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How to Apply for a Certificate of HK Service Supplier
(January 8)
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Hong Kong Service Suppliers Q&A

Hong Kong service companies planning to take advantage of CEPA must first apply with the Hong Kong Trade and Industry Department (TID) for a "Certificate of Hong Kong Service Supplier." At the Chamber's CEPA roundtable workshops on December 19 and January 8, TID officials and solicitors explained in detail all the documentation and processes needed for companies to submit their applications. Following are selected questions and answers from those two workshops, which have been edited for length and clarity.

Question: For certifying your operations and also the reports and certifying copies, does the certifying professional need to be an independent party? For example, if one of our directors is a certified public accountant (CPA), could he still certify the documents?

Answer: The designated professional can be either a China-Appointed Attesting Officer (CAAO), or a CPA, but I would strongly suggest that you take an independent designated professional. I think that is quite a good rule in all things where you are submitting an important application. It would be a pity if that were in any way to jeopardise it. Technically, I don掐 think it is a problem because it is not stipulated in the agreement, but I would always err on the side of caution.

Q: IT and training are not included in the list of 18 service sectors that Hong Kong companies can apply for. Are they not on the list period? Or are they within one of the subcategories listed?

A: IT is not one of the 18 service sectors. There is a sector on management consultancy, so some IT consulting could be in there. Education is also not one of the sectors on the list, but Henry Tang has asked Beijing if that can be added later on. So if your business is not in one of the 18 service sectors, we suggest you push to have that included in CEPA II.

Q:  I would like to raise a question on the business premises requirements report. The word commensurate is used. What is the expectation or benchmark for meeting the requirements that the business premises are commensurate with the scale and scope of its business?

A: Commensurate means that the business premises should be owned or rented by the applicant for conducting the relevant business operations and that they are sufficiently equipped in terms of size and facilities to enable the applicant to carry out the scope and scale of business in which the applicant is operating. So it depends on which services the applicant is providing. If they are providing trading services, they may need just a small office with some business equipment, but if they are engaging in warehousing services, then the applicant should of course have a warehouse.

Q: Does the service being applied for have to be the main or major part of the business operations in Hong Kong? Could a company, in the trading business, which also does distribution and marketing on the side for their own products in Hong Kong _ if they have their own manufacturing in China -- could they set up a separate WOFIE (Wholly-owned Foreign Invested Enterprise) in China to introduce their own marketing and distributing services to support its products made in China.

 A: The business that the applicant is engaged in should be a substantive part of its business operations here in Hong Kong, but not necessary the main business. The service should also be provided to its clients, not just an in-house service, otherwise it wouldn't be regarded as a service provider. So the main thing is that the application does not need to be for the principal business, but it must be a real business and it must satisfy the licensing thresholds in China.

Q: Regarding the written reports on the number of employees and the business premises that companies must submit, do you recommend that the reports be written in Chinese or English?

A: It can be in either language, but you have to bear in mind that the Trade and Industry Department must submit the documents to the Mainland authorities, so they may require you to have an official Chinese translation of that report.

Q: What exactly does substantive business operations mean? Is there a minimum revenue requirement or other benchmark?

A: To apply for a Certificate of Hong Kong Service Supplier (CHKSS), you first need to satisfy five criteria -- nature and scope of business, years of operation, profits tax, business premises and employment of staff. After fulfilling these criteria you still need to fulfil the entry threshold requirements of the Mainland side, which is quite sector specific. For example, in distribution the entry threshold is quite high. You also need to remember that the substantive business must be in Hong Kong. So there is no set scale or number to define substantive. It is really sector by sector.

Q: A question about sole proprietorships. Talking about documents required to apply for the certificate, a couple of points that you mentioned were the certificate of incorporation, which the sole proprietor obviously doesn't have, and also the requirement for audited financial statements. So is a sole proprietor not eligible to apply for the certificate? And can you also talk about the so-called natural person that doesn't have to jump through any of these hoops?

