Hong Kong has no minimum amount of share capital, so it is common to set up a new Hong Kong company with just one share at a price of 1 Hong Kong Dollar.
Only companies with foreign-sourced income, which conduct no business within Hong Kong and derive their profits from overseas, are granted the offshore status that allows the company to be taxed at 0% for Profit Tax.
Hong Kong has one of the world's lowest corporate income tax rates, currently a maximum of 16.5 percent.
Setting up an offshore company in Hong Kong offers numerous advantages, including tax efficiency and access to international markets.
This guide will walk you through the essential steps, legal requirements, and strategic considerations to establish your offshore presence in this thriving global business hub.
Is It Difficult to Set Up a Company in Hong Kong?
Setting up a company in Hong Kong is not difficult, provided you can fulfill their requirements.
Hong Kong has a very straightforward process for establishing an offshore company, making it highly appealing for international enterprises and entrepreneurs. This is due to several reasons, such as:
- No Mandatory Hong Kong Resident Directors: Unlike many other nations, Hong Kong doesn't mandate local directors, favouring foreign investors in its offshore company policy.
- No Compulsory Hong Kong Resident Shareholders: Foreign entrepreneurs aren't obliged to partner with local residents for a Hong Kong company setup, eliminating this common requirement.
- Remote Company Formation: Directors or corporate shareholders need not be physically present in Hong Kong during incorporation; the process can be conducted remotely.
- Flexible Address Requirements: A local physical address for the new Hong Kong company is unnecessary; a registered address notification suffices, often utilizing the company secretary's office address.
- Accessible Company Secretary Options: Numerous cost-effective local company secretary firms offer assistance in ensuring business compliance.
- Efficient Regulatory Authorities: The Companies Registry and Inland Revenue Department, overseeing offshore companies, demonstrate remarkable efficiency and rapid application processing.
How to Register a Hong Kong Offshore Company
The process for Hong Kong incorporation should proceed as follows:
- Verify the availability of the company name with the Companies Registry. The company name can be in either English or Chinese and will end with the word ‘limited’
- Decide the share capital structure of your company, who will be shareholders, and the shares each one of them will hold
- Decide who will be the director; this person is the administrator of the company
- Submit business documents to the Companies Registry, including the Incorporation form NNC1
You should expect to receive a reply from the Hong Kong Companies Registry in about 3 to 7 working days from the date of filing the incorporation documents.
Once the Hong Kong offshore company is incorporated, you will receive the certificate of incorporation from the Companies Registry. As for the Business Registration Certificate, you must register within one month from the incorporation of your new Hong Kong offshore company.
Since 2011, The Inland Revenue Department and The Companies Registry have jointly implemented a "One-stop company and business registration service." When an applicant presents the incorporation forms with the Companies Registry, it will be considered to have made the application for the Business Registration certificate simultaneously, saving time for applicants.
Following company incorporation, it is time to work on internal documents and seals. Most of these serve as integral components for internal governance and compliance. These include:
- Articles of association
- Share certificates
- Company organizational chart
- Register of Significant Controllers
- Common Seal/Company Seal
- Business license (if applicable)
If you opt for Hong Kong incorporation services through a provider such as a Company Secretary or a law firm, they typically prepare these documents, maintain company records, and facilitate ongoing compliance.
📖 Note: A Company Seal is no longer needed after the new Companies Ordinance 2014. Read more about the difference between a Company Chop and a Common Seal.
Opening a Business Bank Account in Hong Kong
Opening a business bank account in Hong Kong can be complicated and takes several weeks to complete. More than 100 licensed banks can provide business banking services in Hong Kong.
With this many options, foreign companies looking to open an offshore company in Hong Kong may have difficulty choosing the right one for their business. This is why we have prepared a guide on the best banks to use in Hong Kong.
Be sure to check the requirements for opening an account with each bank in detail because they may have different requirements that your offshore company may not have.
💡 Related: If you are looking for virtual banks, we have compared the 8 best virtual banks in Hong Kong for your offshore company.
What Are the Legal Entity Types for Registering a Hong Kong Offshore Company?
The alternatives for establishing a private offshore company limited by shares are:
- Private Limited Company: A Hong Kong limited company is popular for domestic and offshore operations. It offers protection from liability to its owners as it is a separate legal entity and is simple to incorporate and maintain.
- Independent Registration: You can personally incorporate and register a new offshore company in Hong Kong. If you already have a foreign or local company, it can serve as the shareholder for your new entity.
