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12 September, 2016
It was recently named as the most expensive city in the world for a company to send an expatriate worker on assignment in Mercer's latest annual expat cost of living survey. Yet, bustling and vibrant, with good career prospects in the highly-remunerated finance industry and year-round warm weather, Hong Kong remains a popular city for expats.
Introduction to Hong Kong
Hong Kong is a former British colony located off the southern coast of China and lying next to the Kwangtung province. It sits at the mouth of the His Chiang Estuary and is approximately 140km to the northwest of the Chinese port city of Canton, 65km to the west of which lies the former Portuguese colony of Macau.
The territory comprises Hong Kong Island and the adjacent islets, Stonecutters Island, the Kowloon Peninsula on the mainland and the New Territories. The New Territories comprise approximately 90 percent of the land surface area of Hong Kong and consist of a portion of the Chinese mainland and over 230 islands.
Total land area is now just over 1,000 sq km, but is increasing all the time due to ongoing land reclamations which are the direct consequence of an urban development program which is limited by a shortage of land.
The capital city of the territory is at Victoria, on Hong Kong Island, which boasts one of the world's finest natural harbors. The territory's hilly terrain has had an impact on the direction of urban development. The Kowloon ridge is the dividing line between urban and rural Hong Kong with the harbor area, the commercial, industrial and residential districts located to the south while the agricultural area is restricted to the north and occupies some of the islands.
The yearly average temperature is 21° C, with mean January and July temperatures standing at 16° C and 28° C respectively. Average annual rainfall is about 200cm, of which about 90 percent falls between April and October. Typhoons occur between July and October.
Hong Kong And China
Since the handover of sovereignty from Britain to China in 1997, Hong Kong has been a "Special Administrative Region" of the People's Republic. Its constitution, known as the "Basic Law", is modelled on the constitution of China, under the guiding principle of "one country, two systems," which was established before the handover.
The Chinese government agreed that Hong Kong's capitalist system would remain unchanged until the year 2047. Thus, except in the areas of foreign policy and defense, which remains the exclusive domain of Beijing, policy makers in Hong Kong have been free to continue pursuing the same laissez faire economic policies which have positioned it on the map as the world's third financial center after New York and London, and Asia's most important.
However, as the world has seen played out on its TV screens in recent times, the yearning within Hong Kong's population for more democratic rights has challenged both the rulers of China and the SAR itself, and will continue to do so in future until a compromise of some sort is reached.
The Economy, Finance And Multinationals
One of the consequences of Hong Kong's economic openness and its reliance on international financial services has been its vulnerability to regional or global economic shocks, and for this reason its economy has tended to see-saw in recent years.
Low-value manufacturing used to be the mainstay of Hong Kong's economy, but this industry has now largely decamped to neighboring Chinese provinces, with the territory's economy now based largely on re-exporting and services, particularly financial services.
Banking is a major constituent of Hong Kong's substantial financial services industry, and, Tokyo aside, Hong Kong is Asia's largest banking hub in terms of external transaction volume. Hong Kong is also recognized as the leading fund management center in Asia.
Importantly for Hong Kong, it has established itself as the favored base for multinational companies looking to expand into Asia-Pacific markets. Indeed, according to the United Nations Conference on Trade and Development, Hong Kong continues to be one of the "major destinations" for the headquarters of multinational companies targeting Asia Pacific markets.
In recent years, companies in asset management and biomedical sciences have been prominent among these new investors. However, in the past year or so, there has been a growing number of companies in emerging businesses investing in Hong Kong, including the Internet of Things and financial technology industries.
A Favorable Tax Environment
Unlike most places, income tax in Hong Kong is levied on a "territorial" basis, which means that income tax is due on locally-sourced income only. What's more, there are no capital gains taxes, no withholding taxes, no sales taxes, no VAT, and no wealth taxes.
Rates of personal taxation are also low by international comparison. Income tax, known in Hong Kong as Salaries Tax, is paid at either a flat rate of 15 percent, or on a progressive scale between two percent and 17 percent. Taxpayers may elect to choose to pay tax under either of these systems, depending on which one gives them the lower tax liability. Helpfully for expats, the definition of income in Hong Kong does not include a pension from a source outside the SAR.
Until June 2001, the territory had no comprehensive double taxation agreements in place. However, under article 151 of the Basic Law the territory can negotiate its own double taxation treaties and the government is now entering an increasing number of tax treaties of various types. According to Hong Kong's Inland Revenue Department, the territory has concluded comprehensive DTAs with 35 jurisdictions, including Canada, France, Ireland, Japan, Luxembourg, Mainland China, Russia, South Africa, Switzerland and the United Kingdom.
Legislation which came into operation in March 2010 allows Hong Kong to incorporate the international standard on exchange of information into DTAs. In 2013, it also put in place a legal framework for entering into standalone tax information exchange agreements with other countries and territories. Hong Kong has also signed an inter-governmental agreement to facilitate compliance with the United States Foreign Account Tax Compliance Act, and has indicated its support for implementing the new global standard, known as the Common Reporting Standard.
It's easy to picture Hong Kong's 7m-plus population crammed into a dense thicket of high rise towers which have transformed the territory into the proverbial "concrete jungle." However, there is a fairly diverse array of properties available to suit an individual's needs and budget in the SAR.
Obviously, bijou apartment living remains the city's specialty – more than 90 percent of the available accommodation is in the form of flats. But there are also larger apartments available for families, and for those with deeper pockets, detached houses are found in certain areas.
Singles often seek to settle in Central and nearby districts to be close to the city's nightlife. However, Hong Kong Island is one of the priciest places is the world for rented accommodation, and one gets little for one's money in terms of square footage. As a rule, Kowloon is cheaper than Hong Kong Island, and property in the New Territories may be a more affordable option still.
For more information on property in Hong Kong, please visit the Finding, Buying And Renting For Expats In Hong Kong section.
Entry, Residence and Work Permits
Visitors from most countries can visit Hong Kong for periods of up to 90 days (the exact length depends on the person's country of origin), without a visa. Holders of British passports can remain in Hong Kong visa-free for up to 180 days.
Visitors are also required to have adequate funds to cover the duration of their stay without working and, unless in transit to the Mainland of China or the Macao Special Administrative Region, to hold onward or return tickets.
A visa is required if an individual intends work, study, establish or join in any business or to take up residence in Hong Kong. Visitors are not allowed by law to take up employment (paid or unpaid), to establish or join in any business, or to enter school as a student, nor, except in the most unusual circumstances, are visitors allowed to change their immigration status after arrival.
The main Hong Kong visas include Visitor (this is mostly for nationals who come from countries which do not qualify for a free stay), Transit (to qualify for this visa you must have already bought an onward ticket to a destination other than mainland China or Macao), Working holiday, Study, Training, and Dependent.
An investor visa, known as the Entrepreneurs Visa, is issued to non-resident entrepreneurs who want to start their own business in Hong Kong. The main requirements for this type of visa are a sound, economically viable business plan, and proof that the business will bring an economic benefit to the territory. The visa lasts for two years, but can be renewed after that.
Relevant visas can be applied for at the nearest Chinese diplomatic and consular mission, or directly through the Hong Kong Immigration Department by post or via a local sponsor.
For more information on visa requirements in Hong Kong, please visit the Hong Kong Visas and Passports section of Expat Briefing.
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