Hong Kong is the ideal place when it comes to setting up a company or doing business.
Let's understand the situation where you are ready to start your business.
You’ve done your research, you’ve discussed with the people around you and Hong Kong appears to be the clear choice for where you want to start setting up a company.
But where do you go from here?
10 Steps to Opening a Company in Hong Kong
- Get Familiar with Local Organizations & Institutions
- Choose a Company Name
- Choose Your Company's Legal Vehicle
- Appoint a Company Secretary
- Select the Registered Address of Your Company
- Prepare Incorporation Documents
- Submit Your Application to the Company's Registry
- Pay Relevant Government Fees
- Get Relevant Licenses and Permits
- Keep Up with Your Taxes
Why Set Up a Company in Hong Kong?
Beyond its limitless amount of things to do and amazing natural beauty, Hong Kong's jurisdiction, culture, and business environment are also some great reasons to open your business there.
1. It’s straightforward and cheap to set up
Many of the constraints imposed in other countries are not present in Hong Kong: no minimum registered capital, no need for a local director, no restriction on foreign investment, and the list goes on.
2. Hong Kong offers a vibrant business environment
Hong Kong is the 3rd most competitive economy according to the World Economic Forum’s Competitiveness Index 2019.
That’s why many entrepreneurs use Hong Kong as a strategic springboard to develop their business in the rest of the region.
Home to 340,000 SMEs, Hong Kong is also a hub for start-ups in the region.
In 2020 alone, the Hong Kong Government has committed to investing HKD100 billion in innovation and technology.
For more information we went to the source and interviewed InvestHK, the government body in charge of attracting and retaining foreign direct investment which is of strategic importance to the economic development of Hong Kong.
3. Taxes are business-friendly
Corporate tax is 16.5% only, with an exemption for the first HKD 20,000 profit.
4. No VAT or tax on capital gains
On a related note, the monthly social charges a company must pay are at most HKD 1,500/employee
1. Get Familiar with Local Organizations and Institutions
At the time of setting up a company, and throughout your company’s life, you will be in contact with 3 main interlocutors:
Your company secretary
Your company secretary will be your primary contact regarding all corporate questions about the establishment and maintenance of your company: appointing a new director, changing shareholders, increasing your registered capital, and so on.
Read more about company secretaries below.
The Companies Registry
The Companies Registry is the government department responsible for the registration of companies in Hong Kong.
Its role also includes the monitoring of companies to ensure that they operate in compliance with corporate laws and regulations.
The Inland Revenue Department
The Inland Revenue Department (IRD) is the government department responsible for taxes and duties in Hong Kong.
To put it simply, every year you must file your company tax return with the IRD, who will then determine how much tax your company has to pay.
2. Choose your company name
The first thing that comes first, select a name for your company. It can be in traditional Chinese, English, or both.
Here are a few recommendations that may save you a lot of trouble:
Tip #1 – Check if the name is available on the Hong Kong Company Registry’s website.
Alternatively, you can send a list of names to your company secretary who can check it for you.
Tip #2 – Make sure your company name is not trademarked in another region.
For example, there is no company registered with the name “Pop-Tarts®” but you probably don’t want to get into a legal battle with the Kellogg’s Company.
Tip #3 – If you intend to use your company name as a trademark, make sure you protect it by registering it at the Hong Kong Intellectual Property Department.
If you need more details on company name registration, check the Companies Registry guideline.
3. Choose the Legal Vehicle of Your Company
Now that you have the name of your company, it’s time to decide what legal form is best for your business.
This is an important step as it impacts everything from your business operations to your tax filing.
There are 3 main types of company vehicles in Hong Kong:
- Limited company
- Sole proprietorship
Let’s get straight to the point, go for a ‘Limited company’ structure. Here’s why:
Firstly, it’s the most common legal structure in Hong Kong.
Secondly, it’s an independent legal entity which means that your personal assets are protected from your business risks and liabilities.
Third, if you raise funds, it’ll be easier to have your new investor(s) taking a share in your company.
In the same manner, transferring a share from one shareholder to another is a very straightforward process.
4. Appoint a Company Secretary
All companies in Hong Kong are required to have a local company secretary.
It’s mandatory for a reason: Hong Kong authorities want to have a “go-to” person in case they have any inquiries about your company.
That’s why your company secretary has its name mentioned in the registration document of your company.
Your company secretary will be in charge of ensuring that your company is in good standing with the regulations governing the incorporation and maintenance of companies in Hong Kong.
Who can be your company secretary?
Short answer: any Hong Kong resident, no matter if it is an individual or a company.
Long answer: You can ask your friends or family, as long as they reside in Hong Kong, to be your company secretary.
