5.4

STARTMEUPHK and CW: On the Way to Consolidate Hong Kong as a Hub for Technology and Innovation Companies of the World

Hong Kong, the Asian financial and trade center, consolidates itself as a great beacon for innovation and technology. This makes it idealistic for foreign companies interested in increasing their competitiveness and accessing the Mainland China Market. StartmeupHK is an Invest Hong Kong initiative that seeks to facilitate the entry, establishment, and permanence of foreign technology companies so that they take full advantage of the benefits offered by Hong Kong’s innovation ecosystem, one of the most advanced in the world. 

Every year, StartmeupHK holds a great event to bring together experts, service providers, financial institutions, investors, and all kinds of companies related to the management of technology startups.

During this year’s occasion, the specialized event focused on the Latin American region. On 10 June 2021, a webinar was organized with 12 expert specialists and a panel of foreign startup companies. David Barriga, CW’s representative for Latin America, presented the closing remark for the international event.

Learn more about the webinar: https://www.startmeup.hk/salons/s-america/

Highly committed to developing innovative companies, CW offers a package specially designed for startups that facilitates their constitution and management in Hong Kong and creates their wide network of contacts with Hong Kong entities involved in the innovation ecosystem. If you are interested in more information about our services for startups, do not hesitate to contact us.

Written by David Barriga, Latin Department, CW CPA

 

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Electronic Audits by the Customs Authority in Mexico

Based on the Customs Valuation Agreement of the World Trade Organization, the customs authority of any country has the power to doubt the veracity of the information presented regarding the value of imported goods. In this sense, following the faculty granted by the mentioned International Agreement, the Mexican customs authority has determined the causes that will take into account to reject the customs value of imported goods. The table below shows a summary of some of the most important causes:

Accounting of the Mexican enterprise

Documents provided by the suppliers aboard to the Mexican importer​

The importer opposes the exercise of the verification faculties of the customs authorities, or it is detected that the importer has incurred in any of the following behaviors:

  1. Not keeping the accounting, or not keeping it according to the principles and legally applicable precepts; not make the accounting available to the customs authority.

  2. Omitting or altering the records of foreign trade operations.

  3. Omitting the presentation of the tax return exercise of any contribution until the moment at which the exercise of verification faculties begins.

  4. Not meeting the requirements of the customs authorities to present the documentation and information proving that the declared value was determined according to the legal provisions.

If it is established that the value declared by the importer was not determined following the customs laws, upon updating any of the following assumptions:

  1. In the documentation or information provided to justify the customs value of the merchandise that has been declared, it is not possible to corroborate its veracity or accuracy. In the case of having used the method of the transaction value for their determination, it is not reliably proven the price that was actually paid or will be paid for the mentioned merchandise;

  2. Any payment not justified to suppliers and exporters of the merchandise is detected in their accounting. It is known, derived from an international certification, that the alleged supplier of the merchandise did not make the sale operation to the importer or denies having issued the invoice presented by the importer in the petition; or

  3. When the value declared in the petition is 50% or lower than the transaction value of identical or similar goods determined following the customs laws.

RISKS

The Mexican tax and customs authorities will have full faculty of electronic revision. They will be able to review all payments made abroad related to the purchase of foreign merchandise imported into Mexico.

In this sense, the situation becomes delicate when the Mexican customs authority reviews the movements of money abroad and when the movements of money do not exist in the accounting records or are not justified to the satisfaction of the mentioned authority. Then, there will surely be a rejection of the customs value of the merchandise, which could lead to the omission of taxes, having to be paid along with their accessories, and the consequent payments of the corresponding fines.

OUR SUGGESTION

In the case that your enterprise has branches in Mexico, such as trading companies or manufacturers, we recommend you to ensure that accounting is carried out following the applicable legal principles and precepts; make correct payments abroad that are related to merchandise imported into Mexico and relate them to the accounting entries, to avoid unnecessary inconvenience from the Mexican tax and customs authorities.

If you have any questions about the incremental or decrementable concepts that must be declared in the import petition or the accounting, please do not hesitate to contact our team of professionals.

Written by Baker Tilly Garza García, 

Members of Allinial Global 

Baker Tilly Garza Garcia

 

Contact

Monterrey Office 

Jorge Hernandez Parra

Email: jhernadezp@btmgg.com.mx

M: +52 1 81 8396-3872

Alejandro Angeles Acosta

Email: aangeles@btmgg.com.mx

M: +52 1 81 1707 5378

 

Querétaro Office

José Ángel Blanco M.

