Hong Kong & Singapore and their territorial tax system How can they be used in Russia

1. Hong Kong & Singapore and their territorial tax system How can they be used in Russia Globalserve Moscow Seminar September 2013 ByPhani Schiza Antoniou

2. FACTS about Hong Kong One of the major financial and banking centres in the world Sound legal system Highly reputable- stable jurisdiction Boosting economy Financial stability Good communication infrastructure English widely spoken The gate to China mainland

3. Hong Kong company main characteristics Company Type: Limited Liability Company Governing legislation: Hong kong company registry is the governing authority and companies are registered under the Hong Kong Ordinance 1984, which is similar to Anglo saxon system. But new legislation is in place as from 2014 Information published: Names of officers appear at public registry but nominee officers can be used to preserve confidentiality Accounts : audited financial statements must be prepared and filed but information is not publicly accessible Secretary: Local secretary compulsory Capital : in any currency and no minimum Registered agent needed Minimum shareholders and directors: 1 Time for registration : 10 days

4. Major changes introduced in Hong Kong companies as a result of the new legislation enacted in 2014 Equity : shares will have no par value and it is the shareholders who will determine its price. # Also there will be no need to proceed with increase of capital at premium and maintain separately share premium reserve. Now all capital raised will be issued capital No requirement for authorised capital approval. Easier to reduce capital by special resolution; no need to apply to court. Bearer shares not allowed and if issued in past must be converted into registered shares Directors need to issue credibility declaration that the company can repay its obligations within the period of 12 months . Likewise credibility declaration is needed to be issued by directors in case of buyouts or entrance of new shareholders in the company . Increased responsibility for the director the declarations are not correct. If statements were issued without having the facts to base on, 2 years imprisonment

5. Major changes introduced in Hong Kong companies as a result of the new legislation enacted in 2014 Registrar’s rights increase with respect to documentation required for filing of changes Share transfer must be filed at the Registrar within two months; if not notice must be sent to provide explanations; high fines Article 140. director cannot issue shares without directors’ resolution Capital tax is abolished Shareholders’ meetings can be done via teleconference Corporate Documents : No need to register Memorandum. Just file the articles No seal Director alone can sign and represent the co. if it is two directors then one director together with the secretary can represent the company

6. Major changes introduced in Hong Kong companies as a result of the new legislation enacted in 2014 Corporate director is still allowed but at least one must be physical person. Have 6 months after the law is enacted to make the adjustments need under the new law Transactions in which the directors have an interest, it must be announced and the transaction to be approved by the shareholders Directors details and addresses are registered at the public registry but this information is not open to public but creditors can ask for the information through legal action Increased responsibility of secretary Financial reforming. Not audited financial statements for small companies

7. Tax system in Hong Kong Companies registered in Hong Kong are not taxable provided no transaction is carried out in Hong Kong . If this is not the case the tax rate is 16.5% on profits made A company will be liable for tax if: It has its own premises in Hong Kong and employs staff If company is partly or wholly managed on Hong Kong territory If its client base is in Hong Kong If its suppliers are in Hong Kong If merchandise for sale is stocked in Hong Kong If none of the above, we apply for offshore tax exemption

8. Tax system in Hong Kong It should be noted that Hong Kong is a special administrative area and it is permissible to conduct business in China without being subject to tax Tax Declarations: the Hong Kong tax authorities will send out a form entitled ‘Tax Return’ 18 months to the day after the registration of the company . Then it’s the moment to apply for offshore status and supply audited set of accounts Hong Kong Double Tax Treaty with Russia is of limited scope just for the aviation No need for DTT in the past but since 2010 Hong Kong has signed 28 DTT and exchange of information

9. Uses of Hong Kong companies Ideal for Trading companies and services companies as they are not black listed like the classical offshore Principal agent scheme Asset protection as the last company in a structure, although it is more expensive than the alternative classical offshore Cannot be used as financing or holding or for royalties with respect to Russia because there is no Double tax treaty with Russia

10. Facts about Singapore One of the major financial and banking centres in the world Sound legal system Highly reputable- stable jurisdiction Boosting economy Financial stability Good communication infrastructure English widely spoken – highly educated personel The gate to Far East Common law jurisdiction

11. Singapore company main characteristics Company Type: Limited Liability Company (Pte) Governing legislation:Singapore Companies Act 1963 Information published: Names of directors and shareholdersappear at public registry but nominee officers can be used to preserve confidentiality Accounts : financial statements must be prepared and filed. Audit financial statements required above minimum conditions Director. Minimum 1 and at least one to be from Singapore Secretary: Local secretary compulsory Capital : No minimum capital Registered agent needed Minimum shareholders and directors: 1 Time for registration : 10 days

12. Tax system in Singapore On profits earned in territory upto SGD 100000 tax free for the first three years. From 100000-300000 tax rate at 8.5% Above SGD 300000 tax rate at 17% Condition for above is to be tax resident and not to have more than 20 shareholders On profits earned overseas companies are exempt from all taxes earned overseas as well as profits for financial securities Profit earned overseas but introduced in Singapore is taxed Dividends distributed to shareholders are not taxed if company was taxed before

13. Tax system in Singapore Tax declarations: Every year companies must provide following documents to IRAS: Estimate of taxable income EC1 within 3 months from year end Declaration of taxes on cos’s income Form C by 30/11 together with Financial statements Declaration of income directly online on IRAs website Double tax treaty with Russia: WHT 5* /10% if minimum 15% shareholding WHT 7.5% on interest and royalties Good for holding company in Russia but not for financing or royalty, Becase of the 7.35% WHT on interest it falls behind the other holding jurisdictions