Far-East Countries

CHINA

Introduction

The People's Republic of China (PRC) is the world's second largest economy after the United States. It is the world's fastest-growing major economy, with growth rates averaging 10% over the past 30 years. China is also the largest exporter and second largest importer of goods in the world. The country's per capita GDP (nominal) was 5,184 (International Monetary Fund, 90th in the world) in 2011. The provinces in the coastal regions of China tend to be more industrialized, while regions in the hinterland are less developed. As China's economic importance has grown, so has attention to the structure and health of that economy.

Types of Business Structure

Wholly Foreign Owned Enterprise (WFOE)

Wholly Foreign Owned Enterprise is a limited liability company wholly owned by the foreign investor. A WFOE requires registered capital and its liability is limited to its equity, it can generate income, pays tax in China and its profit can be repatriated back to the investor's home country. Any limited liability enterprise in China which is 100% owned by a foreign company, individual(s) or companies can be called as WFOE.

Representative Office (RO)

Representative Office is a liaison office of its parent company. It requires no registered capital. Its activities are limited to: product or service promotion, market research of parent company's business, quality control or contact liaison in China. A RO is generally prohibited from generating any revenue and entering into contracts with local businesses in China.

Joint Venture (JV)

Joint Venture is a limited liability company formed between a Chinese company investor and a foreign investor. The parties agree to create an entity by both contributing equity, and they then share the revenues, expenses, and control of the enterprise. A JV has usually been used by foreign investors to enter the restricted industries such as: Education, Entertainment, Mining, Hospital etc.

Hong Kong Company

Hong Kong Company often is used as a Special Purpose Vehicle (SPV) to invest in Mainland China. Hong Kong is one of the quickest locations to incorporate a business. Although a HK company is not a legal entity in mainland China, many foreign investors, especially investors from Europe and North America choose to form a Hong Kong company as a SPV to invest in China.

Taxation

The standard corporate tax rate in China is 25%.



HONG KONG

Introduction

Hong Kong is one of those many places where East proverbially meets West, a synergy of ethnicity and foreign practice. In the past twenty years, Hong Kong's economy has successfully doubled in size, with GDP growth at an average annual rate of 5% in real terms. Hong Kong also received recognition for being one of the primary locations in the 'Inward FDI Performance Index'. This benchmark ranks countries by their ability to attract inward foreign direct investment.

A tourist visa can be converted into a business visa if the non-citizen intends to apply for an Occupation Permit.

Types of Business Structure

Limited Liability Company

Governed by the Companies Ordinance of Hong Kong, any person (foreign or local) above the age of 18 years can setup a limited liability company in Hong Kong.

Representative office

When a foreign company wishes to analyze the suitability of the Hong Kong market for its goods or services or both, a representative office can be opened. A company establishing a representative office should register under the Business Registration Ordinance (Cap 310). This type of business entity is only permitted to carry on promotional and liaison work in Hong Kong. A representative office is prohibited from carrying on any business in Hong Kong or entering into any contracts in Hong Kong. Once such a company commences the carrying on of a business, it is required to register under the Companies Ordinance

Branch office

If a foreign company wishes to carry on business in Hong Kong and operate through a branch office, it must register the business under the Business Registration Ordinance. It must also register as a non Hong Kong company under the Companies Ordinance. To register under the Companies Ordinance, the foreign company will need to appoint a local person authorized to accept service of proceedings and notices in Hong Kong and have a registered place of business.

The branch will not be subject to limitations on the scope of its activities. However, certain types of business activities will require approvals and licences from other government authorities before the proposed business activities can begin. The registered foreign company will then be able to carry on business in Hong Kong.

Hong Kong Subsidiary

A foreign company may wish to incorporate a wholly-owned Hong Kong subsidiary as a Hong Kong company. One advantage of a subsidiary arrangement is that it limits the liability of the parent company in relation to operations carried on by the Hong Kong subsidiary. The subsidiary may be either a private company or a public company.

