redistributed in other Asian countries.


Confirming the role of Hong Kong as an entry point to China for European companies, the arguments in favor of Hong-Kong remain unchanged and therefore give us a new insight about the new treaty. Actually clarifying taxation, the new treaty actually facilitates and orients the flow of China’s ever-growing outbound investment towards France. It is a great tool for future investments in France and a confirmation that China is opening not only thinking about inbound but also getting ready for another mew outbound wave.


1. Introduction of time limit requirements for trademark application, review and objection: a welcomed clarification.

The time cycle for initial trademark application has been reduced from a more than 2 years average to a compulsory 10 months.

In case of refusal, the applicant may request for review. Following the review application, the legislator’s decision has to be announced within 9 months from the date of receiving the review application. Under special circumstances, an extension of 3 months may apply.

In case of objection raised against a trademark previously approved, the legislator’s decision has to be announced within 12 months from the date of the objection. Again and under special circumstances, an extension of 6 months may apply.



2. Improvement of the Trademark opposition system: a major change to clarify the process and limit malicious opposition.

The Renewed Trademark Law takes both into account the credentials of the opposition entity and the opposition reasons. As a result, opposition reasons raised by any prior right holder or stakeholder shall only be limited to relative reasons, while opposition reasons raised by anyone else shall be limited to absolute reasons.

The opposition appeal system is partially abolished to simplify the procedures: once the Trademark Office has decided that the opposed trademark shall be registered, the claimant no longer has the right to initiate proceedings for opposition appeal. However, he can still object the registered trademark through a separate objection process.

Two aims are targeted here: reduce the disturbance power of the claimants in order to ease the registration of valid trademarks and emphase for the claimant the importance of providing sufficient and relevant evidences during the opposition procedures.



3. Strengthening of the protection of registered trademarks exclusive usage rights: an improved anti piracy tool.

The first significant move forward impacts the types of trademark infringement that are further clarified and refined.

The second major improvement regards the process of compensation which is strengthened through a significant increase of the potential compensation’s amount and a clarification of the process’ method. 3 particular points have to be noted:

a) The compensation amount’s determination is specified technically and legally;

b) A punitive damages mechanism is introduced;

c) The upper limit for the compensation amount is increased from RMB 500,000 to RMB 3,000,000.



4. Intensification of the efforts for crack downing and punishing trademark infringement: an essential move forward

Article 60(2) of the new Trademark Law further clarifies the standard of administrative punishment for trademark infringement and increases the intensity of penalties as detailed below:

In the previous version of the Chinese trademark law all tools “specifically” used for manufacturing infringing products and forging trademark labels were intended to be confiscated and destroyed. In the new version, all tools “mainly” used for trademarks’ infringement purposes will be as well subject to seizure and destruction.

Heavier penalties for recidivists are introduced: “offenders that have engaged in acts of trademark infringement for more than twice within five years or in other severe circumstances shall be subject to heavier punishment.”



5. Emphasis on the principle of good faith in trademark application and increase of the efforts to curb malicious trademark squatting.

Article 7(1) of the new Trademark Law provides that “The principle of good faith shall be observed when applying for registration and use of trademarks.”

Malicious trademark squatting by those with contractual, business or other relations and who clearly knows the others’ prior use of the trademark is prohibited. As long as the trademark applicant being opposed “clearly knows” the existence of the previously used unregistered trademark, he is potentially submitted to malicious trademark squatting.



6. Major improvements on the application of trademark registration: structuring the procedures.

A couple of procedures and trademark components detailed below have been added, clarifying the process: Adding sound trademarks to legislation;

Prohibiting the use of national anthems, army emblems, military anthems as well as the names, signs and other marks of central and state authorities as trademarks; Prohibiting deceptive trademarks specifically defining them as “fraudulent marks”;

Adopting trademark registration application of “one trademark under multiple categories”; Allowing submission of documents in electronic format to facilitate the process; Advancing and releasing a time limit for going through formalities for renewal;

Further specifying the requirements for transfer and the procedures and nature for permits being filed on record.