Email: jblanco@btmgg.com.mx

M: +52 1 56 1584-0019

Juan Carlos Castro

Email: jcastro@btmgg.com.mx

M: +52 1 442 154 99 54

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Webinar: Empower Your Company’s HR and Payroll Management With AI and Cloud Technologies

Traditionally, when HR and payroll management comes to mind, we think of recruitment involving face-to-face interactions, attendance records through card readers and sign-in sheets, leave, and claims request managed with hard copies and lots of paperwork, etc.

However, the COVID-19 pandemic has enforced considerable changes upon numerous companies. For example, employees are now able to work remotely from home or even abroad. It is almost impossible to administer HR and payroll through traditional means. With technologies like AI and cloud, companies are able to streamline remote recruitment, attendance, leave applications, performance assessment, training, as well as other HR and payroll processes.

At this webinar to be organized by the German Chamber of Commerce, Hong Kong, speakers from Neufast and CW CPA will give you more insights on how these technologies can empower your company’s HR and payroll management.

Date: Tuesday, 8 June 2021

Time: 11:00 am – 12:00 noon

Cost: Free for GCC members / HK$150 per person for non-members

Remarks:

  • The access link for the webinar will be sent to participants 1 day before the event. This session will be conducted via GoToWebinar.

Register now: https://gicgcchk.glueup.com/event/37112/register/

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WeChat Image_20210513110222

CW signs an MOU with the Universidad Tecnológica de San Juan del Rio (Mexico) for launching a virtual internship program

Our firm signed an important collaboration agreement with the Universidad Tecnológica de San Juan del Rio (UTSJR) to improve the skills and abilities of students through professional practice in various aspects such as business development and information and technology in an international company with a focus on the Latin American region. 

This new project aims to promote direct contact, educational and research cooperation between students and the company. Furthermore, both parties will endeavor to cooperate in various fields of interest: joint education activities and exchange of information and publications.

In total, eight Mexican students were selected for the virtual internship program.  These students are from engineering, IT, and business background, eager to carry out professional work in an international environment.

For further details, please contact our Latin Department Assistant Manager, Victor Herrera, at victor.mendoza@cwhkcpa.com.

Written by Victor Herrera, Latin Department, CW CPA

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Podcast

CW Latin Department Launching a Podcast in Spanish

To offer morinformative and practical content to its Spanish-speaking clients on issues related to establishing, maintaining, or strengthening commercial and investment operations in mainland China and Hong Kongwe are pleased to share with you the opening of a new communication channel – a business podcast in Spanish, operated by our Latin American Representative, David Barriga.  

In the first episode of our podcast, we invited our special guest, Verónica Medina, Representative of Invest Hong Kong in South America (except Brazil), to share her interest and efforts in attracting investors from Latin America to Hong Kong. The interview with Verónica serves as a prelude to our upcoming series of episodes on practical aspects to establish a company in Hong Kong, key considerations to open a corporate bank account, costs, and actions needed to maintain a  Hong Kong company.  

Currently, our Latin Department has established accounts on various social media platforms such as Instagram, Facebook, YouTube, and Linkedin, providing instant communications with our Latin American and Spanish followers. The inclusion of a Spanish podcast channel is a major milestone for our Latin Department to becoming a top-of-mind service provider and connector of knowledge, network, and social impacts to our communities.   

To those Spanish-speaking executives, managers, and business owners who are doing business with China: If you would like to keep you updated on the best practices for dealing with China businesses, please access our new podcast channel both on Spotify or iVoox.  

Spotify: 

https://open.spotify.com/episode/64LtB35kt2jW3JKSGHw4Fu?si=nFkpqLZrRiy2TpfJh1tdkw  

iVoox: 

https://go.ivoox.com/rf/68457104 

Written by David Barriga, Latin Department, CW CPA

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CW at German Chamber Spring Reception 2021

From 21 to 22 April 2021, the German Chamber of Commerce Southwest China held its 2021 spring reception in Shenzhen and Guangzhou. More than 110 members and friends gathered and spent two pleasant evenings. CW German Desk Business Advisor , Therese Feng, had the honour to attend it on 22 April 2021 in Guangzhou, together with Phenix Zheng, Manager (FDI Legal Counsel) from our China Consultancy Team.

