Hong Kong is located in the southeast of mainland China by the South China Sea. It is also in the center of East Asia, a quickly developed region, providing it with an extraordinary geographical location. Hong Kong is sized around 1,100 km2 and consists of three parts: Hong Kong Island, Kowloon Peninsula, and the New Territories.
Hong Kong Island was ceded to Britain in 1842 and returned to China in 1997. At the moment, it is the world’s 11th largest trading entity and has an very good financial environment with no restrictions on cash flow. The Hong Kong Special Administrative Region is an administrative jurisdiction of the Government of the People’s Republic of China, but with sovereignty remained.
Regarding corporate income tax, as Hong Kong has adopted a territorial tax system, only income generated in Hong Kong will be taxed. In other words, income generated from regions outside Hong Kong are exempt from tax. It includes income from triangular trade (or even multangular trade), where Hong Kong is only a transit port and offices in Hong Kong earn money from switch bill keeping products outside Hong Kong. The said income and derived capital gains, dividend income, dividend remittance, interests and royalties are truly a great profit for companies that make reinvestment to mainland China through Hong Kong and those who work in Hong Kong. Hong Kong is also an important sales and marketing channel agent for Taiwanese companies that wish to have a business development in mainland China. Furthermore, after the launch of China's new tax law in 2008, mainland Chinese companies deduct only 5% (was 10%) from the amount when distributing stock dividend to Hong Kong shareholders, providing them with a great tax advantage.