||What particular service sectors are open for Hong Kong service providers?
A1. There are 18 service sectors as provided in annex 4 of the CEPA. They include the following service sectors: -
||Management consulting services
||Storage and warehousing services
||Convention and exhibition services
||Real estate and construction services
||Medical and dental services
||Freight forwarding agency services
||Who are the Hong Kong service providers?
Annex 5 of the CEPA provides for two categories of Hong Kong service providers: natural persons and juridical persons. Natural persons are permanent Hong Kong residents, and juridical persons include companies, partnerships, and sole proprietorships, trade associations and chamber of commerce who are legally formed under the Hong Kong laws.
||What criteria must the Hong Kong service provider fulfill?
With the exception of the legal service sector, a Hong Kong juridical person including a Hong Kong company must meet the following five criteria:
- Its scope of business must encompass the services it intends to provide in the Mainland of China;
- It must have been engaged in substantial business operations for 3 years (5 years for construction companies, insurance companies and banks);
- It must have more than 50% of their staff who are residents in Hong Kong without any limit of stay;
- It must have paid profit taxes in Hong Kong;
- It must have evidence of owning or renting a business premises commensurate with its scale of operations.
||. In a certain period during the year, our company’s Hong Kong employee ratio drops to less than 50%. But the ratio of Hong Kong staff to total staff is over 50% at the beginning and end of the year. How is the number of Hong Kong employees with residence status determined?
It is not specifically given in the CEPA annexes whether a weighted average headcount method will be used to calculate the numbers and thus compute the ratio of Hong Kong employees to total employees. It is expected that the detailed calculation method will be announced later.
||Our company will send the Hong Kong employees to work inside the Mainland. Is that a mandatory requirement for the Hong Kong employees to work in Hong Kong?
The CEPA does not state that Hong Kong employees have to work in Hong Kong. But CEPA requires that the employer must file to the Inland Revenue Department the “Employers’ Return of Remuneration and Pension of Employees” and keep the copies for record.
||What documents are required for certification as Hong Kong service providers?
The intended service provider should produce the following documents to the Industry and Trade Department to apply for a certificate as the Hong Kong service provider:
After receiving and examining the above information from the service provider, the Trade and Industry Department will issue a “Certificate of Hong Kong Service Provider?showing that the applicant has fulfilled the criteria of Hong Kong service provider as per provisions in article 6(3) of the Annex 5 of CEPA. The two sides to the CEPA will work out the format and contents of the “Certificate of Hong Kong Service Provider?later.
- Copy of Certificate of Incorporation issued by the Companies Registry;
- Copy of Business Registration and an Extract of information on the Register of Businesses;
- Audited financial statements for the past 3 years (or 5 years);
- Original or copy of documents substantiating the owning or renting of business premises in Hong Kong by the Hong Kong service provider;
- Copy of profits tax returns and Notice of Assessment and Demand for tax for the past 3 years (or 5 years as the case may be);
- Copy of Employer’s Return of Remuneration and Pensions in respect of the employees of the Hong Kong service provider;
- Original or copy of documents substantiating that more than 50% of the company employees are residents of Hong Kong as defined;
- Original or copy of documents substantiating the nature and scope of the Hong Kong service provider;
- A Statutory Declaration by the authorized representative of the Hong Kong service provider.
||If a foreign company acquires the shares in a Hong Kong company that satisfies the requirements of a service provider, will the acquired Hong Kong Company be still accepted as a Hong Kong service provider at the time of submitting the application for certification as Hong Kong service provider?
The acquired Hong Kong Company will have to wait for one year before it can submit its application for certification as the Hong Kong service provider.
||IIf there is a change in the shareholdings of the Hong Kong following a group re-structuring without a change in the beneficiary ownership, will the re-structure affect the Hong Kong company when it submits its application for certification as a service provider?
The Annexes and CEPA itself do not specifically deal with this issue. We have to wait for further elaboration from the two sides on this.
||What is the requirement for a natural person to be certified as Hong Kong service provider?
The Hong Kong service provider should provide identification of his or her Hong Kong permanent resident status, and for Chinese citizens among such service providers, they should provide the Home Visit Permit or the HKSAR passport. In addition, they should provide copies of statutory declarations, identification document of the natural person, and documents of Business Registration, Profit Tax Returns, and evidence of owning or renting business premises. All of them must be attested by an attesting officer as recognized by the Mainland.