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Legal Update

Abolition of Capital Duty and Reduction of Business Registration Fee in Hong Kong

27 March 2012
Mayer Brown JSM Legal Update

Summary

As from 1 June 2012, capital duty currently levied on Hong Kong companies on the increase of its share capital will be abolished. Previously a fee of HK$1 per HK$1000 of capital increase capped at HK$30,000 per capital raising applied. Its abolition will allow Hong Kong companies to raise their capital without any government fee or tax.

For the period from 1 April 2012 to 31 March 2013, Hong Kong business registration fee (including levy) will be reduced by HK$2,000 (for principal Hong Kong place of business) and HK$73 (for other Hong Kong branches). A concessionary refund of the business registration fees paid for this period is allowed in certain cases.

Abolition of Capital Duty

Currently, capital duty is payable to the Companies Registry on the creation of the nominal share capital of a Hong Kong company (ie. the authorised capital, whether or not it is issued), the increase in the authorised share capital and the allotment of shares at a premium. Capital duty is payable at a rate of HK$1 per HK$1,000 of the authorised share capital created or increased, or the amount of the premium (capped at HK$30,000). This will now be abolished with effect from 1 June 2012, subject to necessary legislative process.

The abolition of capital duty will be applicable to Hong Kong companies which lodge the relevant documents about incorporation (Form NC1), increases in nominal share capital (Form SC4) or the issuing of shares at a premium (Form SC1) with the Companies Registry on or after 1 June 2012.

The Companies Ordinance (Amendment of Eighth Schedule) Order 2012 was gazetted on 16 March 2012. The Order is to implement the Financial Secretary's proposal in the 2012-13 Budget Speech to abolish capital duty levied on local companies.

Please also refer to the following link to the Companies Registry's press release http://www.cr.gov.hk/en/publications/press20120316.htm and the following link for a copy of the Order http://www.cr.gov.hk/en/news/highlights.htm#108.

Reduction of Business Registration Fee for One Year (from 1 April 2012 to 31 March 2013)

The Government published in the Gazette on 1 February 2012 the Revenue (Reduction of Business Registration Fee) Order 2012 to waive the business registration ("BR") fee for the year 2012-13. This is to implement the Financial Secretary's proposal in the 2012-13 Budget Speech. As such, the business and branch registration fees for the new certificates or renewal certificates within the year 2012-13 will be reduced by HK$2,000 (for main BR) or HK$73 (for branch BR). This means that the BR fee (including levy) to be payable within the period from 1 April 2012 to 31 March 2013 will be as follows :

Main BR Certificate

HK$450 (1-year)

HK$4,550 (3-year)

Branch BR Certificate

HK$450 (1-year)

HK$1,466 (3-year)

A concessionary refund of business registration fees paid for the year 2012-13 will be allowed to the following businesses, upon their applications :

(a) Business or branches, which hold a 3-year registration certificate with a commencement date before 1 April 2012 and an expiry date on or after 31 March 2013;

(b) Ceased businesses or branches, which last hold a 1-year registration certificate with a commencement date between 1 August 2011 and 31 March 2012;

(c) Ceased businesses or branches, which last hold a 3-year registration certificate with an expiry date between 1 April 2012 and 31 March 2013;

(d) Local companies registered under the One-stop Registration, which make incorporation applications between 1 August 2011 and 31 March 2012 and hold a 1-year or 3-year registration certificate with a commencement date between 1 April 2012 and 31 March 2013.

Please also refer to the following link to the IRD's website for more information on this topic http://www.ird.gov.hk/eng/tax/waiver_of_br.htm and the following link for a copy of the Order http://www.legco.gov.hk/yr11-12/english/subleg/negative/ln015-12-e.pdf.

For inquiries related to this Legal Update, please contact David Ellis, Winnie Lam, Michelle Chow, or your usual contacts with our firm.

Learn more about our Hong Kong office, Business & Technology Sourcing, Corporate & Securities, Company Secretarial, Financial Services Regulatory & Enforcement, Private Investment Funds, Private Equity, Mergers & Acquisitions practices.

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