What are the tax incentives in the Greater Bay Area, China?

A simple tax system is a major advantage of setting up a company in Hong Kong and in general only a simple profit tax is required. In contrast, there are more taxes required in the Mainland, China. However, if entering into the Greater Bay Area ("GBA"), Hong Kong companies and Foreign companies will have tax concessions. For the specific industries, the tax rate would be even lower than the tax in Hong Kong.

What taxes do companies have to pay in Hong Kong and the Mainland?

Comparing with the general profits tax, the corporate income tax in the Mainland will be higher than that in Hong Kong. Starting a company in Hong Kong only needs to pay 16.5% of profits tax. Recently, under the two-tier profits tax system, the profits tax for the first 2 million profits is only at 8.25% and Hong Kong companies are also not required to pay dividend tax and capital gains tax, etc. The tax rate is relatively low in many countries and regions. On the contrary, without any concessions, the mainland corporate income tax is 25%, and a value-added tax ranging from 3% to 13% is levied on company dividends and rental income.

Taxes actually required for business in GBA

Although there are many tax types in China, there are also many concessions. In China, there are many free trade zones and you can find most of them in GBA region. In the Pearl River Delta region alone, there are Guangdong Free Trade Zones consisting of Qianhai, Nansha, and Hengqin Area. These areas, as well as the GBA, have various tax incentives. It is difficult to generalize. Here are a few examples:

• Carry out designated projects such as e-commerce in Qianhai and Hengqin, the corporate income tax is about 15%

• Shenzhen, Guangzhou, Zhaoqing and other cities in the Greater Bay Area, after September 9, 2016, the corporate income tax levied on foreign companies is lower than that of Hong Kong, and the preferential treatment covers multiple industries, such as professional services such as Shenzhen’s fiscal and taxation industry.

• After the COVID-19, SME whose corporate profits are less than RMB 3 million have a value-added tax as low as 5%-10%

Tax incentives for different industries

The division of the industry is also an important factor affecting the tax concessions in China. The high value-added or high-tech industries supported by China, such as chips, electronic platforms, artificial intelligence, autonomous driving, etc., will have different tax concessions in different cities across the country, and the corporate profits tax rate can be reduced to 15%.

For example, in free trade zones or bonded areas such as Qianhai, e-commerce can be tax-exempt; as for different industrial parks, different industries such as biotechnology, and even popular industries such as vaccine research after the outbreak of COVID-19, can be deducted to varying degrees. taxi. Therefore, before entering the Greater Bay Area, you can check with our tax advisor about the tax deduction model that belongs to your industry and choose the best place to settle in order to obtain the best tax concessions.

If you want to know more, please feel free to contact us at info@rbcs.com.hk .

Insights of ASEAN E-commerce (2021)

The spread of Covid-19 has compelled ASEAN leaders to impose social distancing measures and lock down cities from time‑to‑time, since the beginning of the outbreak in early 2020. It has put strain on traditional retail given the widespread closures of physical stores and diminishing consumer demand. While the pandemic has led to a period of extreme upheaval for traditional street-side stores, it has driven a dramatic uptake of digital adoption across ASEAN countries, accelerating the shift towards online retail channels that was already underway.

Store‑based retail sales plunged and remained weak over the last year in major ASEAN consumer markets. As the pandemic progressed, however, it has sped up digital transition and accelerated an expansion of e‑commerce. Consumers are provided with access to a significant variety of products from the convenience and safety of their homes, while retailers scramble to bolster their online channels to minimize impacts from social distancing measures or contact restrictions.

First Time Using E-commence

There was a dramatic uptake of digital technologies across key economies in Southeast Asia, with 40 million people came online for the first time in 2020 alone, bringing the total number of internet users to 400 million, up from 250 million in 2015. More than three out of five people in these economies are now online and since the pandemic began they have been spending more time on the internet. Time spent online per day rose by an average of one hour across ASEAN countries, with the highest spike in the Philippines, where consumers spent more than five hours a day online.

