Court proceedings in Hong Kong are time consuming, inflexible and expensive. In commercial disputes, litigation can be detrimental to valuable long-term business relationships.

Alternative dispute resolution provides an opportunity for disputants to settle outside the traditional judicial process. Mediation, a common route, is quick and less expensive process compared to litigation.

Types of disputes and solution options include:

• Employment: You may approach the Labour Relations Division of the Labour Department to seek a preliminary consultation or voluntary conciliation service.
  
• Contract: Cases that involve monetary claims of less than HK$50,000 will be heard by the Small Claims Tribunal. If the amount of the claim is over HK$50,000, but less than HK$1 million, the case will be heard by the District Court. If the plaintiff is claiming more than HK$1 million, such a case will be handled by the Court of First Instance of the High Court.

The Chinese University of Hong Kong has more information on mediation.

The Law Society of Hong Kong has a directory of law firms, including areas of practice.

Intellectual property (IP) rights are protected in Hong Kong under various laws and regulations including:

• Copyright Ordinance
  
• Trade Marks Ordinance.
  
• Prevention of Copyright Privacy Ordinance.
  
• Trade Descriptions Ordinance.
  
• Patents Ordinance.
  
• Registered Designs Ordinance.
  
• Plant Varieties Protection Ordinance.
  
• Lay-out Design (Topography) of Integrated Circuits Ordinance.

The Intellectual Property Department is responsible for promoting IP protection through public education and is responsible for IP registration. Details of registration procedures are on the department’s website.

The Customs and Excise Department is responsible for enforcing the criminal aspects of infringement of IP rights. It investigates complaints and has extensive powers of search and seizure.

Copyright and trademark owners who find their rights being infringed should contact the Customs and Excise Department.

Hong Kong’s tax system is relatively simple compared to many countries.

There are no taxes on sales, capital gains, dividends and on an individual’s estate and there is no withholding tax.

Also there are no customs tariffs on goods imported into Hong Kong apart from a few items subject to strict import and export licensing controls. The government collects an excise duty on tobacco, hydrocarbon oil, spirits and methyl alcohol.

According to the Forbe’s Tax Misery Index 2009, Hong Kong has the third lowest in the world.

Taxes on profits

There is no distinction made between residents and non-residents when it comes to tax liabilities on profits. A non-resident is liable to pay tax on profits arising in, or derived from Hong Kong. Businesses need to keep business records for at least seven years and notify the Inland Revenue Department in writing about any changes in business status.

Property tax

Rental income from letting of properties in Hong Kong is subject to a property tax. Property owners need to keep records of rent received at least for seven years.

Stamp duty

There is a Stamp Duty on certain types of documents, including conveyancing on a sale, agreements for sales of residential property, leases of immovable property (eg. a tenancy agreement) and documents on transfers of Hong Kong stocks.

All companies incorporated in Hong Kong are required to keep proper books and records and prepared annual financial statements. Annual financial statements of companies with limited liabilities have to be audited by a certified public accountant.

Partnerships and sole proprietor businesses have no statutory obligation to have the annual financial statements audited, except for stockbrokers, commodities dealers and insurance companies.

Public or listed companies must lodge their audited financial statements with the Registrar of Companies annually. A private company is not required to file its audited financial statements with the Registrar.

Wholly owned subsidiaries need not prepare consolidated financial statements if certain conditions are met. One of these conditions is that the ultimate or intermediate holding company prepares consolidated financial statements that comply with Hong Kong Financial Reporting Standards (HKFRS) or International Financial Reporting Standards (IFRS).

Books of accounts must be retained by the company for at least seven years from the end of the financial year to which they relate.

Audit requirements

Hong Kong companies must have their annual statutory financial statements audited. Only a member of the Hong Kong Institute of Certified Public Accountants with a practicing certificate may act as an auditor.

Hong Kong Financial Reporting Standard are fully converged with IFRS issued by the International Accounting Standards Board.

BDO Hong Kong has a Guide to the new Hong Kong Financial Reporting Standards 2009

Companies in Hong Kong selling goods to local businesses or individuals usually adopt cash on delivery terms, especially when they trade with each other for the first time, or if it is a one-off deal.

If it is an ongoing trade, 30-day/45-day/60-day/90-day credit terms can be negotiated, depending on the level of trust between the two parties. Companies usually trade in Hong Kong dollars, while some trade may be in US dollars. The payment method would be either bank-in, cash or by cheque.

Suppliers in Hong Kong selling goods to overseas clients normally trade in US dollars. If there is a high risk, especially when the trading amount is large (eg. more than US$100,000), suppliers would ask the buyer to issue a letter of credit (L/C) and make payment before the goods arrive at the destination port.

A Bill of Lading (B/L) will only be issued to the buyer after payment is confirmed received. The buyer can only collect the goods from the port with the B/L. Payments are usually by wire or telegraphic transfer (T/T).

Companies in Hong Kong that provide services to local businesses or individuals usually collect payment after the service is delivered. If the dollar amount is large, companies would collect a retainer fee before providing the service. If the actual charge turns out to be less than the retainer fee, the service provider will refund the difference. The payment method would be bank-in or by cheque. Similar practices are followed by Hong Kong companies providing services to overseas clients.

Hong Kong is a free port and has no exchange controls and companies have total flexibility in the movement of capital and the repatriation of profits. Funds invested in Hong Kong can be repatriated at will. Dividend interest, royalties, service fees, and branch profits are also freely remittable.

To avoid scams, companies should hire credit check service providers to perform due diligence on possible trading partners before making any deals. There are a small number of phoney businesses. It is business credit records that suppliers should be more concerned about as it is not unusual for buyers to fail to make payments.

Hong Kong meets a number of international environmental protection conventions and has enacted a series of laws and regulations as part of the Government’s commitment to environmental protection.