Benefits and problems of registering a company in Hong Kong
Press the link headings below to read detailed, relevant, up to date information.
Benefits and problems
Benefits of Hong Kong company registration
The Heritage Foundation has ranked Hong Kong as the world’s freest economy. The World Bank takes a similar view, having listed Hong Kong as the 5th best place in the world for doing business. This has essentially been as a result of the strength of its liberal economic policies and the potential access to the massive Chinese market. Examples of these business-friendly policies include:
- Clients can register a private limited company in Hong Kong in one week with a share capital of only US$1. Furthermore, Hong Kong law permits capital denomination in other currencies, so Clients may use US$, GBP, euros or any other freely-convertible currency that they prefer;
- Clients starting a business in Hong Kong require only one director and one shareholder. Furthermore, these individuals do not need to be residents of the city and there is no requirement for them to travel in order to incorporate the company;
- All Hong Kong companies require a company secretary to manage the statutory filings and administration. The company secretary must be resident in the special administrative region and may be either an individual or a company. Healy Consultants provides company secretarial services to our Clients registering companies in Hong Kong with us;
- No physical premises are required to set up a company in Hong Kong. A registered address is therefore sufficient for company registration.
- Readymade companies are permitted in Hong Kong, allowing businesses to commence operations without having to wait for completion the company formation process. Buy a Hong Kong shelf company that already has a bank account with one of our turnkey solutions.
- A Hong Kong company is legally tax exempt if it has no local base or Hong Kong-derived income. This legitimate tax advantage makes the city attractive to entrepreneurs and established businesses;
- For resident companies, the corporate tax rate is among the lowest in Asia at 16.5%;
- Setting up a Hong Kong offshore company is an excellent way to boost global profits as there is no withholding tax, sales tax, VAT, import and export tax or capital gains tax;
- A business based in Hong Kong benefits from 37 international double tax treaties that the government has signed to minimize withholding tax on payments abroad.
In addition to its business-friendly policies, Hong Kong has a number of other advantageous attributes that make it a great place in which to do business.
- A Hong Kong business is an efficient vehicle that faces minimal corruption, restrictions, and red tape. Consequently, the city is ranked as the 4th best place in the world to start to a new business;
- English is the official business language in Hong Kong; all formal company documents are written in both English and Chinese. As a result, a foreign entrepreneur is likely to find that working in the city is easy;
- Obtaining bank credit is relatively simple in Hong Kong. Consequently, the city is ranked as 19th best place in the world to obtain credit for business;
- A Hong Kong business benefits from the absence of exchange controls to restrict foreign direct investments, multi-currency accounts or the repatriation of capital and earnings. This monetary flexibility and the city’s status as a global financial centre make it a great location for treasury accounts, cash management accounts and other corporate banking services;
- It is possible for a resident company, regardless of nationality of its owners, to invest in every business sector in the city without any government restriction;
- Along with Singapore, Hong Kong is the leading financial centre in Asia. The city’s International Financial Centre hosts many global financial firms, insurance companies, banks and asset management firms;
- Long Term Investment – setting up a company in Hong Kong is a secure long-term investment. Because Hong Kong follows globally recognized Organisation for Economic Cooperation and Development (OECD) standards; Hong Kong is a reputable, secure and an effective jurisdiction for long-term investment planning;
- Hong Kong is itself a free economic zone (it is officially a part of China known as the Hong Kong Special Administrative Region). Therefore, a resident company is a great business vehicle for foreign investors who need a regional distribution base or headquarters;
- Being a founding member of the World Trade Organization, Hong Kong promotes free trade and does not charge tariffs on imports and exports. Furthermore, bureaucratic procedures like licensing and government registration are kept to a minimum;
- The local government is also ranked as the 17th least corrupt place in the world. This makes it easier for foreign investors to depend on the local laws to protect their assets;
- As a former British colony, Hong Kong’s legal system and many of its laws are based on English common law. The legal system is therefore stable and familiar to foreign investors;
- Hong Kong has a great reputation as a business and financial centre, meaning that a company based there is often seen as reputable by global customers, suppliers, investors, venture capitalists, governments, and banks.