The use of e‑commerce has also surged since the start of the pandemic, with the strongest uptake in Indonesia, followed by the Philippines and Malaysia. As consumers increasingly embrace the benefits of safety and convenience over e‑commerce, the shift to online shopping is expected to stay post‑pandemic. Interestingly, many ASEAN countries have seen stronger e‑commerce adoption among internet users than the world average as well as many mature markets. Indonesia was found to have the highest e‑commerce adoption in the world last year, with 87% of its internet users having purchased online via an electronic device, followed by the U.K. (86%), Thailand (84%) and Malaysia (83%).[4] Adoption in other ASEAN countries, such as the Philippines, Singapore and Vietnam, has also outrun mainland China, which is considered one of the world’s largest e‑commerce market.

Being late adopters to the internet, most consumers in the region have never owned a desktop computer. Instead, with smartphones becoming increasingly more affordable and accessible, mobile devices have become the main means to stay connected and shop online. Indonesia emerged as the world’s most enthusiastic adopter of mobile e‑commerce last year, with about 79% of Indonesia’s internet users purchasing something online via a mobile device, followed by Thailand (74%) and the Philippines (70%). Meanwhile, mainland China ranked the sixth in mobile e‑commerce usage, with 64% of internet users having shopped online using a mobile phone.

E‑commerce was previously factored by many retailers in ASEAN as a good‑to‑have option rather than being an essential business strategy. As Covid-19 reshapes consumers’ behaviours and accelerates transition to online shopping in ASEAN, e‑commerce has become an effective channel for companies, including Hong Kong SMEs and exporters, to reach local consumers or grow their existing footprint in ASEAN markets.

Lazada and Shopee are the two key online platforms with operations in major ASEAN countries, including Indonesia, Vietnam, Thailand, Singapore, Malaysia, and the Philippines. While these two leading e‑commerce players took a regional approach, there are also many local B2C platforms in individual ASEAN countries. For example, Tokopedia and Bukalapak are popular in Indonesia while Sendo is well‑liked by Vietnamese consumers.

Consumer electronics and apparel are the key product categories purchased online by Southeast Asian consumers, accounting for over half of the region’s e‑commerce gross merchandise value (GMV) in 2020. Meanwhile, the “stay‑at‑home economy” has disrupted food purchasing and consumption habits, forcing many consumers to cook or eat at home, and experiment with ordering food and groceries online. The e‑commerce GMV share of food and groceries jumped from 4% in 2015 to 11% last year, with more than two out of five ASEAN consumers are new to online groceries purchase.

<Source: HKTDC - Melissa Ho>

Carbon Neutral@HK

The Hong Kong economy is predominately supported by the tertiary industry without major energy-intensive industries. In 2019, electricity generation was the largest source of carbon emissions (66%), followed by transport (18%) and waste (7%). These three major emission sources together accounted for over 90% of the total emissions, and are therefore the three most critical areas of our decarbonisation work.

Currently, the local fuel mix for electricity generation mainly relies on fossil fuels such as coal and natural gas. We can remove most of the carbon emissions if we increase the use of zero-carbon energy for electricity generation and gradually phase out fossil fuel vehicles by electrifying the transport sector. For carbon emissions from waste, they are mainly GHGs generated by the decomposition of municipal waste in landfills. As such, we will have to break away entirely from landfilling for municipal waste disposal in order to reduce carbon emissions and avoid utilising our precious land for developing new landfills. As for the remaining carbon emission sources, such as non-road vehicles and refrigerants, we have to identify suitable zero-carbon energy or alternative technologies.

Increasing the use of zero-carbon energy requires the support of technologies as well as finance and land resources. On the other hand, reducing the energy demand can lower the total cost of switching to zero-carbon energy and lessen the financial burden on the public. At present, buildings account for about 90% of the electricity consumption in Hong Kong. As such, improving energy efficiency of buildings to reduce the energy demand will be our top priority in future energy saving efforts.

Based on the above analysis, the strategies for Hong Kong to achieve carbon neutrality before 2050 should comprise: “net-zero electricity generation”, “energy saving and green buildings”, “green transport” and “waste reduction”.