Your company registration in Hong Kong is done and you’re ready to run and grow your new business.
Doing business in Hong Kong consists of two parts: tapping into opportunities and meeting business obligations.
We’ve put this practical guide together with clear action points, so you know exactly what to do when starting your business in Hong Kong.
1. Meeting your financial reporting obligations
1.1. Bookkeeping & Accounting
First, you have to keep business records for 7 years from the date of transactions.
Why?
Just in case the Hong Kong Inland Revenue Department (IRD) conducts a tax audit on your company.
If you’re not able to show company records when requested, you can be fined up to HKD100,000.
Don’t think you’re doing this to please the IRD only. Your business will also directly benefit from it:
- File accurate profit tax returns
- Have better control of your company for financial planning and decision making
- Portray a professional image – showing clean accounts makes it easier to deal with your bank and investors
- Detect losses and theft in your company more easily
- Reduce the cost of compliance – no late filing penalty fee
- Reduce the costs of an audit – if the necessary documents are readily available, you will not need to pay for the extra time spent by a Hong Kong professional accountant
Don’t mistake record-keeping with record stockpiling.
Keep a digital copy of the following company records and categorize them in an organized manner:
- Financial statements/management accounts
- Documentation necessary to verify the entries in the books of account, such as vouchers, bank statements, contracts, invoices, receipts, payroll, and other relevant papers
- Record of the assets and liabilities of your business
Of course, you can also keep the original paper copy but the ink may fade over the years and it takes lots of space in one of the world’s most expensive cities.
➡️ ACTION: Choose your online accounting software. There are plenty on the market: Xero, QuickBooks, Zoho, etc. but make sure you understand the key considerations beforehand.
1.2. Annual financial audit
All companies incorporated in Hong Kong are required to have an annual audit of their financial statements.
This audit must be performed by a Hong Kong Certified Public Accountant.
You may find some alternative company secretaries in Hong Kong that provide Accounting and Tax Auditing services.
The auditor will not only review and certify your accounts but also create a tax computation form.
You will then receive an audit report that needs to be signed by the directors of your company.
This annual audit is a pre-requisite to your annual return filing with the Companies Registry and your annual tax return filing with the IRD.
➡️ ACTION: Ask your company secretary if they can recommend audit firms.
1.3. Annual filing requirements
You’re almost done with the least pleasant aspect of running a company! Remember you have 3 types of filings and deadlines every year:
- Annual return (Form NAR1) must be filed with the Companies Registry within 42 days of your company’s incorporation anniversary date.
- Annual profits tax return (Form BIR51) must be filed with the IRD, together with audited accounts. The filing must be done within one month of the issue date of corporate profits tax returns, i.e. in May. For newly registered businesses, the IRD will issue the first profits tax return 18 months after the date of incorporation.
- Employer’s Return (BIR56A & IR56 Forms) must be filed with the IRD. As for the annual profits tax return, the IRD issues the Employer’s return on the first working day of April. The filing must be done within one month from the issue date of BIR56A.
➡️ ACTION: To be honest, your only action here is to reply to your company’s secretary's emails. It is your company secretary’s role to file your annual return, and they’ll also file the profit tax return and employer’s return if you’ve hired them for your accounting matters.
2. Hiring employees
Before you start hiring, you must understand what your obligations as an employer are.
The Hong Kong Employment Ordinance only sets out the minimum requirement for all types of employees (full time, part-time, and temporary), it’s up to you to make your compensation package more appealing…Hong Kong unemployment rate stagnates around 3% so the talent war is real!
Be aware of the following common practices on the market:
- Remuneration package expressed on a monthly basis
- Maximum 40-50 hours of work/week, 5 days a week
- 12 days of paid public holidays
- 7 days of paid annual leave (the first year, one additional day ever subsequent year)
- 24 days of annual sick leave (the first year, 48 days from the second year onwards)
- 1 to 6-month probation period (usually 3 months)
- 1-month termination notice period
Unless you have a business that requires special clauses in an employment contract, you can find generic templates on the platform such as Zegal.
If you’re already working with a law firm for your other legal documents, ask your lawyer for help.
If you are hiring foreign employees, you will have to apply for a work visa with the Hong Kong Immigration Department.
The application process is quite straightforward: both your employee and you will need to fill an application form that can be downloaded online, prepare the supporting documents (mainly a copy of your ID, academic qualifications and relevant work experience, employment contract, business registration certificate, proof of financial standing, the company background and business plans).
And you’ll thank Hong Kong for this: it only takes 4 weeks to process a visa and the visa fee is only HKD230.
2.1. Pensions
You must contribute to the Mandatory Provident Fund (MPF), a retirement scheme, for all your employees.
Your mandatory contribution as an employer varies with the monthly salary paid to your employee.
Here’s a summary:
| Monthly relevant income | Mandatory contributions | |
|---|---|---|
| Employer portion | Employee portion | |
| Less than HKD7,100 | Relevant income x 5% | No contribution required |
| HKD7,100 to HKD30,000 | Relevant income x 5% | Relevant income x 5% |
| More than HKD30,000 | HKD1,500 | HKD1,500 |
If you’re a caring employer, you can also make an additional voluntary contribution.
The conditions of such contribution depend solely on your chosen MPF scheme.
Bear in mind that you can claim tax deductions for all mandatory and voluntary MPF contributions (capped at 15% of your employees’ total compensation).
➡️ ACTION: Select the MPF provider from this list and set your monthly mandatory and voluntary contribution. Your first-time contribution can be tricky as you’re not required to arrange MPF for employees who have not been employed for 60 days or more.
