Today, many investors and entrepreneurs are choosing to set up their businesses overseas – especially in jurisdictions like Hong Kong. The rationale behind this trend is to primarily facilitate entry into an international market and to benefit from tax friendly jurisdictions. Hong Kong is considered one of the best cities to establish and run a business, as it scores high on factors that matter to businesses. Strategic location, productive work-force, stable economic and political environment, attractive tax regime, pro-business environment, world-class infrastructure, an effective legal system are some of the factors that continue to contribute to its success.
Detailed below are some of the key benefits of setting up a business in Hong Kong and will serve to provide you with the answers to the question "Why choose Hong Kong to set up a business?".
Hong Kong is strategically located at the heart of the Asian continent. A five-eight hour flight will connect you to most markets in the Asia-Pacific region. If you need to tap into the Mainland Chinese market you will find that Hong Kong is perfectly situated on the southeast coast of Mainland China, flanking the mouth of the Pearl River Delta. This facilitates travel to and from Hong Kong to Beijing, Shanghai and other major Chinese cities within a single day.
Hong Kong is renowned for being an easy place to set up a business. You can open your company in about two week's time in Hong Kong. It is noted for its excellent infrastructure facilities and business premises are easily available. Intellectual Property protection is taken seriously, with strict regulations in place. There are various dispute resolution channels that businesses can avail of.
Besides, the simple and business friendly tax system is also another reason drawing foreign investors to the city. In this regard, Hong Kong boasts of being one of the lowest tax jurisdictions in the world. Personal income tax, or salary tax as it is known, starts at 2% and goes up to 17% for income above HKD 120,000. Corporate tax is set at 16.5% of assessable profits for corporations and 15% for unincorporated businesses. There is no capital gains tax, nor any withholding tax on dividends and interest or collection of social security benefits. Furthermore, there is no sales tax or VAT in Hong Kong.
There are no restrictions on inward and outward investments, no foreign exchange controls and no foreign ownership restrictions in Hong Kong. Factors such as a sound banking system, almost no public debt, a strong legal system, sizable foreign exchange reserves and a strict anti-corruption regimen serve to strengthen Hong Kong's position as a business friendly region.
Hong Kong follows a liberal immigration policy. Nationals of about 170 countries and territories are allowed visa-free visits to Hong Kong for periods ranging from 7 to 180 days. Short-term visitors may conduct business negotiations and sign contracts by entering Hong Kong on a visitor visa or entry permit. The government has introduced appropriate work visa provisions, anticipating the needs of business entrepreneurs who may wish to relocate to Hong Kong to run their business or who may want to hire foreign professionals to work in their company. There are various policies and schemes for the employment of foreign professionals, employment of Mainland talents and professionals, those wishing to enter for investment etc. However, at the moment, Vietnam citizens are facing a lot difficulties when applying for work pass in Hong Kong.
Hong Kong's legal system is separate from Mainland China's, and English common law prevails. With the establishment of the International Arbitration Centre in 1985, Hong Kong has become a key centre for arbitration in Asia and arbitration is now a popular method of dispute resolution in Hong Kong
The law is committed to the protection of Intellectual Property Rights (IPR) and enforces stringent regulations for patents, copyrights, trade marks and registered designs. The specially set up Intellectual Property Department monitors the IP regime in Hong Kong and is reputed to have extensive experience in handling IP matters. There are distinct rules and regulations concerning trade and commerce, employment, taxation and other business-related areas, making it an attractive place to setup and operate a business.
Hong Kong consists of a highly trained, well-educated and skilled wok-force. The workforce consists of a local talent pool of experienced and entrepreneurial professionals who are known to be especially well versed with the business culture in the fast-growing Mainland cities. Employees are generally considered to be hard-working, competitive and are constantly seeking to improve themselves. Although English is the language of communication in business settings, bulk of the workforce is also conversant with Cantonese and Mandarin, owing to the country's link to China.
Hong Kong has taken endless measures to continuously upgrade its infrastructure in order to meet the growing demands of businesses. It is said to have one of the Best Airports and Busiest Ports in the world. Transportation services are efficient and cheap connecting all major centres.
Hong Kong is home to world-class industrial/business parks like Cyberport and the Hong Kong Science and Technology Parks. These parks provide integrated infrastructure in one region that help reduce the per-business expense, and also help companies operate in a highly conducive, environment friendly setting.
Hong Kong s telecommunications infrastructure is one of the most technically advanced in the world. Broadband coverage is available to virtually all commercial and residential buildings. Hong Kong s open markets ensures there are several competitive mobile phone and Internet service providers. Broadband Internet connection is available to over 98% of households in Hong Kong.
Most foreign professionals and entrepreneurs who setup a business in Hong Kong tend to re-locate with their family. Hong Kong has been very famous for its standard of living. The public transportation system in Hong Kong is well connected, clean, safe, efficient, reliable and above all affordable. Getting around Hong Kong is easy, given its wide network of buses, trains, ferries and taxis.
Hong Kong is home to several international schools which follow a curriculum identical to those in their home country and offers world class private and public health services and expert medical practitioners. The health-care environment is clean, efficient, safe and affordable.There are several recreational activities to indulge in and Hong Kong boasts of a vibrant and exciting Nightlife and is often quoted as the 'city that never sleeps.'
The most common type of business entity registered in Hong Kong is a private limited liability company. Limited liability companies have a separate legal personality, limited liability for its owners, strong public perception and an enduring structure; raising capital and transfer of ownership is easier when compared to other business structures such as sole proprietorship and partnership. Foreigners who wish to register an limited liability company or offshore one in Hong Kong, must take into consideration the following points:
Foreigners are free to be the sole directors and shareholders of a Hong Kong company. There are no local resident requirements.