The majority of subsidiary companies are private companies. Private companies are limited to a maximum of 50 shareholders, must have restrictions on the transfer of shares and may not issue shares in bearer form. Private companies are also subject to fund raising restrictions and must not engage in any activity that would require the lodgement of a disclosure document (e.g. a prospectus). A company may be incorporated with one member, and companies which are not part of a listed group may have a single director. The directors of a Hong Kong company are not required to be Hong Kong residents. Every Hong Kong incorporated company must have a company secretary, who must be resident in Hong Kong.

Partnership

Partnerships are comparatively inexpensive to establish and can be formed quickly. The agreement creating the partnership does not need to be registered, but the partnership itself requires registration under the Business Registration Ordinance once it establishes a place of business in Hong Kong.

Each partner is jointly liable with all the other partners for all debts and obligations of the partnership incurred while he or she is a partner. The size of partnerships is limited to 20 members. However, an exception is allowed for certain types of professional partnerships

Joint venture company

This is a normal company used to carry on the joint venture activity on behalf of its shareholders. This type of business structure is an entity which is legally distinct from the parties which comprise it. It is used where a number of parties wish to carry on business together. The component parties' liability is limited to their share of capital investment in the joint venture company. The formalities for establishment are similar to those for a subsidiary company.

Shelf companies

Shelf companies are "ready made" companies, waiting to be purchased. Shelf companies, therefore, offer an immediate solution to an urgent requirement for a company, as it usually takes an average of 7 to 10 working days to incorporate a company in Hong Kong.
A shelf company does not come with a name and specific provisions in the Memorandum and Articles of Association which may be changed as required subsequent to the acquisition.

Taxation

Those who conduct business in Hong Kong, whether it be operating companies, business partnerships, or individuals, are liable for profits tax, if the business has been carried out in Hong Kong. The maximum tax rate for corporations is 16.5% and for unincorporated businesses, it is 15%.

Deductible items:

Exempt items:

Interest income and dividends received from corporations capital gains

Tax Advantages to Foreigners:

Hong Kong tax system is an attractive advantage for foreign entrepreneurs looking to expand their business into Asia. An effective tax system allows companies to conduct business without being overpowered by their tax liabilities.

Advantages of a Hong Kong Company for Foreigners

Foreign entrepreneurs enjoy a number of advantages from Hong Kong company formation, including Legal tax exemption on company profits, if sourced from outside Hong Kong.



INDONESIA

Introduction

Indonesia is asserting itself as a prime destination for international business and investment. The country's natural resources, large population, macroeconomic stability, generally open investment regime, and low asset prices have become major attractions over the past few years.

Types of Business Structure

Limited Liability Company

Limited Liability under Indonesian Law is a legal person with a fixed capital divided intoshares and with the liability of each shareholder limited to the extent of the par value of the shares held. The Indonesia Commercial Code provides only basic regulations with respect to the most important aspects, from incorporation up to dissolution. As a legal basis, the law is fairly accommodative to various deregulatory policies and measures to date, and those that will be taken by the government in the foreseeable future.

Foreign Companies and Branches

The investment law requires that a foreign owned enterprise operating wholly or mostly in Indonesia as a separate business unit must be organized under Indonesian law and domiciled in Indonesia. Branches are not normally permitted, except for foreign banks and oil and gas companies.

Partnerships

Companies operating in Indonesia need to be aware of the legal status of partnership as they are a common operating structure. There is a collection of recognized legal entities for setting up a business in Indonesia :

A. Persekutuan Perdata (PP) is a partnership between two or more people in one agreement to make a profit.

B. Firma is an open partnership established to continuously hold a business name which is generally used by commercial partnerships such as trading and service enterprises.Each partner has the right to act in the name of the Firma within the scope of its activities and bind the partnership to third person unless he has been expressly denied that right.

C. Persekutuan Komanditer ( Commanditaire Vennootschap – CV ) is a limited partnership governed by the provisions of the Commercial Code. One partner is allowed to invest money into the partnership without having to manage the company

Taxation

The corporate tax rate is 25%.



