5 Steps to Register a Sole Proprietorship in Hong Kong
For solo entrepreneurs in Hong Kong, a sole proprietorship is one of the simplest options. It allows you to run your business independently without the complexities of excessive paperwork or forming a company, but it still requires registration with the tax authorities.
In this guide, I’ll take you through the essential steps of registering your sole proprietorship in Hong Kong, including the eligibility requirements, necessary paperwork, and the tax obligations you need to be aware of.
What Is a Sole Proprietorship in Hong Kong?
A sole proprietorship (also known as a sole trader)is a business structure owned and managed by a single individual. Legally, the business and the owner are considered the same entity, which means they are fully responsible for all business obligations, including debts and legal liabilities.
The owner also has compliance responsibilities, and it will be the owner who can be fined or penalised by the authorities for failure to comply with tax and commercial obligations.
Tip: A person running a sole proprietorship business may be called a sole proprietor.
Key Pros and Cons
A sole proprietorship is simple and flexible. However, it comes with trade-offs that every business owner should consider. Below are the main pros and cons:
Pros
✔️Easy and inexpensive to set up
✔️Full control over business decisions
✔️Simple reporting and tax filing
✔️Profits are taxed at the ‘Unincorporated Business Tax’ rate, which is lower than the corporate profits tax rate.
Cons
❌Unlimited personal liability for business debts
❌Difficult to raise large amounts of capital, as investors prefer corporate structures
❌Business continuity depends entirely on the owner
❌Limited credibility with large clients or suppliers
Can Foreigners Register as a Sole Proprietor in Hong Kong?
Yes, a foreigner can register as a sole proprietor in Hong Kong, but it is challenging. You must meet several strict requirements, including proving that your business operates in Hong Kong, and you will need a local representative to register on your behalf. These constraints can make it unattractive for many international entrepreneurs. Let’s take a closer look at the key conditions to consider below.
Business must operate in Hong Kong
A sole proprietorship is only available for a business that is actually operating in Hong Kong. The Inland Revenue Department (IRD) requires detailed information from non-residents to determine whether a business qualifies as ‘operating in’ Hong Kong.
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Appointment of a local representative
If you are registering as a non-resident, you must appoint a ‘responsible person’ or agent in Hong Kong to handle your affairs with the Business Registration Office. This agent must provide:
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Relocation and investment visa
If you plan to move to Hong Kong to do business, you will need an investment visa. To qualify for an investment visa, you must demonstrate that your business will make a substantial contribution to Hong Kong’s economy. This could include creating jobs for the local workforce or using the services of local businesses.
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Foreigners who already have residency or hold a dependent visa can more feasibly set up a sole proprietorship in Hong Kong. This is because they are legally allowed to live and work in Hong Kong, which makes it easier to fulfill the local presence requirement.
Important: Under Hong Kong law, visitors are not permitted to establish or participate in business. They may only take part in limited business activities, such as attending seminars and concluding contracts. Always ensure you hold the appropriate visa or entry permit.
5 Steps to Set Up a Sole Proprietorship
To operate legally as a sole proprietorship, you must register with the Inland Revenue Department (IRD) and get a Business Registration Certificate (BRC). This registration should be completed within one month after you start your business. The IRD will not accept applications to register businesses that have never existed or have not yet started operations.
Step 1: Choose a Business Name
The first step is to choose a suitable business name that is not identical to other businesses. You can look up trademarks through the Trademark Register and look up existing company names at no cost through the Companies Registry’s e-Search services.
Since the sole proprietorship is not a separate legal entity from the individual, the business name must not imply that the business is incorporated with limited liability. Don’t include names ending with “Limited” or “Ltd.”, or names implying incorporation, like “Inc.” or “Corp.
Step 2: Prepare Documents and Information
In this step, you’ll need a few key things before registering:
- ID: Hong Kong Identity Card for residents, passport for non-residents.
- Business details: Address, description, type of business, and start date.
- Digital certificate (required only for online application): This can be iAM Smart+ or an ITP account. These options are part of Hong Kong’s digital identity authentication system and are available to residents. Non-residents need a local representative for online submissions.
Step 3: Submit Business Registration Application
The next step is to register your sole proprietorship, which means applying for a Business Registration Certificate (BRC). You can complete this process in person at the IRD Business Registration Office, by mail, or online via eTAX on GovHK.
Offline Application
1. Request Application Form 1A
Download the request form from the IRD website then send the request in one of three ways:
- Email: to taxbro@ird.gov.hk
- Post or Fax: Send it to the Business Registration Office (Fax: 2824 1482). The office will mail the form to you.