Interview with Aidan Healy on HK business registration
Problems with Hong Kong company registration
- Our Clients must submit annual audited financial statements to the Inland Revenue Department. Healy Consultants’ accounting specialists can assist with performing this work and reducing the burden of this obligation;
- Hong Kong banks have become very selective of their customers due to the very high global demand for their services; consequently, opening a corporate bank account in the city can be a cumbersome process;
- To open a corporate bank account, the Client must travel to Hong Kong for the account opening interview;
- Following company formation in Hong Kong, obtaining an employment visa will be complicated due to high skill and experience thresholds. Foreign entrepreneurs must provide education and work experience credentials;
- Hong Kong has relatively weak intellectual property laws and protection, especially when compared to Singapore. However, looser protection of ideas has led to a proliferation of innovation in Hong Kong and wider China, particularly the nearby Shenzhen;
- Citizens of certain nationalities are not eligible for a Hong Kong investment visa. Foreign investors from Afghanistan, Albania, Cambodia, Cuba, Laos, North Korea, Nepal and Vietnam cannot register their businesses in Hong Kong;
- The quality of conversational English for an average local employee is relatively poor when compared to the other investment hotspots like Singapore, Malaysia, Dubai and Indonesia;
- Effective from March 2014, at least one of the directors of a Hong Kong company must be a natural person. As long as one individual is appointed as a director, corporate directors are still permitted.
Best uses for a Hong Kong company
Holding company/regional headquarters
- Hong Kong is Asia’s 6th most liveable city, with a blossoming multinational population. The city provides well-developed infrastructure for residential accommodation, tourism, banking, entertainment and business;
- It also boasts highly-skilled labor with a literacy rate of 96% and computer literacy around 95%. Furthermore, most skilled employees are bilingual in English and either Cantonese or Mandarin. As a result, many multi-national companies set up subsidiaries in Hong Kong;
- Employees in Hong Kong understand the corporate culture in mainland China. Therefore, trading and doing business with the Chinese becomes very easy for a resident company;
- Setting up a Hong Kong business allows foreign investors to take advantage of legal tax exemption, while at the same time being able to extract funds from regional subsidiaries in the form of dividends, management fees and royalties;
- Hong Kong is a paradise for high net worth individuals. The city currently hosts many wealthy Chinese and foreign entrepreneurs and is consequently synonymous with luxury, housing some of the biggest brands in the world.
Gateway to China
- As a Special Administrative Region (SAR) of China, Hong Kong enjoys a special relationship with one of the world’s fastest-growing economies. It is estimated that the SAR has access to almost 450 million consumers across nine provinces in southern China, which has led many organisations and individuals to view a Hong Kong business as the optimum way to serve the mainland Chinese market;
- According to the Hong Kong Trade Development Council, the city is one of the largest sources of investment into China;
- HK has excellent air, rail and road links to the booming southern provinces of China;
- On June 29, 2003, Hong Kong and China signed the Closer Economic Partnership Arrangement (CEPA), a free trade agreement granting the city’s manufacturers and service suppliers preferential access to the Chinese market. The agreement is now in its seventh phase, in which China agrees to abolish tariffs on all products of Hong Kong origin (to date there are more than 1,600 products). For more details on how the CEPA can benefit your company, visit the CEPA Website;
- Other options for doing business in China include incorporating a Wholly-Foreign-Owned Enterprise (WFOE) in China or registering a company in Macau.
Gateway to Asia
- Hong Kong is the top choice for product distribution within Asia. The city has the world’s 2nd best infrastructure in the form of a natural deep sea port, the world’s busiest cargo airport, and a well-developed rail and road system;
- The city’s strategic location makes it an ideal business gateway to Asia. A Hong Kong corporate entity allows foreign entrepreneurs easy access to the massive Chinese, Indian and Australian consumer markets;
- The city is the historic import and export hub of the Asian continent. A large number of international trading companies and banks are based here, which has resulted in the availability of excellent trade finance facilities. Furthermore, the strength of the city’s shipping and transportation sector attracts the world’s leading freight forwarders, shipping companies and insurers;
- The city is deemed as the most business friendly city in Asia. The city’s liberal policies, vibrant business environment and low taxes attract both foreign investors and qualified labor from across Asia;
- Hong Kong will soon have a Free Trade Agreement with ASEAN, which will help Hong Kong based businesses trade without tariffs with a market of 600 million people.
Similar low tax jurisdictions