Our client is a North American entrepreneur who designs and sources packaging in China for high-end boutique retailers in North America. His business is expanding, and his customers are increasingly demanding a wider and more distinctive product mix. In order to fulfill this demand, he needs to have his own project management staff in China to handle sourcing, quality control and liaison with his vendors throughout the manufacturing process.

ICS TRUST worked with this client to refine his China entry strategy and to implement it in the quickest and most cost-effective way possible. To ensure that he can manage a successful trading business from his office in North America, we have done the following:

1. Strategic Advice: Our client was originally thinking of establishing a Wholly Foreign-Owned Enterprise in China, but after extensive discussions with ICS TRUST about his proposed operations and medium-term goals, we concluded that he could meet his needs more directly and with a much smaller initial investment by opening a Representative Office (RO).
2. Hong Kong Structuring: To create a liability firewall between our client's North American operations and his China venture, we established a Hong Kong company to serve as the RO's parent. ICS TRUST handles all of this company's day-to-day commercial activities, including invoicing, banking, bookkeeping and liaison with the RO staff.
3. China Structuring: Once the Hong Kong company was in place, we set up an RO in Guangzhou, close to the factories where our client sources his products. ICS TRUST assisted with and advised on all aspects of establishing the RO, including tax compliance issues, staff recruitment and ongoing accounting and auditing requirements in China.
4. Banking: We established bank accounts for our client at leading institutions in Hong Kong and China, including a letter of credit account in Hong Kong. ICS TRUST was named as a signatory to all accounts, to facilitate timely transactions during the workday in China, when our client's head office staff in Canada are sleeping.
5. Trade Services: All customer orders are placed to the Hong Kong company, which oversees the RO staff in China. Hong Kong's 0% tax rate on offshore profits makes this a tax-neutral solution for our client, while facilitating payments and the flow of goods.
6. Accounting: ICS TRUST provides a variety of value-added accounting services to help our client track the performance of his Asian operations. We also arrange for annual audits in Hong Kong and China to ensure compliance with the laws of each jurisdiction.
7. Taxation: We helped our client to achieve and maintain a 0% tax rating on his Hong Kong company's profits, and continue to advise and represent him regarding Hong Kong taxation. Once his China operations were established, we also worked with the client's accountant in Canada to achieve a deferral of Canadian tax until the Hong Kong profits were repatriated.

Conclusion

By partnering with ICS TRUST to structure and manage his Asian operations, our client established his China business quickly and achieved his business objectives with only a modest initial investment. Without incurring any tax liability in Hong Kong, he was able to establish a mechanism to reinvest his trading profits before Canadian tax. This structure has proved so successful that our client now offers consulting services to fellow importers and uses his RO to process and manage their transactions.