As an international business hub with advanced technological infrastructure, the city consistently ranks as the world’s freest economy. This is influenced by the administration’s pro-business ethos, tax incentives for startups, a productive legal system, and world-class tech infrastructure.
To take advantage of the opportunities that Hong Kong offers, the first step is to incorporate a company in Hong Kong. Read on to discover all there is to know about business registration in Hong Kong.
Advantages of business registration in Hong Kong
Before we highlight what’s required for business registration in Hong Kong, it’s important to understand the key benefits of incorporating a company in the region. These benefits are outlined below:
- The process for opening a company in Hong Kong is fast, simple, and cost-effective. The Certificate of Incorporation and Business Registration (“the Certificates”) is typically available within four working days of an approved application.
- Together with Singapore, Hong Kong has gained a reputation as the most liberal jurisdiction in the world.
- In findings published by the World Economic Forum’s Global Competitiveness Report 2019, Hong Kong ranks number one as the world’s best financial system.
- Baker Mckenzie & Oxford Economics’ Global Transactions Forecast 2019 ranks Hong Kong as the number one location for IPO and M&A activity in the Asia-Pacific.
- Foreign investors can run their company incorporated in Hong Kong from anywhere in the world. They simply need a local holding address, as opposed to a physical address.
- Profits made outside of Hong Kong are tax-free, with revenue generated in Hong Kong and income tax over 120,000HKD set at approximately 17%.
- Strategically located at the heart of Asia, Hong Kong exists alongside many of the region’s most advanced business markets, including China, Singapore, and South Korea.
- English common law is prevalent and the city’s legal system is autonomous from that of Mainland China. English is also spoken as one of Hong Kong’s two main languages (with Cantonese being the other).
Types of business entity in Hong Kong
When establishing a company in Hong Kong, it’s important to identify the appropriate company type. The key company types are summarized below:
- As one of the most popular options for companies setting up in Hong Kong, limited companies are unrestricted in the activities that they perform.
- Limited companies in Hong Kong benefit from tax exemptions on income generated from overseas operations. This makes Hong Kong the perfect location for establishing a holding company or company headquarters.
- There are minimal requirements to set up a company in Hong Kong, including only one director and only one shareholder (who can be of any nationality). It is also a requirement to have a resident company secretary.
- Limited companies are separate legal entities that can carry out activities distinct from their owners.
- Although corporate shareholders are common, corporate directors are not permissible under Hong Kong company law.
- Limited companies must submit audited accounts with tax returns at their annual general meetings.
- There are no minimum share capital requirements. Likewise, there is no government approval required to incorporate a limited company in Hong Kong.
- A company’s shared capital can be denominated in any currency including USD, EUR, GBP, and HKD.
- Branch offices are considered extensions of their parent company, therefore they do not have a separate legal identity.
- A branch office is ideal for companies needing to commence business immediately or companies with smaller operations that are only selling in Hong Kong.
- Both positive and negative financial impact for a branch company is attributed to the parent company.
- Hong Kong branch offices are permitted to conduct trade within the scope established by the parent company. However, they can only carry out business in Hong Kong with appropriate licenses.
- A branch office in Hong Kong can commence operations up to one month prior to registering with the Hong Kong Companies Registry.
- Any foreign companies establishing a branch office in Hong Kong need to register as a “Registered Non-Hong Kong Company” within a month of setting up.
- Branch offices in Hong Kong are permitted to sign local sales contracts, invoice local customers, and receive income from local customers.
- A branch office in Hong Kong is not required to submit audited accounts with their annual returns and tax filings.
- A representative office is exempt from making direct sales in Hong Kong.
- Activities for representative offices in Hong Kong are restricted to carrying out market research and promoting the parent company’s business.
- For companies that only have a representative office in Hong Kong, they must appoint a local distributor or agent to sell goods and provide services to local customers.
- A representative office is ideally suited for companies wishing to enter Hong Kong to carry out market research and explore business opportunities due to the limitation in business activities.
Understanding business registration in Hong Kong
For those wishing to register a company in Hong Kong, they can be guided by the Companies Ordinance of Hong Kong. This is an official document that states the legal limits within which companies are able to conduct business in Hong Kong.
Here are some more useful facts that individuals and businesses should know about company registration in Hong Kong:
There must be a minimum of one individual director — with there being no requirements or restrictions on the director’s residency or nationality. There is also no cap on the maximum number of directors.
A limited liability company in Hong Kong is required to have a minimum of one shareholder and a maximum of 50. There are no residency requirements that are placed on shareholders.
There is no minimum share capital required to register a company in Hong Kong. With this being said, the most common practice is to have a share capital of HKD 10,000. Because the minimum paid-up capital in Hong Kong for one share is HKD 1.00, this capital is represented by 10,000 ordinary shares of HKD 1.00.
Hong Kong uses the territorial basis of taxation. That is, where registered companies only pay the corporate tax on business conducted in Hong Kong. In addition, there is no withholding tax on dividends and interest or collection of social security benefits, nor sales tax on VAT.
There are two options for Profit Tax Rates in Hong Kong. The first is the Single-Tier Corporate Tax System, where corporations are taxed at 16.5% on assessable profits and unincorporated businesses are taxed at 15%. The second option is the Two-Tier Profits Tax Regime, which applies to both corporations and unincorporated businesses by lowering the tax rate to 8.5% for the first $2 million of assessable profits.
It is mandatory for any limited liability company to have a company secretary who resides in Hong Kong. A company secretary acts as a company’s representative in Hong Kong, ensuring that a company’s operations are managed following applicable laws. Additionally, a company secretary is charged with maintaining a company’s statutory books and records.
After a company has been successfully registered in Hong Kong, it is incumbent on the company’s owners, directors, and company secretary to ensure that accounts are prepared and maintained adequately. Accounts must be audited every year by a certified public accountant in Hong Kong. Audited accounts must then be submitted to Hong Kong’s Inland Revenue Department.
Opening a Corporate Bank Account
Banks in the same territory are generally recommended for companies wishing to use reputable payment gateway providers like Stripe and PayPal. The basic documents required for opening an account in Hong Kong are:
- Account application forms
- Corporate registration documents
- Copies of passports of major members
- Personal resume
- A bank reference letter of each major member
- A bank statement of each major member, or any related corporates
- Proof of business such as agreements, invoices, and contracts of the current company or any related one
Documents needed for business registration in Hong Kong
Several documents must be prepared when registering a company in Hong Kong. These are outlined below:
Articles of Association: This sets out the rules and guides how a board can operate a company. It is frequently seen as a contract between company members and the company.
Also, a company registration form that is duly filled with the following details:
- The company name
- The company’s registered address
- An accurate description of the company’s main activities
- Details relating to the company’s shareholders, directors, and company secretary
- For companies with shareholders and directors who are non-residents of Hong Kong, copies of passports and proof of residence in their countries must be provided
- If a company has local shareholders and directors, copies of their identity cards should be provided
- In the case of corporate shareholders, there must be a copy of the company registration for the parent company
- Liabilities of company directors
- Total share capital
In the instance that any documents are provided in a language other than English, there must also be an English-translated document.
Hong Kong is one of the world’s key investment locations for any business looking to enter the Asia-Pacific market. This is influenced by the region’s attractive tax system, world-class financial and technological infrastructure, and simplicity of company incorporation.
Establishing a company in Hong Kong can be achieved in a matter of days. There are straightforward regulations to follow, which include at least one director, shareholder, and a resident company secretary. Companies are also required to open a corporate bank account.
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