Written by Therese Feng, German Desk, CW CPA

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E-commerce

Webinar: How to Develop Business Models through E-commerce

On 25 February 2021, CW organized its first webinar dedicated to the importance of E-Commerce, with the support of two Allinial Global member firms – LawBiz of Mexico and Alfredo Lopez y Cia of Colombia.  

The online webinar with specialists and experts from Chile, Colombia, and Mexico attracted over 150 participants. Specialists from various regions presented their insights on why companies today should pursue the digitalization of their operations and incorporate B2C and B2B virtual processes to market their products and services. The renowned entities included Concanaco from Mexico, Invest Hong Kong, Bogotá Chamber of Commerce, Lawbiz, Alfredo López y Cia, and the Colombia China Chamber of Commerce. 

The webinar encapsulated E-commerce’s importance in the development and growth strategies for small and medium-sized companies in Latin America. The growth and impact these channels have had on economies such as China and other Asian countries are clear signs that are now more important than ever.  It is necessary to accelerate the process of adopting new technologies and especially the use of electronic channels.  

The webinar’s key takeaways included the need to link universities with SME’s innovation processes, the role of social networks as a mechanism to generate knowledge, the importance of human resources, and their update in the face of technological innovation. The adoption of online platforms is necessary for companies in various industries; even governments have adjusted tax and legal procedures electronically. 

In this sense, CW presented its new service portfolio provided by MHnCW as an integral solution to Latin America companies that seek to export or sell their products to the mainland Chinese and Hong Kong markets.  Please visit our website: www.mhncw.com

For more details of the webinar and access to the event’s full recording, click here: https://youtu.be/0SWt_veNZc0

 

For more information, 

David Barriga 

Representative CW/MHnCW for Latin America 

David.barriga@cwhkcpa.com 

Written by David Barriga, Latin Department, CW CPA

Newsletter

E-Commerce

E-commerce in the European Union and its VAT changes in 2021

  • The European Union will implement new Value Added Tax (VAT) regulations on cross-border e-commerce businesses on 1 July 2021. Due to the increase in globalization, international trade and the need for worldwide tax controls, the new regulation aims to simplify and modernize the procedures.   

    How will this affect exporters from China? How can you regulate your sales in EU? 

In response to the increase in globalization, international trade, and the need for worldwide tax controls, on 1 July 2021, the European Union will enact the new regulatory package of Value Added Tax (VAT) on e-commerce.    

The package introduces the ‘Import One-Stop Shop’ electronic portal, which regulates the payments of e-commerce VAT in each member state. This change concerns the growth of e-commerce and digitalization, which have boosted international trade; Companies based in the European Union selling online can also export to mainland China and Hong Kong, and vice versa. 

 

KEY CHANGES IN VAT REGULATIONS  

  • Changes in VAT declaration   

The regulation includes an important change of the VAT collection method on e-commerce. Previously, VAT was paid in each European Union member state, depending on the seller’s location. To illustrate, if a seller in Germany sells products online to a Spanish client, VAT would be declared and taxed in origin, Germany.   

As of 1 July, 2021, tax will be declared in the state where the buyer is located and the purchase is made. Hence, in the previous example, the VAT declaration would be made in Spain. This regulation also affects sellers outside the European Union.  

  • Exemptions of the VAT   

The current system permits VAT exemptions on products imported to EU which are less than €22, while those products exporting from EU are still subject to VAT. This exemption makes imported products more competitive in terms of price compared to those of European origin.    

The regulations as of 1 July will eliminate the e-commerce VAT exemption for products with a value of less than €22, which implies that all imports to EU, even those of little value, will be charged VAT at the destination. This is one of the most supported initiatives since it can balance the playing field between imported products and local products.   

Meanwhile, imports of products with a value of less than €150 are still not subject to customs duties and do not require a full customs declaration. 

 

IMPLICATIONS FOR ONLINE SELLERS FROM MAINLAND CHINA OR HONG KONG  

The different online platforms and marketplaces are contemplated in this regulation as these platforms are, by far, the most used vehicles for the sale of online products from overseas, including China and other parts of Asia. On behalf of users and buyers, the platforms will act as guardians of compliance with the e-commerce VAT, which especially includes those outside the European Union member states and that import from non-member countries.  