- Purchase an Existing Company: Another option is to acquire an existing Hong Kong company, commonly referred to as a 'Hong Kong shelf company.' These companies have already been established and registered but are currently dormant, ready for purchase and immediate trading. This is a convenient choice when expediency is crucial, as it avoids the waiting period associated with obtaining a certificate from the Hong Kong Companies Registry. Your company secretary can assist you in acquiring a Hong Kong shelf company.
- Joint Venture with Local Partners: Consider entering a joint venture with Hong Kong resident partners. This approach allows you to become the majority shareholder in a special-purpose company alongside local businesses, offering valuable regional market access and expertise, especially if you plan to conduct business in the area.
Reasons to Establish an Offshore Company in Hong Kong
While there are many reasons why entrepreneurs around the world come to Hong Kong to establish an offshore company, this section will highlight some of the most common reasons.
International Trade Links
Hong Kong has a well-deserved reputation as a hub for international trade and finance: Hong Kong companies are trusted and highly thought of, both internationally and in mainland China.
While Hong Kong and mainland China operate distinct business registration systems, there is a free trade agreement between the two (the Closer Economic Partnership Arrangement, or ‘CEPA’), making import and export straightforward and one of the main advantages that offshore companies incorporated in Hong Kong can access.
Furthermore, Hong Kong has free trade agreements with a range of other jurisdictions, including Australia, New Zealand, ASEAN, and many European countries. This gives Hong Kong offshore companies an almost unrivaled international ‘reach.’ The lack of foreign exchange controls makes operating in multiple currencies easy.
Hong Kong has one of the world's lowest corporate income tax rates, currently a maximum of 16.5 percent, making Hong Kong's low tax jurisdiction one of the most attractive to entrepreneurs who conduct business operations in the Asia Pacific.
Furthermore, if the company intends to hire employees, individual income taxes are also very low (with a current top bracket of 17 percent). It is also worth noting that Hong Kong is not considered a ‘tax haven’ and will not be affected by the OECD’s new 15 percent global minimum corporate tax rate (as it is already above the minimum).
Hong Kong's tax system has no indirect taxes such as the Valued-Added Tax (VAT) or Goods and Services Tax (GST), such as those that apply in the UK, the European Union, Australia, or New Zealand. Additionally, there is no withholding tax on dividends and interests.
As Hong Kong has no minimum amount of share capital (such as the 25,000 Euro minimum share capital required in Germany), it is common to set up a new Hong Kong company with just one share at a price of 1 Hong Kong Dollar.
Furthermore, a competitive market for company secretaries, accounting, and audit services makes it easier to pay the ongoing costs of company administration in Hong Kong than in many other locations.
Offshore Status from the Inland Revenue Department
Many people often misunderstand the term “offshore company.”. It is often assumed that remotely incorporating a company in Hong Kong will grant the company the automatic right to be classified as an offshore company by the Inland Revenue Department and access the Profit Tax rate of 0%.
However, The Inland Revenue Department grants offshore status to companies that have foreign-sourced income, meaning that no trade or business should be performed in Hong Kong and the source of the gains of the company has an origin overseas, allowing the company to be taxed at 0% for Profit Tax.
When presenting a case to the Inland Revenue Department, companies must prove their source of income comes from other jurisdictions outside of Hong Kong. The applicant must present supporting documents that explain their operation, and the information must satisfy the authority criteria.
For example, a company performing international business sourcing in China and selling overseas. It is very common for Chinese suppliers to invoice the Hong Kong company through another company in Hong Kong. In this case, the source of the income might be considered from Hong Kong, and the company most likely will not be granted offshore status.
If you are in search of a proper service provider to assist you in the offshore status application, you can visit our Company Secretary Review page and find a tax specialist for your company to determine if your company in Hong Kong complies with the requirements of foreign sourced income and apply for the offshore status with the Inland Revenue Department.
When considering an offshore location for your company, Hong Kong stands out. Its organised environment and well-thought-out system make it easy to form an offshore company.
Nevertheless, entrepreneurs establishing their offshore companies in Hong Kong must diligently manage the legal, compliance, and banking prerequisites for smooth operation.
Neglecting these aspects could lead to penalties jeopardising your Hong Kong company's operations. Finding the right partner for your business is important to ensure a seamless company setup and ongoing compliance in Hong Kong.
What is an offshore company?
What are the requirements for setting up an offshore company in Hong Kong?
How long does it take to set up an offshore company in Hong Kong?
What are some benefits of setting up an offshore company in Hong Kong?