- In Person: Collect the form at the Business Registration Office, 4/F Revenue Tower, 5 Gloucester Road, Wan Chai
2. Once you receive the Application Form 1A, complete it and submit it:
- By Post: P.O. Box 29015, Gloucester Road Post Office, Hong Kong (underpaid mail will be rejected)
- In Person: Business Registration Office, 4/F Revenue Tower, 5 Gloucester Road, Wan Chai
This is what Form 1A looks like.
Online Registration
- Go to the Application for Business or Branch Registration page and click Apply Now.
- Click Begin Application.
- Read the Personal Information Collection Statement carefully. By accepting it, you are consenting to the terms. You will then be redirected to select the application type. Choose Individual Tax Portal because a sole proprietor pays individual tax.
- Log in using your digital certificate, either iAM Smart+ or an ITP account.
- You will be redirected to the page for selecting the application type.
- Choose Sole Proprietorship.
- Fill in the required information, including particulars of the applicant and particulars of the business carried on
- Choose whether you want a 1-year or 3-year certificate, which determines how often you need to review.
- Provide contact information
- Provide your digital signature and click Sign & Submit.
Insight: The application typically takes 10–20 minutes to complete if you have all the required information on hand.
Step 4: Make the Payment
The fee for a 1-year certificate is HKD 2,200, and for a 3-year certificate it is HKD 6,020 during the period from 1 April 2025 to 31 March 2026. Payments can be made offline or online, depending on the method you choose to submit your application.
Offline application:
Pay at the counter or include payment with your postal application. Underpaid mail will be rejected, so ensure sufficient postage is paid.
Online application
Pay with JCB, Visa, MasterCard, UnionPay, FPS, or PPS. Note that FPS and PPS may not be supported on mobile devices.
After completing payment, an acknowledgement page will appear confirming that your application has been successfully submitted. This page will display a Transaction Reference Number, which is needed to track your application. Be sure to save or print the acknowledgement page and record the Transaction Reference Number for future reference.
Note: Submitting your application along with payment completes the process, but it does not guarantee approval. If your application is not approved after review, the payment will be refunded.
Step 5: View Application Result and Collect the Certificate
Your application is usually processed within 30 minutes for in-person submissions and within 2 working days for postal or online applications.
You can collect your certificate based on the submission method:
- In person: Collect a paper certificate directly at the office.
- By post: The certificate will be mailed to you in paper form.
- Online: Once your application result is ready, a notification email will be sent to the email address provided during submission. After receiving the email, log in to your tax portal account, go to "View and Download Result of Application" under "Application for Business or Branch Registration," and enter your Transaction Reference Number to access your application result. If approved, you can download the certificate via GovHK.
Tax Obligations for Sole Proprietors
A sole proprietorship is not a separate corporate entity, so its income is not taxed as corporate income.
The business is taxed under the ‘Unincorporated Business Tax’ rates, which is slightly lower than the corporate tax. Sole proprietorships in Hong Kong are subject to the following two-tiered tax rates:
| Profit | Tax Rate |
|---|---|
| The first HKD 2,000,000 of profits | 7.5% |
| Any profits above HKD 2,000,000 | 15% |
Tax Report
Sole proprietorship income is reported on the owner’s individual tax return, specifically in Part 5 of the Tax Return – Individuals (BIR60).
Below is the requirement and deadline
| Annual Profit | Requirement | Filing Deadline |
|---|---|---|
| Less than HKD 2,000,000 | No need to submit financial statements with the tax return | Within 4 months after the end of the basis period, unless you have already received a tax return from the Department. |
| HKD 2,000,000 or more | Must attach certified financial statements, including profit and loss statement, balance sheet, and tax computation |
Note: Hong Kong follows a territorial taxation system, meaning that only profits earned in Hong Kong are subject to tax. For more details, check out our guides on Offshore Tax Exemption
Final Note
Setting up a sole proprietorship in Hong Kong can be a simple and low-cost option for local small business owners, with registration available online or offline. However, it comes with clear limitations for foreign business founders, such as needing to prove a local business operation to the IRD and appoint a local representative.
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FAQs
What is a sole proprietorship in Hong Kong?
A sole proprietorship in Hong Kong is a form of business structure, owned and operated by a single individual. Legally, the owner and the business are considered the same entity, meaning the owner is personally responsible for all obligations, debts, and liabilities of the business.