Foreigners who do not plan to relocate to Hong Kong are free to operate their Hong Kong offshore company from overseas. They can travel to Hong Kong on a visitor visa as and when required.
Although their is no requirement to be physically present at the time of company registration, physical presence may be required for the purpose of opening a bank account, depending on the bank chosen.
Directors – A minimum of one individual director and unlimited maximum number of directors allowed. The director must be a natural person who can be of any nationality and need not be resident in Hong Kong. Directors must be at least 18 years of age and must not be bankrupt or convicted for any malpractices. There is no requirement for the directors to also be shareholders. Nominee corporate directors can also be appointed in addition to the individual director. Directors Board meetings can be held anywhere in the world.
Shareholders – A Hong Kong private limited company can have a minimum of 1 and maximum of 50 shareholders. There is no residency requirement for shareholders. A director and shareholder can be the same or different person. The shareholder must be at least 18 years of age and can belong to any nationality. The shareholder can be a person or a company. 100% local or foreign shareholding is allowed. Appointment of nominee shareholders is permitted. Shareholders meetings can be held anywhere in the world.
Company Secretary – Appointing a company secretary is mandatory. The secretary, if an individual, must ordinarily reside in Hong Kong; or if a body corporate, must have its registered office or a place of business in Hong Kong. It has to be noted that in case of a sole director/shareholder, the same person cannot act as the company secretary. The company secretary is responsible for maintaining the statutory books and records of the company and must also ensure the company's compliance with all statutory requirements. A nominee secretary can be appointed.
Share Capital – Although there is no minimum share capital requirement, the general norm for companies incorporated in Hong Kong is to have at least one shareholder with one ordinary share issued on their formation. Share capital can be expressed in any major currency and is not restricted to the Hong Kong Dollar alone. Shares can be freely transferred, subject to a stamp duty fee. Bearer shares are not allowed.
Taxation – Corporate tax, (or profits tax as it is called), is set at 16,5 % of assessable profits for companies setup in Hong Kong. Hong Kong follows a territorial basis of taxation i.e. only profits which arise in or derived from Hong Kong are subject to tax in Hong Kong. There is no capital gains tax, withholding tax on dividends, or GST/VAT in Hong Kong.
Ongoing Compliance – It is mandatory for companies to prepare and maintain accounts. Accounts must be audited annually by Certified Public Accountants in Hong Kong. The audited accounts together with tax return must be filed annually with the Inland Revenue Department.
To setup a Hong Kong limited liability company, normally the following documents will be required:
• A copy of the Articles of Association for the company. (we will provide)
• A duly completed incorporation form that includes the following: Company name; Registered address; Brief description of business activities; Particulars of shareholders, directors and company secretary; Liability of members; Share capital registered on incorporation; Number of shares taken up by subscribers (we will support you to fill in)
For non-resident shareholders and directors: Copy of passport, overseas residential address proof, bank reference letter
For resident shareholders and directors: Copy of Hong Kong identity card and Copy of residential address proof
For corporate shareholders and directors: Copy of parent company registration documents such as Certificate of Incorporation and Articles of Association
Note: Officially certified translated versions for any non-English documents must be provided.
Our support service shalll include:
Opening a Representative Office (RO) is a suitable option for foreign companies who wish to explore opportunities in Hong Kong and the surrounding regions, before making large investments. A Representative Office is considered a promotion and liaison office and must restrict itself to conducting such activities only. A Representative Offices have no legal status and cannot conduct any profit generating business activities.
A Representative Office has no legal standing or recognition and the parent company bears implicit liability for all the actions of the Representative Office.
Generally, the name of the Representative Office must match the name of the overseas parent company. However, if the name is already in use in Hong Kong, the overseas company will need to adopt another name for the Representative Office in Hong Kong.
A Representative Office operates as a cost centre and can only engage in liaison, promotional work, and market research type activities. It cannot engage in commercial profit generating activities such as engaging in business, concluding contracts, providing consultancy for a fee, undertaking transshipment of goods, or negotiating letters of credit. If it wishes to enter into any transaction which creates a legal obligation it will need to change its business structure to that of a subsidiary company or a branch office.
A Representative Office is considered as a temporary administrative office helping the foreign company test business environment and explore the viability of doing business in Hong Kong.
There is no registered capital requirement to set up a Representative Office.
Representative Offices are non-earning entities and are not liable for filing tax returns with the Inland Revenue Department. However, Representative Offices must file for a Business Registration Certificate with the Inland Revenue Department.
A Representative Office will usually appoint a staff member from its foreign parent company who will relocate to Hong Kong and manage the office. The RO may also engage local employees as support staff.
There are no registration requirements with the Companies Registry for Representative Offices in Hong Kong. However, it must apply for a Business Registration Certificate with the Inland Revenue Department within one month from its date of commencement. The following documents are required during registration:
Completion of a prescribed application form
Proof of identity for the RO's chief officer in Hong Kong
Once the Representative Office has received the Business Registration Certificate from the Inland Revenue Department, a corporate bank account can be opened with any of the major banks in Hong Kong.
Registering a branch office is one of the ways a foreign company can establish a presence in Hong Kong, the other two options being, setting up either a Hong Kong subsidiary or a representative office.
A Hong Kong branch office is a legal entity registered with the Company Registry. Unlike a subsidiary, a branch office is treated as an extension of the parent company and as such the parent company is responsible for all the debts and liabilities of the branch office.
Note: Any documents not in English or Chinese must be translated in English or Chinese through official channels before submission.
Register branch name and prepare documents required to set up branch in Hong Kong
Provision of a registered address for the first year (includes the safe-keeping of the company's statutory documents)
Business registration certificate for the first year
All government fees for incorporation (to HongKong government and government agencies)
Support to apply for Employment pass for Local Representative office in Hong Kong
Other services (if any)