Although the general concern for exporters whose sales cover the entire EU territory is how to make the declaration in multiple states, the ‘Import One Stop Shop’ records, and files all declarations across the EU. On the contrary, if the seller does not want to use the ‘Import One Stop Shop’, the alternative is to allow the final consumer to pay VAT when the product is delivered, and all responsibilities and declarations rest on the consumers.  

The foreign trade community is concerned about the increase in costs borne by the final consumers. As VAT is an indirect tax, it is transferable to final consumers. For example, a European consumer who initially purchases a product imported from China valued at €20 may have to pay €24.2 for the same product in Spain after the implementation on 1 July 2021.  

There is a worldwide trend for regulation of VAT on imports. To demonstrate, some cross-border trading platforms in China require companies that ship products to pay VAT in advance for all merchandise.   

How quickly will the final consumers adapt to the VAT regulations of electronic commerce in the European Union, especially in pandemic times? It is only a matter of time the end consumers adapt to these changes.   

Written by Luz Deneb Martínez, Latin Department, CW CPA

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Beautiful Brazil

The diplomatic relationship between Brazil and China began in the 19th century. This relationship became closer in the ’90s due to a more complementary commercial approach. Since 2009, China has been Brazil’s leading trading partner. The economic connections between the countries have brought them closer despite the great geographic distance.

Brazil is a crucial commodities supplier, whereas China provides mostly raw materials, supplies, and machinery to Brazil. China additionally plays a vital role in the Brazilian economy since it buys more than it sells. Since 2010, China is also responsible for heavy investments, especially in energy and infrastructure. In 2019, China invested USD 1.9 billion in Brazil, following the Chinese government commitment made at the 11th BRICS summit in Brasília to invest UDS100 billion.

From January to October 2020, 21.6% of all products imported to Brazil were from China. According to Mr. Yang Wanming, Chinese Ambassador to Brazil, more than 300 Chinese companies invested in Brazil, of which 25 ranked in the top 500 companies globally. The closer connections between the two countries are even more evident now with the joint efforts to elaborate a vaccine against COVID-19.

China considers Brazil as a strategic partner. This scenario presents an opportunity for Brazilian companies that want to expand their businesses to China, even more so after the country’s new Foreign Investment Law came into effect last year, which aimed to make foreign investments in China safer and easier.

Establishing a business in China can present a range of strategic benefits to Brazilian companies, especially to those that wish to partake in product import-export services or establish their operational focus on the Chinese market, from preparation to the distribution of their products services. Although not every company has the same needs, we list a few benefits of establishing a company in China:

  • Access to foreign investment protection as a China-based entity
  • Obtain Chinese-speaking skilled workforce
  • Closer contact with Chinese suppliers
  • Access to one of the biggest consumers markets in the world

Understanding the potential of these fruitful economic relations between Brazil and other Latin American countries, Mr. Thomas Wong, Partner of CW CPA, established a team entitled ‘Latin Department’ to serve Spanish and Portuguese-speaking clients. One of CW’s differentiating factors is that we offer experienced native-speaking advisors that attenuate the cultural differences, thus making the navigation through the complex Chinese market smoother.

To date, our Brazil Desk is a division under the Latin department, assisting various sizable Brazilian companies operating in China, with two Brazilian advisors, namely Kemelly Vera and Rafael Fraga. Our Brazil Desk focuses on international retailers, technology equipment manufacturers, and medium-sized traders that are sourcing components from mainland China. If you are looking to capitalize on China’s market opportunities, please contact our Brazil Desk:

Kemelly Vera | LinkedIn profile

kemelly.vera@cwhkcpa.com

Rafael Fraga | LinkedIn profile

rafael.fraga@cwhkcpa.com

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compliance

Your Simplified Annual Compliance Guide in Hong Kong

Are you considering setting up a company in Hong Kong? Perhaps you have a Hong Kong Company but find it confusing to keep up with the compliance. Has your accountant suddenly reached out to you with a new charge that you are not familiar with? This article is to clarify the basic responsibilities that your Hong Kong Limited Company shall take up every year.

 

Annual compliance in Hong Kong

Annual compliance refers to a set of responsibilities a company should assume once it has been established. You must observe these compliance requirements according to your company’s fiscal year-end and the anniversary date. In Hong Kong, every private company must comply with the obligations administered by these two government entities:

– Companies Registry

– Inland Revenue Department

 

COMPLIANCE WITH THE COMPANIES REGISTRY

The Companies Registry is the department in charge of registering local and non-local companies in Hong Kong. It maintains records of active and dissolved companies.