A: You need to submit the documents only if they are applicable to your company's situation. So if you are a sole proprietor you don't have to submit the certificates of incorporation. And if you are not a company incorporated under the company ordinance, you are not required to submit the audited financial statements to us. Applicants just need to submit the documents applicable to their company't situation.

Q: If I am applying under the telecommu-nications sectors, there are five categories, do I have to fall into each category in order to apply for a certificate to be eligible for CEPA?

A: You don't have to fulfil all the five value-added services sectors, as long as you fulfil one of them we will issue a certificate for that service.

Q: What documents do I have to have certified by a certified professional?

A: 1.   A statutory declaration issued by the authorised representative of the applying company.  Also bear in mind that the applicant can apply for more than one type of businesses.

2.   A written business premises report to prove that the premises of the applicant are commensurate with the scope and the scale of its business. A copy of the computerised land registry and lease, whether paid with stamp duties or not, are also required. If the company has more than one premises, with a main and branch offices, the documents should be based on the main office.  You could submit a list of branch offices as supporting documentation.

3.   A written report certifying that more than 50 percent of staff employed by the applicant are Hong Kong residents.

4.   A certified letter stating that the company, through board resolution, wishes to apply for a CHKSS.

5.   A certified letter on the financial status, premises and employees.

6.   Attesting documents that the status of the applicant is a natural person.

Q: Can a China Appointed Attesting Officer (CAAO) do all the paperwork, so that we don't need to use the services of a CPA?

A: A designated professional refers to a CPA and CAAO. You could appoint a CAAO to prepare all the documents required for certification, if you want. A CPA, besides preparing the written report, could also help in preparing part B of the application form, in which the applicant is required to provide details of turnover and operating expenditure of the business that the applicant is applying for. If the company is engaged in several businesses and would only like to apply for one or two of them, then a CPA would be helpful in providing the supporting figures.

Q:  If I want to do several different businesses in China, say a logistics and freight forwarding agency, storage and warehousing services, do I need to apply for separate certificates?

A: Yes, but you can apply for several services in one application.   TID will issue three certificates covering each service, and you could then apply to the Mainland authorities for a business license.

Q: If the status of my company changes after the CHKSS has been issued, what should I do?

A: If your company undergoes any changes after the CHKSS has been issued and these changes affect your entitlement to the certificate, you must inform the TID, and the TID will then decide whether or not to revoke the certificate.

Q: My company is an overseas branch office in Hong Kong and we have filed our profit tax returns. As such, can my company apply for a CHKSS?

A: No. Registered overseas companies in Hong Kong, their offices, liaison offices, "mail box companies" and companies specifically established for providing certain services to their parent companies do not qualify as Hong Kong service suppliers.

Q: My business is under a group company structure, and the applicant company does not directly employ any staff, as they are seconded from another company. Given this situation, could I still apply for a CHKSS?

A: The current requirements under CEPA stipulate that the applicant has to fulfil all the requirements, including the number of staff employed by the applicant. TID has been discussing this situation with the Mainland's Ministry of Commerce, but at the moment the answer is no.

Q:  If my company only has two employees, can I qualify for a CHKSS?

A: TID will study whether the two staff could operate the company. 

Q: Do I need to submit a list of staff who work at my company with my application for the CHKSS?

A: That is not necessary. The TID depends on the written report prepared by designated professionals.

Q: The CHKSS is only valid for two years. Do I need to re-apply after it expires?

A: Basically no. However, if in the future more concessions are offered under CEPA that you would like to take advantage of after your CHKSS expires, then you have to apply for a new certificate to qualify.  

The above information is provided for readers' reference only. It does not represent legal advice. Companies wishing to take advantage of CEPA should seek professional legal guidance on the laws and regulations governing CEPA.


(December 19)
Ms Chau's Speech Ms Yu's Speech Ms Lavender's Speech
Q & AWebcasting

(January 8)
Ms Chau's Speech    Ms Wen's Speech    Q & A   
Ms Chau's Slides >>   Ms Wen's Slides >>   Mr Lee's Slides >>