Why are Hong Kong and Singapore holding companies attractive to foreign investors investing in Asia?

In terms of ease of doing business, both locations take the stance of protecting investors and facilitating cross-border trade, by providing highly transparent business environment and favorable tax regime to businesses. Also, with English being the official language for the judicial system and the workforce, the time and precision of communication would be in comparative advantage in comparison to other Asian locations. Thus, it is no surprise that both locations have been topping the list for ease of doing business for years.

 

Apart from the macro-factors, the actual setting up of a private (holding) limited company in both locations is inexpensive, swift and easy. The benefits of using holding companies can be manifold: firstly, it further adds a corporate layer between the Chinese or ASEAN subsidiaries and the parent company, which will further reduce the risk of bearing the liabilities of the Chinese or ASEAN subsidiaries; secondly, if the parent company wishes to sell off the Chinese or ASEAN subsidiaries, it can be done in the holding company level (i.e.: the Hong Kong or Singapore company), which will greatly reduce the administrative costs and relevant applicable taxes, if the transactions are to be taken place in China or other ASEAN countries; thirdly, given the reliable and sophisticated banking and legal systems of Hong Kong and Singapore, the holding companies thereof can safely hold earnings from Chinese or ASEAN  operations in an offshore manner. Lastly, when remitting such earnings back to the foreign headquarters, there are no applicable taxes imposed on these remittances, as opposed to the tax regime in, for example, China.