Q: We are a USA company that wants to set up a 100% owned factor in PRC. We also heard some good reasons to set up a Hong Kong holding company for the PRC entity, but wanted to get your opinion. Please let us know what you feel are the benefits of setting up a HK company as opposed to direct ownership from the USA of the PRC entity.
A: keeping in mind that you should consult with accounting/business formation specialists before you make an investment so they can review the particulars of your specific situation.
Because of the special status of HK to China, setting up a factory owned by a HK holding company takes less time, money and paperwork than doing PRC entity ownership directly from your HQ in USA.
If your USA HQ ever wants to sell the China assets, a potential buyer will place value on having a HK set of audited books. While you may end up running a world class set of books at your PRC factory, buyers tend to place more credibility with HK accounts.
There may be some tax deferral benefits of using HK, but you would need to consult with experts as transfer pricing issues come into play.
There is also the benefit of risk avoidance for the USA HQ.
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