Hong Kong leapfrogs UK for offshore company registrations

Hong Kong has toppled the UK as the top international financial centre (IFC) for global corporate services, while the trend towards moving business to onshore and mid-shore jurisdictions continues to increase, according to research by Vistra

Hong Kong is now the most popular jurisdiction, while the British Virgin Islands (BVI) and the UK are ranked second, followed by the US and Singapore, according to research by the global trust and corporate services provider.

The UK has dropped out of top position in the last 12 months as investors question longer-term post-Brexit business climate.

In the latest survey, only 35% of respondents expect the UK to become more open to the industry and IFCs after Brexit. If the UK cannot provide attractive conditions for business, it is expected that a greater number of organisations will switch to Luxembourg or Frankfurt as their European headquarters.

The research, based on a survey of 800 professionals in the industry, highlighted a decline in demand for certain offshore jurisdictions such as BVI and Cayman Islands due to uncertainty driven by the EU’s recent ‘economic substance’ requirement.

Top 10 jursidictions by importance

Ranking 2018 (2017)

Jurisdiction

2018

2017

1 (2)

Hong Kong

3.5

3.3

2= (1)

UK

3.3

3.5

2= (3=)

BVI

3.3

3.1

4 (3=)

US

3.1

3.1

5 (5)

Singapore

3.0

3.0

6 (6=)

Cayman Islands

2.9

2.9

7(8)

Luxembourg

2.6

2.8

8 (6=)

Switzerland

2.5

2.9

9= (10)

Netherlands

2.3

2.2

9= (9)

Jersey

2.3

2.4

Source: Global Witness

According to the analysis, Hong Kong’s leading position is down to a rise in Chinese companies listing on the Hong Kong Stock Exchange and a growing base of Chinese high net worth individuals (HNWIs) with increasingly sophisticated needs.

Despite 33% of respondents believe that political upheaval has affected Hong Kong’s reputation as an IFC, any harm has been offset by the city winning business from offshore regions, particularly among clients in Asia, offering a lower tax rate and a stable legal system.

Despite the revelations in the Panama Papers in 2016 and the Paradise Papers in 2017, BVI remains at number two and has experienced growth in new incorporation volumes: 11.2% in the first nine months of 2018 over the previous year, in Vistra’s portfolio, much of it reliant on Chinese investment.

Vistra’s analysis suggests that in previous years, Brexit was not an issue and the UK’s favourable corporate tax rate and flexible labour legislation provided a friendly environment as an IFC.

Jonathon Clifton, regional managing director at Vistra, said: ‘There is a continuing trend towards onshore and mid-shore jurisdictions, with the top five dominated by international financial centres (IFCs) either in or close to the world’s political centres.’

Vistra 2020, Disruption Advantage report

Report by Pat Sweet

0
Be the first to vote
Subscribe