Our take on this: set this up as soon as available, it’ll save you from a few headaches.
But if you have time to spare, full details can be found on the MPF Schemes Authority.
2.2. Payroll
Stay away from the hassle of handling payslips, MPF, annual leave, time & attendance, claims, and other operational HR matters, go for an online HR solution.
It doesn’t cost big money and it saves you lots of time.
The real value-added of this online HR software is the easy integration they have with online accounting software.
➡️ ACTION: If all you need is a simple payroll solution, HR easily has a free plan to help you with calculation and payslip. If you want the full package, it will cost you a minimum of HKD40 per employee per month. Check out Gpayroll, Talenox, Simplepay, amongst others.
3. Finding your office space
Next decision: co-working space or private office?
3.1. Co-working space
From experience, co-working spaces are great when you start a business but that doesn’t mean that they are cheap.
You can negotiate a good deal if you intend to stay there for more than 6 months.
The true value of co-working spaces is the flexibility that it offers, notably in terms of space and lease terms.
Of course, there are other perks coming with moving to a co-working space.
They inevitably vary from one space to another so pick the ones that suit your business best.
You have plenty of options in Hong Kong: WeWork, The Hive, The Executive Center, TheDesk, BluePrint, UCommune Or let CoWorker help you find the right co-working space for you!
3.2. Private Office
Typically, once your team reaches a certain size, you’ll want to have your own private office.
At this point, you’ll need to understand what the common practices are for Hong Kong private offices.
➡️ ACTION: Go the traditional way of contacting co-working spaces or real estate agents. Try your luck with Instant Offices, they were of great help to us when we looked for our space.
4. Protecting your business
4.1. Taking out business insurance
In Hong Kong, the Employees’ Compensation Insurance is the only compulsory insurance you need to run a business.
For small companies with less than 200 employees, your insurance coverage must be HK$100 million minimum.
It’s usually better to get it through an insurance broker because they have more leverage and can get you a better deal.
You will get a notice of insurance (sample) that you need to post in a place that is clearly visible to your employees.
Make sure you sign, date and put the company chop on the notice before you put it up.
It is not mandatory to take health insurance for your employees, but we highly recommend that you do so.
It’ll show your employee that you care and it’s also good for your employer branding.
Now don’t stop there, this is only the minimum requirement.
There’s more you can do to protect your business, for example taking out a business insurance package.
A bundle of insurance policies that will cover the basic needs (including the employees’ compensation insurance!) of your small business, such as:
- Business interruption
- Property damage
- Personal accident
- Money
- Neon signs
- Glass breakage
- Fidelity guarantee
- Public liability
➡️ ACTION: Simplify your life and contact an insurance broker specialized in serving SMEs, such as Cléma. You will save time and get better coverage for a fee that is reasonable.
4.2. Registering your Intellectual Property (IP)
If you’re not in a business that involves protecting your intellectual property, skip to the next section.
For everyone else, if you need to register a logo, trademark, copyrights, design, patents, or trade secrets, you’ll have to apply at the Hong Kong Intellectual Property Department.
This can be quite costly and you probably won’t be able to protect all your IP in one go.
Get in touch with IP lawyers to elaborate an IP strategy for your business.
5. Growing your business
5.1. Taping into public resources and funds
As a financial hub for many entrepreneurs, Hong Kong has put in place a number of schemes to help SMEs, notably:
- The SME Funding Scheme by the Hong Kong Trade and Industry Department provides (i) financial assistance to SMEs participating in export promotion activities and (ii) loan guarantees to help SMEs secure loans.
- The Innovation and Technology Fund by the Hong Kong Government has 4 funding programs to help SMEs upgrade their technological level and introduce innovative ideas to their business.
- SUCCESS – Support and Consultation for SMEs portal by the Hong Kong Government provide business information and consultation services free of charge.
- The SME Support Centre by the Hong Kong Trade & Development Council (HKTDC) provides access to multiple electronic business databases and information on the Mainland China market. The HKTDC also organizes business matching, seminars, and conferences to help SMEs promote their products and services.
- SME One by the Hong Kong Productivity Council provides information or referrals to SMEs on areas that facilitate their growth. They mainly offer support related to information technology, digital transformation, and technical solutions, as well as financing through regular seminars and training workshops.
For a more comprehensive list of Government Funding Schemes, check this link.
5.2. Networking
Hong Kong is a city that never sleeps, there are literally professional networking events, conferences, or fairs happening every single day of the week (even on weekends if you’re a workaholic!).
Those are organized by the Chambers of Commerce, business associations, private companies, co-working spaces, Meetup groups, interest groups, etc.
A couple of useful links:
- Eventbrite
- Multi-Networking Business Community Meetup group
- The HK Hub
- Hong Kong General Chamber of Commerce event calendar
- French Chamber of Commerce event calendar
- Australian Chamber of Commerce event calendar
5.3. Fundraising
If you’re looking to pitch to a Venture Capital (VC) into investing in your business, do your homework and know what the do’s and don’ts are before you start the process.
It will take several months to find the right investor, negotiate and close a venture capital round.
So be patient and prepared, but most importantly take appropriate measures to make sure that your business runs as usual.
Looking for a new way to make payments with your Hong Kong business?
Open an account with Statrys and get access to 11 currencies in less than 48 hours.
FAQs
Which department conduct tax audits for my company in Hong Kong?
The Hong Kong Inland Revenue Department (IRD) conducts a tax audit on your company.
How long should I keep my business records for transactions?
What kind of company records should I keep?