Malaysia

Introduction

Multinational corporations from many countries have invested in various projects in Malaysia. Foreign investors must comply with government guidelines and policies, and obtain a license from the government, for investment in the following sectors:

Types Of Business Structure

Types of Business Structure

Companies

There are generally three types of companies operating in Malaysia that can be set up by any Foreigner. A. Companies limited by shares B. Companies limited by guarantee C. Foreign branches.

Sole Proprietorship

These are basically one-owner businesses. Before commencement of a business under a sole proprietorship, an interested person must seek registration with the Registrar of Business under the Registration of Business Ordinance 1965.

Partnership

These are business concerns consisting of not less than two and not more than 20 partners. Registration must be formalised at the Registrar of Business also under the Registration of Business Ordinance 1965.

Taxation

The standard corporate tax rate in Malaysia is 25%.

Tax Incentives

A wide range of incentives are available for certain industries, such as manufacturing, IT services, biotechnology, Islamic finance, energy conservation and environment protection. Available incentives include: tax holidays of up to 10 years (pioneer status); investment tax allowances (i.e. 100% allowance on capital investments made up to 10 years); accelerated capital allowances; double deductions; and reinvestment allowances (i.e. 60% allowance on capital investments made in connection with approved projects).

Advantages to Foreigners


Non-Resident Individual

A Non-Resident individual is assessable only on income derived from sources in Malaysia. Non-residents are not eligible to claim tax relief and rebates, and are subject to a tax of 27% on their taxable income.

Non-Resident Company

A Non-Resident company is liable to Malaysian tax when it carries on a business through a permanent establishment in Malaysia and is assessable on income derived only from sources within Malaysia.


SINGAPORE

Introduction

Singapore's well-developed and efficient infrastructure is one of the best in the region. Singapore has made convincing strides in its economic success. In spite of lack of sufficient natural resources, Singapore has been transformed into an industrial and financial centre due to its strategic location and versatile population, supported by political stability and sound economic policies. The central purpose in providing the various concessions and incentives is to broaden the industrial and financial base of Singapore.

Types of Business Structure

Sole Proprietor

Foreign individuals and corporations may register a Sole Proprietorship but must appoint a Singapore resident manager. Singapore citizens or permanent residents may easily register a Sole Proprietorship.

General Partnership

Foreign individuals and corporations may register a Partnership but must appoint a Singapore resident manager.

Limited Liability Partnership

Foreign or local individuals, a local company, a foreign company or another LLP But must have one Manager who is a Singapore Resident can set up LLP.

Private Limited Company

A private company in Singapore can have 100% foreign or domestic ownership with a compulsory requirement of a Singapore Resident Director with minimum setting up requirement of 1 shareholder and 1 director (both can be same).

Branch Office

The setting up of a Branch Office in Singapore requires 1 Corporate Shareholder and at least 2 Singapore Resident Agents with a registered office address at Singapore.

Representative Office

The setting up of a Representative Office in Singapore requires 1 Corporate Shareholder and at least 1 Singapore Resident Representative.

Taxation

The corporate tax rate in Singapore is 25%.



TAIWAN

Introduction

Taiwan has a developed capitalist economy that ranks as the 19th largest in the world by Purchasing Power Parity (PPP) and 24th in nominal GDP of investment and foreign trade by the Republic of China government which governs Taiwan. Real growth in GDP has averaged about 8% during the past three decades. Inflation and unemployment are low; the trade surplus is substantial; and foreign reserves are the world's fourth largest

 



THAILAND

Introduction

Board of Investment of Thailand offers various investment incentives as well as a wide range of financial and non-financial incentives to foreign and domestic investment considered important and useful to the social and economic development of Thailand.

In order to alleviate the strain on Bangkok’s infrastructure and to spread the benefits of development to the countryside, the Industrial Estate Authority of Thailand Act provides assistance and special incentives for investors who operate within industrial estates.

