Benefit #1: Easy access to China
As far as the geographical location is concerned, Hong Kong has the strategic advantages of, apparently, being close to China, and that enables a whole lot more advantages to expand their businesses to the Greater China market, especially to startups.
There are quite a few privileges that China offers to Hong Kong businesses to allow them to have easier access to the China market.
In 2004, the Chinese government has already introduced Closer Economic Partnership Arrangement and the CEPA, agreements like these lower the entrance limits for companies, especially if you’re an international business trying to step foot in the Chinese market.
It goes without saying that China is the biggest trading partner with Hong Kong, with that relationship plus the expertise in technology and financial edge, a sound infrastructure system as well as top-notch marketing.
Benefit #2: Financial benefits
As I mentioned before, Hong Kong is an amazing place to start international companies that want to set foot in the Chinese market.
You might already know about this but, Hong Kong has one of the lowest tax rates here and the tax regime is relatively simple.
This allows businesses to be able to enjoy the dream benefits of having the lowest cost, but with the highest profits generated by the company.
There are also not many capital requirements on this part.
If you’re concerned about the capital entrance requirements, don’t worry, the money required is extremely low.
We’re talking about HK$1, you can already set up a business here.
Crazy, isn’t it?
In the constitution documents, you also don’t need to state precisely the maximum authorized capital.
Now, the profit tax rate is even better - it doesn’t matter whether you’re a local or international company, the rate is as low as 16.5% for you, either way, making your business all the easier in Hong Kong.
One thing you should pay attention to though is the two-tiered profits tax rate here in Hong Kong.
Essentially, how it works is that the first two million worth of profits that you make will be taxed for 8.25%; and another 16.5% tax will be charged for your remaining profits with certain kinds of exceptions.
To top it all off, there is absolutely zero sales or VAT tax here in Hong Kong.
The limited tax base makes it a more competitive place for you to start a business here.
Benefit #3: Laissez Faire Economics
It is no secret that Hong Kong has one of the freest economies in every aspect: monetary integrity and transparency from government, freedom in trade.
Besides, you’re basically allowed to run any type of business here (as long as it’s legal): consulting services, E-commerce, financial assets holding, trading, e-commerce, and more.
Except for a few products, including tobacco, motor vehicles, methyl alcohol, liquors, and hydrocarbon oil, there is really not much tax that is chargeable for imported goods to Hong Kong, which adds to the many benefits here.
Other than that, there are also quite a few tax exemptions, and you can excise some duties on total exports.
If you need to transfer some payments, either to or from Hong Kong,
Also, if you’re a business owner, then you should already know the struggle of transferring money or incorporating a decent quality of forex exchange service for your business.
The good thing about it is that these services are quite admissible in Hong Kong, which makes it easier for your business.
Benefit #4: Productive workforce
It is no doubt that Hong Kong is chock full of high-quality talent that’s both highly skilled and highly-educated, often times the local workforce has studied abroad.
If you have a friend working in a Hong Kong company or owns a company in Hong Kong, then they will tell you that employees in Hong Kong are found to be more competitive, diligent, and strive for personal advancement in the workplace (not to toot my own horn.
Don’t believe me? Here are the stats:
|Most motivated workforce in Asia||7||IMD World Competitiveness Yearbook, 2016|
|Best Labour/Employer Relations in Asia||2||The Global Competitiveness Report, 2007-2008, World Economic Forum|
Besides that, the workforce here is generally more multilingual.
It is compulsory for local students to take up Cantonese, English, and Mandarin in their primary education until secondary education.
If you intend on doing business with China, the additional advantage of your employees speaking Mandarin/Cantonese is essential, if not a must for your China ambitions.
Benefit #5: Liberal Immigration Policy
Immigration might also be one of the concerns on top of your list.
You can also do visa-free visits to Hong Kong, and that is available to more than 170 countries’ nationals, typically ranging from 7 to 180 days.
If you’re visiting Hong Kong for just a short period of time, you are even allowed to sign contracts or conduct business negotiations if you have an entry permit or visitor visa.
If you’re a business owner or that you are going to set up a new office in Hong Kong want to move your employees here, the work visa provisions made it easy for you to do it.
If you’re thinking about hiring staff here, dependent visas might be something that you’ll be interested in.