However, we advise you to use this option only if they are familiar with the duties of a company secretary.
Otherwise, you should look to hire a qualified company secretary holding a TCSP license.
What does a company secretary do for your business?
Do not underestimate how much time and trouble your company secretary can save you.
The services your company secretary may provide include:
- Maintaining your company records, such as the register of directors, the register of shareholders, the share certificates, and the significant controller register
- Organizing, preparing the agendas for, and taking minutes of your board meetings and annual general meetings
- Arranging your tax filings
- Monitoring changes in relevant legislation and the regulatory environment and taking appropriate action
5. Select the Registered Address of Your Company
The registered address of your company is the address at which governmental departments will send correspondence.
Needless to say, you want to make sure that you receive them.
For this reason, it is common (and recommended) to use your company secretary’s address as the registered address for the company.
The company secretary will alert you of any new mail sent to your company.
Of course, there’s nothing wrong if you prefer using your office address as a registered address.
However, in this case, be diligent in collecting your mail and remember to inform the authorities of Hong Kong each time you relocate your office.
6. Prepare the Incorporation Documents
Unlike many countries, the incorporation of a company in Hong Kong is not subject to the preparation of tons of documents.
All you have to do is to gather the following:
- NNC1 incorporation form duly filled in and signed by one of the shareholders (click here to download the document)
- Copy of the directors’ and shareholders’ identification documents (Hong Kong ID card for Hong Kong residents and passport for foreigners)
- Articles of Association of the company - this is a relatively standard legal document that your company secretary normally provides. The Articles of Association serve as the constitution of the company as it provides the rules that govern the company’s internal affairs: appointment of directors, transfer of shares, handling of financial affairs.
7. Submit to the Companies Registry
The incorporation of your company is a straightforward procedure to be carried out with the Companies Registry.
Incorporation documents must be submitted in either one of the following ways:
- Online through Hong Kong’s 24/7 Companies e-Registry;
- By mail sent to the Companies Registry address; or
- At the counter of the Companies Registry.
Within 2 to 6 business days after submission, the Companies Registry will issue two documents evidencing the incorporation of your company: the certificate of incorporation and the business registration certificate.
Both certificates can be collected in person at the Companies Registry or electronically.
Keep in mind that the certificate of incorporation is issued only once, at the time your company is set up and remains valid during the entire lifetime of the company.
On the other hand, the business registration certificate is only valid for one year.
It must be renewed every year within one month following the anniversary date of the establishment of your company (otherwise fines will be issued).
8. Pay the Government Fee
At the time you submit the incorporation documents to the Companies Registry, you will be required to pay the applicable government fee.
In reaction to the economic slowdown caused by the coronavirus, the Hong Kong government has decided to waive the fees for the years 2020 and 2021.
Enjoy your new Hong Kong company for HKD 0!
9. Get Relevant Permits and Licenses (if necessary)
Chances are high that your company will not need any permits or licenses to carry out its business in Hong Kong.
As a matter of principle, being one of the most liberal economies in the world, Hong Kong authorizes everyone to engage in every business.
Exceptions only apply when licenses and permits are necessary to protect the general interest (safety & hygiene, public health, people’s savings...).
For instance, if you’re opening a restaurant, you will need to obtain a General Restaurant Licence and Provisional General Restaurant Licence, and a Liquor Licence from the Food and Environmental Hygiene Department.
You can visit the government website to find out which licenses, permits, certificates, and approvals are actually needed to carry out certain businesses.
10. Keep Up With Your Taxes & Financial Reporting
At the time of incorporation, the Companies Registry will automatically report the existence of your company to the Internal Revenue Department.
So no need for you to take any action on this front.
Hong Kong is known for offering many tax benefits to companies, such as:
- Corporate tax rate of 8.25% on the first HKD 2 million of profits, and 16.5% on everything thereafter. One of the lowest corporate tax rates in Asia and in the world
- Territorial tax regime, which means there is no profit tax for companies conducting their business outside Hong Kong
- No capital gains tax
- No VAT
For more information and updates regarding the rules and regulations for tax in Hong Kong, you can check the Hong Kong Government’s website.
Generally speaking, your reporting and tax notifications should be handled and communicated to you by your company secretary.
Depending on the level of service your company secretary provides, you may want to keep these items in the back of your mind or on a calendar.
If you're looking to register your company in Hong Kong, why not do it with Statrys?
We make it easy. We make it effortless. And we make it affordable—because the last thing you need is a complicated registration process that's going to cost you more money than you can afford.
We'll take care of everything from start to finish, so you can focus on what matters most: growing your business!
Why set up a company in Hong Kong?
Which department is responsible for taxes in Hong Kong?
What are the main types of company vehicles in Hong Kong?