Types of Business Structure

Limited Companies

In Thailand two types of limited companies are acknowledged: public companies and private companies. Public companies are regulated by the Public Companies Act and certain other Acts, and private limited companies are regulated mainly by the Civil and Commercial Code.

Private limited companies

Generally, businesses in Thailand are set up through private companies. In this type of business there is no limit on capital investment. Foreigners may in general own 100% of the shares of a private company but there are certain types of business that foreigners cannot own on a majority basis, under the Foreign Business Act and other industry specific legislation. In some cases it may be possible to apply for a licence or permission for majority foreign ownership.

Private companies need to have at least three promoters to register the company and a minimum of three shareholders must be maintained at all times. In addition accounting, auditing and tax filing procedures described in the Civil and Commercial Code, the Revenue Code, and the Accounts Act, must always be complied with

Public Companies

These companies are liable to more onerous requirements regarding minimum capital, the number of shareholders, public offering of shares and other financial instruments, additional financial requirements, and a far greater degree of accountability to their shareholders. There are many legal requirements for a public company. For example half of the promoters must be resident in Thailand and there must be 15 promoters for the Memorandum of Association.

By passing a special resolution of the shareholders as specified by the Civil and Commercial Code, a private company may be transformed into a public limited company. However, a public company may not be converted back to a private company.

Sole Proprietorships

In a sole proprietorship one person is in charge of the business with unlimited liability. Legal action can be taken against the person's business and his assets. Other than those who are permitted under the United States-Thailand Treaty on Amity and Economic Co-operation, foreigners may not run sole proprietorships. A sole proprietor pays income tax at rate bands of 10 to 37 percent on the net profits, the same income tax rates that apply to individuals.

Partnerships

In Thailand, three types of partnerships are acknowledged. The tax treatment and degree of liability of the partners are the only differences between the partnerships. The Board of Investment generally does not encourage Partnerships, so it's unusual for foreign investors to form this type of company.

Taxation

The corporate tax rate in Thailand is 30%.

Corporate income tax is levied on both Thai and foreign companies. A Thai company means a company incorporated under the law of Thailand. Thai company is subject to tax in Thailand on its worldwide net profit at the end of each accounting period (12 months). A foreign company means a company incorporated under foreign law.



VIETNAM

Introduction

The economy of Vietnam is a developing planned-market economy. Nowadays, Vietnam is in the period of integrating into the world's economy, as a part of globalization. Vietnam has been rising as a leading agricultural exporter and an attractive foreign investment destination in Southeast Asia. According to a forecast by the PricewaterhouseCoopers in 2008, Vietnam may be the fastest growing of emerging economies by 2025, with a potential growth rate of almost 10% per annum in real dollar terms that could push it up to around 70% of the size of the UK economy by 2050.

Types of Business Structure

Joint Venture Enterprise (JVE)

A JVE is an enterprise jointly established in Vietnam by two parties or several parties on the basis of a joint venture contract or agreement. A JVE may be established as Limited Liability Company and is a Vietnamese legal entity. The liability of each party is limited to the respective amount of legal capital contributed.

A foreign party may make its contribution of capital in foreign currency, Vietnamese currency generated from investment activities in Vietnam, equipment, machinery, plant, building facilities, industrial property rights, technical know-how, technical processes, and technical services.

Business Cooperation Contract (BCC)

BCCs are a quasi-corporate entity formed on the basis of a contract. The BCC operations are governed by a management committee appointed by the BCC partners. BCCs are common in certain sensitive sectors in which foreign companies are not yet allowed to directly invest in a corporate entity form, such as telecommunications business, advertising sector etc.

Enterprise with 100% Foreign Owned Capital (EFOC)

An EFOC is an enterprise in Vietnam whose capital is wholly owned by foreign investor(s). The EFOC has a corporate charter which sets forth its management structure and mechanisms. An EFOC may joint venture with other existing foreign invested companies and/or foreign investors in setting up new foreign invested companies in Vietnam.

Taxation



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