Foreign investors who want to minimise risks if their company goes bankrupt may want to consider a special purpose vehicle. Let’s find out more about special purpose vehicles in Hong Kong in this guide we have put together.
What is a special purpose vehicle?
A special purpose vehicle (SPV) is usually a subsidiary incorporated to secure the assets of the parent company’s investors if the company faces bankruptcy. It separates risks by safeguarding assets away from the parent company.
How are special purpose vehicles set up?
SPV may take the form of a private limited company, a trust or a partnership. In Hong Kong, it is most common for an SPV to be a private limited company.
Advantages of a special purpose vehicle in Hong Kong
One advantage of incorporating an SPV in Hong Kong is that it is a gateway to Mainland China. An SPV in Hong Kong will give foreign investors access to the Chinese market, which is the second-largest economy globally, and Hong Kong is the key financial hub in Asia.
Using a Hong Kong SPV also gives foreign companies the ability to own China-based assets or entities as a Wholly Foreign-Owned Enterprise (WFOE). The foreign company will then be able to sell any of the China-based assets.
Another reason is that Hong Kong provides many tax benefits, and the double tax agreement between Hong Kong and China offers special withholding tax rates on income and dividends.
If you are finding a way to secure your assets, then setting up a special purpose vehicle is the choice you should consider. Schedule a free consultation from Acclime for more information.
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