7. Improvement of the trademarks’ administration: rights and duty of a registered trademark.

The use of trademarks is defined as the “act for identifying the source of product.”

In case of inappropriate use of a registered trademark, the new Trademark Law insists that the misuse shall be corrected within a certain time limit. Failing which the Trademark Office will have the power to revoke the registered trademark. Moreover, in case of non-usage of a registered trademark for three consecutive years, the trademark can be revoked by the Trademark Office.

In case of violation or prohibited use of registered trademarks or use of “well-known trademarks” in commercial activities, the new Trademark Law clearly specifies the penalty amount: a fine of up to RMB 100,000 shall be charged by local industrial and commercial administration bureau.

The revocation of registered trademarks that have degraded to generic names is introduced.


Trademarks as part of Business Valuation

When valuing a company the value of trademarks must be considered. The Fung, Yu & Co. CPA Limited Business Valuation service will not neglect this important asset.












Figures and findings

When it comes to the findings, the decennial version seems to lead at first sight to an obviously sibylline conclusion: China is no longer the Eldorado it once was and times are tougher. Veteran entrepreneurs are moaning, most of the time with reasons, about the Chinese SOE’s (State Owned Enterprises) unfair competition, the unpredictable legislative environment, the discrimination they experience as foreigners. Three major topics, illustrated below, emerged:


Profitability is harder to achieve and the competitive pressure is stronger

The percentage of profitable companies decreases from a top 74% in 2010 to 63% in 2014. Among them, only 37% noted an increase of their EBIT margin compared to 2013. For the first time in history of the survey one third of the respondents declare that their margin is lower in their Chinese subsidiary than their global average.


Optimism and trust into the future Chinese Economic performance are slowing down

Level of pessimism is still low (around 5%) but, compared to the 83% of 2008 the level of optimism decreased to a more common 68%. The expression “end of the golden age” arose together with a shared feeling that local companies catch up and are more and more mature. “China doesn’t need FDI ( Foreign Direct Investments) as it did a few years ago.”


The Chinese marketplace is still regarded as discriminatory and new policy developments are yet to convince

A majority of European companies still deplore the unfavourable treatment they claim to receive and regard regulatory development as uncertain. Even if they note the aim to increase the rule and transparency of Chinese law they doubt the Third Plenum Decision of the 18th Central Committee will really change the situation.




Problematic: is the situation that “dramatic” and what does the survey shows of the new Chinese business environment?

To start with, if the nature of the European Chamber’s business confidence survey gives companies “feelings” a rare auditorium one should not forget that macro-economically wise, optimism for China should still be the norm. The relative decrease of GDP growth rate (though still expected to be close to 7.8% in 2014) and the relative labour costs’ increase hide only partially the growing strength of the Chinese Economy. The trend is indeed globally still positive: Chinese GDP will reach USD 9,761 Billion in 2014 according to the IMF, 7 millions of Chinese will be University graduates this year (for the first time in history), global level of R&D of the Chinese exported products keeps climbing…and the list could go on and on.


Having said that, the growing concerns expressed by the survey should not be undermine by pure figures. Something is happening and is expressed by the survey: with the country as all, foreign entrepreneurship in China is changing.


Chinese increased importance in overall revenue

Between 2010 and 2014 the percentage of European Companies settled in China that made more than 10% of their global revenue in China grow from 32% in 2010 to 48% in 2014. This implies that more central operations are managed in China nowadays and the needs.


China as a hub

Europeans businessmen start considering China as a hub for their development in Asia. They use the experience accumulated to develop in other Chinese provinces and other Asian countries. 45% of companies consider expanding to other provinces and 48% are currently reviewing opportunities to invest outside of China but within Asia.




Conclusion, what does it mean:

The European Chamber business survey confirms the premises of a trend that will change the way of investing in China. Competition is tougher, local players are more and more organized and sophisticated, rules are clearer and the central government is on its way to implement a renovated framework for Foreign Direct Investment.