 

Annual Return

Every year, a company should deliver an Annual Return, which contains its particulars, such as the registered office, shareholders, directors, company secretary. If the company does not file the Annual Return after 42 days of the deadline, the company will have to pay penalties. Please see the Annual Return Form “NAR1(Private)_Specimen-e” for your reference.

Business Registration

Business Registration must be renewed upon its expiry date. Normally, if you have applied for a one-year Business Registration, we recommend preparing the renewal of the Business Registration before the anniversary of the company. Please see Business registration specimen for your reference.

Significant Controller Register (SCR)

To enhance the transparency of corporate beneficial ownership, a company

incorporated in Hong Kong must obtain and maintain up-to-date beneficial ownership information by keeping a Significant Controllers Register. The SCR register must be kept at its registered office address or a place in Hong Kong. In the latter case, the company must file a Form NR2 to the Companies Registry reporting the location of SCR. The Register should be open for inspection by law enforcement officers upon demand. Failing to do so will render the company and the responsible person of the company liable to fines.

 

COMPLIANCE WITH THE INLAND REVENUE DEPARTMENT

 

Bookkeeping

The company should prepare financial statements for each fiscal year. The periodicity of the reports will depend on the company and the need for the availability of financial information. The reports can be prepared on a monthly, quarterly, biannual, or annual basis.

Audit

Regardless of the size, companies in Hong Kong are required to audit their financial statements and present them together with a profit tax return to the Inland

Revenue Department. The audit should be performed on an annual basis.

Profits tax return (“PTR”)

Annual profits tax returns are normally issued to taxpayers on 1 April each year. Once a Profits Tax Return is issued, the company is required to lodge the completed PTR together with the profits tax computation and the duly signed audited accounts for the basis period. Please see “ebir51” regarding the format of the Profits Tax Return.

Employer’s return

Hong Kong Salaries Tax is charged on the assessable income earned by an employee or an office holder in a year of assessment that runs from 1 April to 31 March of the following year.

As an employer, the company has the following reporting obligations to the Inland Revenue Department (“IRD”) if it anticipates that the company hires an employee who is likely to be chargeable to Hong Kong Salaries Tax.

i. Commencement return – The company has to file Form IR56E within 3 months of employing the employee

ii. Annual return – The company has to file Form BIR56A and IR56B. The annual return BIR. 56A is normally issued in early April and the filing deadline of the form (together with completed IR56B, where applicable) is within 1 month from the date of issue.

iii. Cessation return – The Company has to file Form IR56F (Employee who is about to Cease to be Employed) or IR56G (Employee who is about to Depart from Hong Kong) one month before the date of termination of the Philippines employee’s employment. IR56G has to be filed in the situation when the employee leaves Hong Kong for good or a substantial period of time usually in excess of 1 month. From the date of filing IR56G and until such time the employee has made tax clearance and can produce to the company a “letter of release” issued by the IRD, the company should withhold all amounts due to be paid to the employee (including salaries, commission, bonus, reimbursement of rent/expense, gratuity, money or money’s worth included).

Please note that the company does not have a tax withholding obligation except in the situation mentioned in (iii) above when the employee is about to depart from Hong Kong.

Compliance

Our suggestions:

1. Understand the basic accounting and taxation system and practice in Hong

Kong.

2. Review in-depth the service proposal you receive from the external accounting and secretarial services provider.

3. Establish a good habit of keeping and organizing business records from day one.

4. Don’t delay the declarations and reporting. This might lead you to the loss of information and records internally and the delay in presenting information to third parties like the banks, and penalties from the authorities.

5. For companies with a large number of transactions, it is important to prepare financial reports on a more frequent basis.

6. Review your financial reports. Once you receive the financial reports from your accountants, go through the information and seek clarifications if you have doubt. A responsible service provider will be able to answer your questions swiftly.

7. Keep your company statutory and business records up to date.

8. Update your bank at least once a year on the company status. Make sure your bank account has sufficient funds for bank charge deduction.

If you have any questions regarding your company’s responsibilities or how to

prepare the information, please get in touch with us and request a free consultation.

 

Contact: Ms. Lily Xiang, Accounting Manager

Email: lily.xiang@cwhkcpa.com

Written by Luz Deneb Martínez,  Latin Department, CW CPA

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