Essentially, the holder undertakes any sort of legal employment in Hong Kong. And here’s a few visas you can get:
- Employment Visa - If you’re thinking of hiring a foreign employee in Hong Kong, this is the most common type of visa that you’ll need/assign for them or relocating them here.
- Quality Migrant Admission Scheme Visa - This is a program designed for people who wish to conduct businesses or creating employment opportunities in Hong Kong. However, this is an entrant scheme with limited quotas.
- Investment Visa - If you’re a business owner, then this might be for you. This is for foreign professionals who wish to build a business in here or if you want to move to Hong Kong.
- Permanent Resident Visa - If you want to make it a forever home here, you need to reside here for at least 7 years continuously in order to attain the visa.
Disadvantage #1: Opening a Bank Account
Although it might seem a relatively easy process for you to legally set up your business here, however, opening a bank account is not exactly the easiest thing you imagine doing in Hong Kong.
This is especially true if you’re opening a bank account with a traditional bank.
It is extremely costly in terms of time and money for you to apply for an account here.
And don’t expect a guarantee that your bank will approve your application.
Because that’s not as straight up with the banking aspect here as it might seem.
One ridiculous thing that you might not know is that, when you open a bank account, it takes not just the bank teller to approve your application requests, in fact, it takes all the bank directors from your company to be present physically in order to get the application moving.
Also, they require an insane amount of paperwork and proofs for you to prove the legitimacy of your company, which usually involve a mix of the following documents:
- Substantial initial deposit
- Resolution by the board of directors
- A corporate chart
- Establishment documents
- Proper traditional business plan and more
As a business owner, opening a bank account should be the least of your concern and it shouldn’t add to the thousands of things to do on your list, you want to focus your time on more important things on your agenda.
Disadvantage #2: Strict regulations on financial companies
Operating a business in Hong Kong is pretty good generally unless you’re a financial company.
If you think the regulations in mainland China are tough, think about it again because Hong Kong is even stricter.
The same goes for the funding process and such.
But the regulation will hopefully be ease up later on with the Bay Area connected soon after.
Disadvantage #3: High Cost of Living
You might already know about this but Hong Kong ranks number one as the most expensive city to live in, even more so than New York.
If we’re talking about a standard 500 ft apartment (yes, it is already considered as quite a big place to live in here.), it costs around HKD15,000 per month merely renting alone.
And that doesn’t just stop in there.
The rent for office spaces is equally expensive.
If you’re looking at renting an office in Central, it costs around $72 per foot a month.
If you’re looking for something more affordable like a co-working space in Kennedy Town or Lai Chi Kwok, it costs around $130-500 per person per day, which is still rather expensive.
Entertainment isn’t exactly cheap either. If you want to grab a drink after work to relax, don’t think that you can hold 2 pounds and you can get a beer at the bar.
To give you a more clear picture, just a cocktail at the bar costs at least HKD 80 for each glass.
So, if you’re the bar everyday type of guy, the drinks tab for you this month might be a bit more hefty than usual.
Disadvantage #4: Slow tech adoption in HK
When you think about Hong Kong, the word international and advanced would probably be the first few words that pop into your head.
But are businesses in Hong Kong exactly digitized enough to accept the new online era in the industry?
A survey poll conducted by HSBC revealed that only 28% of the businesses are planning on adopting digital technology into their business in the future, which is surprisingly low considering the fact that Hong Kong is such a developed city on the whole.
And the reason for it is that businesses still lack an understanding of the importance of digital technology or the overall knowledge on that aspect, such as API, IoT, and big data, making it hard for businesses to digitize their business in Hong Kong.
Disadvantage #5: Challenges faced by SMEs
The problem of cash flow remains one of the key challenges for local SMEs, especially in terms of receiving payments from customers.
Although Singapore is reported to have the longest waiting period of 41 days, the waiting period for Hong Kong is not short either - it takes 34 days for local SMEs to collect the payment from customers, which can severely affect the efficiency of capital flow in the company.
Being one of the freest economies isn’t exactly all favorable for the businesses either, because that means limited support from the government.
Only 16% of the respondents commented the government policy is beneficial for the running of their business. And that seeking funding definitely still remains to be a challenge for SMEs in Hong Kong.
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