As a result, investing in China is less and less likely to be successful if unprepared. Relying on a network of efficient service providers, lawyers, Chambers of commerce, business partners is the key to structure the opening of an endless opportunities market. With competition, taste for quality is increasing and European businesspeople have a major role to play. The increasing level of education offers new opportunities of rich collaborations and development for European companies. With a good structure, success in China is still incredibly reachable.




The full survey is available here:


For more about Fung, Yu & Co’s services see here:



“Zero Down Payments” (applicable to Domestic Enterprise, WFOE and Sino-Foreign Joint-Venture)

The term “zero down payments” refers to lifting the paid-up capital formerly required for commercial registration. Applicants now are only required to report registered capital upon registration, and administration authorities no longer require capital verification reports from commercial entities, so long as they simply state their subscription amount on their public information platform. In addition, minimum capital and 2-year capital contribution requirements have been removed. These reforms will help to reduce start-up capital costs and improve the operational efficiency of a company’s capital. Meanwhile, the reforms will help to guide companies towards capital contributions that are in accordance with their own needs and capabilities, standardizing registered capital management.


No approval required for Business Scope of Company(only applicable to Domestic Enterprise)


With the implementation of commercial registration reforms, the Industrial and Commercial Administration Bureau will no longer approve the business scope of commercial entities. Relevant administrative authorities will only document the main business categories of the commercial entity within its business license and make no mentioning of specific business projects. The business scope documented within the commercial entity’s prospectus or agreements should be made publicly available through the commercial entity’s information platform.


“One Address and Multiple Licenses” and “One License and Multiple Addresses” are permissible (only applicable to Domestic Enterprise) In addition, the reforms also allow for “one address and multiple licenses” and “one license and multiple addresses”. It has been reported that with the implementation of these reforms, enterprises can expand to additional premises within their respective districts, allowing for “one license and multiple addresses” without the need for separate business licenses for each branch. However, information on the premises shall be reported to commercial registration authorities. As for affiliated investment companies and enterprises located in business parks, the reforms allow for “one address and multiple licenses”, which means that a single address can be used for multiple business licenses. Moreover, to simplify the procedures for registry of domicile and place of business and on the basis of convenient access and to maintain order, rental contracts are no longer a prerequisite for obtaining business licenses.


These current commercial reforms are mainly applicable to domestic enterprises, and changes to the establishment of foreign-invested enterprises is still under review. At the moment, foreign-invested enterprises must still comply with the Foreign Investment Law and MOFCOM regulations. Within the Shanghai Free Trade Zone, however, the commercial reforms for domestic enterprises have already become applicable for foreign-invested enterprises. This indicates that domestic enterprises reforms will gradually extend to foreign-invested enterprises and equity joint ventures.



Our services

Fung, Yu & Co CPA Limited provide a comprehensive range of professional services for accounting, auditing, tax services, company set up, company secretarial and HR outsourcing. For more information read our list of services.



1. Salary Tax

Salary Tax and tax under Personal Assessment are proposed to be reduced by 75% within a HK$ 20,000 limit.  In addition, the limit of several Allowances for Personal Tax Purpose has been adjusted as follow:





Personal Allowances    
Basic allowance HKD 132,000 HKD 120,000
Single parent allowance Additional HKD132,000


HKD 120,000

Married person’s allowance HKD 264,000 HKD 240,000
Dependent Parent or Grand Parent    
Age between 55 and 59 years old HKD 23,000 HKD 20,000
Aged 60 or above HKD 46,000 HKD 40,000
Elderly residential care expenses HKD 92,000 HKD 80,000



2. Profits Tax

Profits Tax for the year of assessment 2015/16 is proposed to be reduced by 75% within a maximum limit of HK$ 20,000. It would be applicable for sole proprietorships, partnerships and limited companies.




1) Business registration fees

Business Registration fee for 2016/17 shall be waived for all types of companies that registered under the Business Registration Ordinance.


2) Government Rates

Government rates payable by all property owners shall be waived for 4 quarters for 2016-17 (instead of just two quarters in last year budget), with a ceiling of HK$ 1,000 per quarter.


3) Relief for the tourism and F&B industry

In view of the decline in tourism and F&B industry, the license fee for 2016-17 will be waived for:

•      Travel Agencies;

•      Hotels and Guesthouses;

•      Restaurants, hawkers and operators with restricted food permit.


4) Incentive to develop the role of Hong Kong as a platform for owning IP rights

The tax deduction for capital expenditure incurred for the purchase of Intellectual Property rights shall be increased.


Note: More to come. Please note that the proposed budget still has to be formally enacted. Items might be added or removed before the enactment. For further details, please refer to:





On 16 November 2011, the PRC Government carried out a major reform on the tax system on goods and services, which is a further important measure on structural tax cuts after the full implementation of VAT Reform in 2009. This is also an important step towards the VAT Reform.


The reform helps in eliminating the current problems of the double taxation of VAT and business tax respectively on goods and services. This is different to the issue of cross-border double taxation between China and Hong Kong. Through optimizing the taxation structure and reducing the tax burden, it strengthens the service industry and accelerates the pace of development, and is advantageous in facilitating economic development and modernizing the economic structure.


In accordance with the plan, this tax reform may bring to an end in Business Tax and replace it with VAT in all industries throughout the whole country in 4 years. The selection of the transportation industries and certain modern service industries in Shanghai to be the pilot sites will be advantageous in accumulating experience in the full implementation of the reform.


Industries Subject to VAT and Their Applicable Rates:


  • Provision of Transportation Services
    • Land Transportation
    • Marine Transportation
    • Air Transportation
    • Pipeline Transportation


Applicable VAT Rates: 11%

Current Business Tax Rates 3%



  • Provision of Certain Modern Services
    • Technological R&D Services
    • IT Services
    • Cultural & Creativity Services
    • Logistics & Auxiliary Services
    • Consulting Services


Applicable VAT Rates: 6%

Current Business Tax Rates 5%


  •  Leasing of Tangible Assets Services
    • Applicable VAT Rates: 17%


      Current Business Tax Rates 5%


  • Other Taxable Service stipulated by MOF and SAT
    • 0%


Threshold for VAT levies (varies across different localities):

1) Assessment on periodic basis: when the assessable monthly sales revenue reaches RMB5,000 to RMB20,000 (inclusive);

2) Assessment on transactional basis: when the assessable sales revenue each time (day) reaches RMB300 to RMB500 (inclusive).


Revision of the threshold will be determined by the Ministry of Finance and the State Administration of Taxation. The relevant Bureau of Finance in different provinces, autonomous regions, municipalities and the State Administration of Taxation shall determine the applicable threshold to a particular locality according to the actual circumstances, and they will be reported to the Ministry of Finance and the State Administration of Taxation for record.


–   General Taxpayer: entity with assessable annual sales revenue more than RMB5,000,000.00.

–   Small-scale Taxpayer: entity with assessable annual sales revenue less than RMB5,000,000.00. The tax rate of VAT for in pilot site is 3%.




Management of VAT Invoices:


General Taxpayers who provide taxable services must issue VAT invoices to the customers, and state the sales amount and taxable amount respectively on the VAT invoices.


Small-scale Taxpayers who provide taxable services may apply to the relevant tax bureau for the issuance of the

VAT invoices to the customer.




Consideration of the Pilot Enterprises in Shanghai:


It is our understanding that the Shanghai Municipal Tax Bureau has already sent “Confirmation of Results by VAT Payer” to the selected pilot enterprises, which sought to clarify the policy. The pilot enterprises in Shanghai have the obligation to:

–   Clearly understand the relevant regulations of the pilot services, and assess the financial impact brought by the issue

of tax reform;

–   Revise and update the contracts with customers, and consider adjusting or re-establishing the prices for services.



Please feel free to inform us anytime for further question regarding the above.



Constitutional Document and Common Seal

Abolition of Memorandum

Articles of association become the only constitutional document of a company.  The memorandum of association is abolished for all Hong Kong incorporated companies.

Model Articles

Model Articles are prescribed under the new CO for use by private companies limited by shares, public companies and companies limited by guarantee.

Common Seal

The keeping and use of a common seal is optional.



Share Capital

Mandatory Regime of No-par

All Hong Kong incorporated companies’ shares will have no nominal value.  The amounts standing to the credit of a company’s share premium account and capital redemption reserve account become part of the company’s share capital.

Statement of Capital

A statement of capital is required to be delivered for registration whenever there is a change in a company’s share capital.




Restricting Corporate Directorship

Every private company must have at least one director who is a natural person.

Long Term Service Contract

An employment contract of a director exceeding 3 years shall be approved by members of the company.



Annual Returns and Accounts

Annual Returns

The annual return of a private company should be filed within 42 days after the anniversary date of the company’s incorporation (unchanged).

The annual return of a public company should be filed within 42 days after 6 months of the end of the company’s accounting reference period (previously within 42 days after the date of Annual General Meeting (AGM)).

The annual return of a guarantee company should be filed within 42 days after 9 months of the end of the company’s accounting reference period (previously within 42 days after the date of Annual General Meeting (AGM)).

Accounts and Reports

Small and medium enterprises may prepare simplified financial statements and directors’ reports.

A private company is qualified for simplified reporting if it satisfies any two of the following conditions:

  • total annual revenue does not exceed HK$100 million;
  • total assets does not exceed HK$100 million;
  • average number of employees during the financial year does not exceed 100.




Companies may dispense with the holding of AGMs by unanimous shareholders’ consent.

General meetings can be held at more than one location by using electronic technology device.




A certified copy of the instrument creating or evidencing a charge or a certified copy of any instrument evidencing satisfaction or release of a charge is required to be delivered with the relevant specified form to the Registrar for registration within one month.



The above is a brief elaboration of the major amendment in the new CO. We shall be more than happy to provide you further consultation and advice regarding the implementation of the new CO and how you as a company incorporated / registered in Hong Kong can react.



Contact us

For detailed information about Hong Kong new companies ordinance, please feel free to contact us at one of our offices listed below.

Reasons for the changes

The changes were made to address one of the recommendations in the 2011 Peer Review Report of the Virgin Islands (the “Report”).

The Report noted, among other things, that there was an absence of any legal obligation for companies incorporated in the BVI to maintain the underlying documentation (including accounts) relating to transactions, and that there was no specific requirement for maintaining records and underlying documentation for a minimum period of five years. The minimum period was considered to be necessary for the operation of an effective mutual legal assistance regime for tax matters.



Prior to enactment

Prior to the enactment of the new Act, section 98 of the BVI Business Companies Act 2004 stipulates the main record keeping requirement for BVI companies.


Pursuant to this section, BVI companies shall have and continue to have the obligation to keep records which:

are sufficient to show and explain the transactions of the company; and

will, at any time, enable the financial position of the company to be determined with reasonable accuracy. Section 98 of the BVI Business Companies Act 2004 continues to apply to all BVI companies.



After the enactment

Following the implementation of the new Act, all BVI companies must satisfy the following criteria:

Ensure that the records and underlying documentation (including accounts) that are retained by the companies are sufficient to illustrate and explain the transactions of the companies and enable a proper evaluation of their financial position.

Please note that the requirement to keep “ accounts” does not mean that BVI companies are obliged to prepare and maintain financial statements.

Retain the records and underlying documentation for a period of at least five years from the date of completion of the transaction, or termination of the business relationship, to which the records and underlying documentation relate.

Business relationship referred to in this paragraph shall mean a continuing arrangement between a company and one or more persons with whom the company engages in business on a one- off, regular, habitual or regular basis.

Keep the records and underlying documentation at the offices of their registered agent in the BVI, or at such other place or places, within or outside the BVI, as determined by the directors of the company.



Please note the following:

(a) Where the records and underlying documentation are kept at a place other than at the office of the registered agent of the

company,the company shall notify the registered agent in writing of the physical address of the place or places at which the records and underlying documentation are kept.


(b) Where there is a change in the location of the records and underlying documentation of the company, the company shall

provide its registered agent with the physical address of the new location of the records and underlying documentation within

14 days from the date of the change of the location.




At  present,  the  new rules  do  not  impose  any  sanctions  for  non- compliance  of  record  keeping  obligation  for  BVI  companies.

However, BVI companies shall comply with requests for information from the BVI International Tax Authority.

However, BVI companies that are non- compliant with the statutory record keeping rules under the BVI Business Companies Act shall commit an offence and be subject to a fine of US$10,000.



Company Formation Services

Fung, Yu & Co. CPA Limited are experienced and knowledgeable about company formation in Hong Kong and in China as well as other countries.

The Financial services industry


  • A Cross-border RMB transactions test bed is being experimented;
  • Pilot cross-border financial loan transactions are allowed;
  • Companies registered in the zone can issue bonds on the Hong Kong capital market;
  • The creation of a Qianhai’s securities fund is in the agenda;
  • The creation of a Qianhai foreign funded equity investment fund is in the agenda;
  • Appropriate lowering of entrance requirement for Hong Kong financial institutions under the CEPA framework is considered;
  • Pilot setup of new financial institutions and commodities transaction platforms in the Zone is encouraged;
  • Establishment of local and foreign financial institutions with international or local management headquarters will be promoted in Qianhai.




  • A 15% Enterprise Income Tax regime will be implemented for eligible companies;
  • Qualified expatriate personnel can be entitled to a reductionor exemption of their Individual Income Tax;
  • Eligible modern logistic companies can benefit from tax collection on a different basis;
    Building materials and maintenance parts and fuels for manufacturing process imported by companies registered in the Zone for their own usage can be exempted from Import Tariffs and Import Value Added Tax;
  • Machinery, equipment and other supplies being imported for the infrastructure of the Zone’s building purpose will be exempted from Import Tariffs and Import Value Added Tax;
  • Raw materials, parts, components, and packaging materials imported by companies in the Zone for producing products dedicated to export will be exempted from Import Tariffs and Import Value Added Tax;
  • Transit cargos within the zone will be handled as bonded cargos and will be exempted from Import Tariffs and Import Value Added Tax;
  • Exported products will be tax exempted and processed products being exported by the companies in the Zone will be exempted from export tariffs.


The Legal Industry


  • Companies in Hong Kong engaged in provision of arbitration services will be allowed to establish branches in Qianhai on an experimental basis;
  • Joint ventures between Chinese and Hong Kong law firms will be allowed on an experimental basis under the CEPA framework.


Human Resources


  • Conveniences for work and living, easy entrance and departure will be provided for expatriate employees, Chinese employees from overseas, and overseas educated Chinese graduates;
  • As approved by the State, Qianhai will be included in the scope of the priority pilot test area of the Guangdong Province;
  • Practitioners, already certified in Hong Kong, will be allowed to provide professional services for Qianhai companies and residents but their services will have to be limited to Qianhai’s area;
  • Hong Kong CPAs will be allowed to become Mainland Chinese accounting firms’ partners.


The Medical and Education sector


  • Hong Kong educational businesses will be allowed to set up wholly-owned international schools;
  • Hong Kong medical companies will be allowed to set up wholly-owned hospitals.


The Telecommunications industry


  • Hong Kong and Macau telecommunication operators aiming to establish joint ventures in the telecommunications industry are encouraged;
  • Innovation in telecommunications will be promoted and innovative local telecommunication companies are encouraged;
  • To meet the Qianhai’s companies’ need for international communications, dedicated international communication’s channels will be set up in Qianhai.


The list of the preferential policies issued by the Qianhai Administration Bureau will be continuously updated.


Registration of companies from the following industriesare encouraged within the zone


  • Financial industry (banks, non-banking financial institutions, securities companies, security investment institutions, futures and options traders, fund service institutions, investment advisory companies and finance and lease companies);
  • Modern logistic industry (supply chain management, trading, agency service, distribution and courier service for e-commerce and third-party logistic service);
  • Information service industry (telecommunication infrastructure, value-added telecommunication services and electronic authentication services);
  • Specialty services industry (accountants, valuation company, law firm, consultants, engineering services companies, public relation companies, human resources advisors, exhibition services, educational and medical services, etc.).



General guide to set up in the Zone


The scope of business that they are going to enter into based on the Qianhai Bonded Port Zone’s entrance requirement;

Company name to be decided that is not conflicting existing names;

Business plan;

After initial examination and approval of the above, the process of registration with various government bureau can start.


Important points to note


  • The applicant must comply with the Industry Investment and Entrance Catalogue for Qianhai;
  • The registered capital of the applicant must reach a minimum level (RMB 5,000,000 for general business and RMB 10,000,000 and above for financial institutions, and the amount of registered capital vary depending on the company’s actual scope of business);
  • Companies incorporated in the municipality of Shenzhen are not allowed to directly relocate to Qianhai but a new entity is mandatory.


We shall be happy to provide any further information needed.


Other Information


  • Mr. Xu Qin, mayor of Shenzhen, mentioned earlier in Hong Kong that “Qianhai is ready for development and opening on a huge scale…….it will become a hot spot for a new round of reforms and development in Shenzhen; it will become the Manhattan of Shenzhen. More than 10 asset management companies are already registered in Qianhai as tax incentive offered are highly attractive to them.”
  • The Zone will be operated as the national pilot test bed and that some specific issues are still in negotiation between the Qianhai Administration Bureau and the Ministry of Commerce. We shall keep you posted of the latest development.


Contact us


For detailed information about investment in Qianhai, please feel free to contact us at:


Johnny Chen

Manager, Guangzhou

Tel: +8620 3762 1108



Jimmy He

Manager, Shanghai and Beijing

Tel: +8621 6289 8813



Bruno Marengo

Manager, Paris

Tel: +33 1 44 50 40 55



Tiffany Wun

Manager, Corporate Service Department, Hong Kong

Tel: +852 2541 6632



Philip Yu

Managing Partner

Tel: +852 2541 6632



Hong Kong Head Office

10/F., Guangdong Investment Tower,

148 Connaught Road Central,

Hong Kong

Tel: +852 2541 6632

Fax: +852 2541 9339



Guangzhou Representative Office

Flat D-E, Yueyun Building,

3 Zhongshan 2nd Road,

Guangzhou, PRC

Tel: +86 20 3762 1108

Fax: +86 20 8762 0508



Shanghai Representative Office

Suite 904, OOCL Plaza,

841 Yan An Zhong Road,

Shanghai, PRC

Tel: +86 21 6289 8813

Fax: +86 21 6289 8816



Beijing Representative Office

Room 2302, E-Tower,

No.12 Guanghua Road, Chaoyang

District, Beijing, PRC

Tel: +86 10 6591 8087

Fax: +86 10 8599 9882


Paris Representative Office

20 Rue Cambon 75001

Paris, France

Tel: +33 1 44 50 40 55

Contact us for more information

Hong Kong

10/F., Guangdong Investment Tower,

148 Connaught Road Central,

Hong Kong


Tel: +852 2541-6632

Fax: +852 2541-9339


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Suite 1206, Jing’an China Tower,

1701 Beijing Road West,

Jing’an District, Shanghai, PRC


Tel: +86 21 6289 8813
Fax: +86 21 6289 8816

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Flat D, 11/F, Yueyun Building,

3 Zhongshan 2nd Road,

Guangzhou, PRC


Tel: +86 20 8762 0508

Fax: +86 20 3762 0543


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Room 2005, E-Tower,

No.12 Guanghua Road,

Chaoyang District,

Beijing, PRC 100020


Tel: +86 10 6591 8087

Fax: +86 10 8599 9882


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20 Rue Cambon
75001 Paris, France


Tel: (+33) 1 44 50 40 55


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