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How to Register Company in Hong Kong

Hong Kong is a special administrative region of China which used to be a British colony and which is now an international financial hub and a major seaport. Hong Kong does not need any additional advertising to attract investors from all over the world. Most of the lucrative opportunities and incentives created recently for investors in the UAE and Cyprus were known in Hong Kong 30 or even 40 years ago.

Only outdated stereotypes and severe restrictions imposed by the Chinese government (however, they have started to be lifted) stop Hong Kong from becoming a hub that attracts entrepreneurs from all over the world. If you decide to register your business there, you will benefit from many opportunities.

10 Reasons to Choose Hong Kong for Registering Company

The colonial past and the current autonomy of Hong Kong facilitate international business development: about 160,000 local and offshore companies are set up there every year. Mainland China has introduced the “one country, two systems” principle – the framework guaranteeing extensive powers to the region until 2047. What does it mean for your business?

  1. You can set up a business in an important financial and logistical hub in Southeast Asia known for its well-developed infrastructure, economic stability and its own currency pegged to the US dollar.
  2. Hong Kong’s legal and judicial systems are based on the same principles as the ones used in the British Empire. English law is more effective for managing a business and protecting economic interests.
  3. In Hong Kong, English remains the second official language, which significantly facilitates all business processes including hiring new employees.
  4. There is no foreign exchange controls in this region. Companies based in Hong Kong can process invoices in any currency.
  5. Business development is also facilitated by the secure bank system of Hong Kong including traditional brick-and-mortar financial institutions as well as brand-new online banks and payment systems.
  6. Both national and international individuals and legal entities can be appointed to be directors and founders of a Hong Kong company.
  7. Registering a new company in Hong Kong is much easier than in mainland China. The process does not take much time, does not require the presence of the founder, and the expenses of maintaining your business will also be way lower than in other countries.
  8. The nominee services are also available in Hong Kong: it is allowed to appoint nominee directors and shareholders.
  9. Choosing Hong Kong as a country for registering your company, you are choosing a region with a good business reputation and the benefits of offshore zones.
  10. Hong Kong has a favourable tax regime for businesses and offers preferential tax treatment in several cases.

Hong Kong Corporate Taxation

The Hong Kong laws allow you to significantly decrease your company’s tax payments: international entrepreneurs can benefit from several options for preferential tax treatment as well as efficient tax optimisation tools.

The standard corporation tax rate in Hong Kong is 16%; if your company’s revenue is less than USD 2 million, the tax rate goes down to 8%.

Hong Kong adopts a territorial principle of taxation, which is its key advantage; it allows you to open an offshore business without paying any taxes on the revenue received abroad.

Depending on the origin of the profit, companies registered in Hong Kong fall into three groups:

  1. Local companies: their revenue comes mostly from Hong Kong sources.
  2. Offshore companies: they trade mainly abroad and the revenue is generated outside of the region.
  3. Mixed-type companies: the revenue is generated both in Hong Kong and abroad.

Statistically, the majority of the companies incorporated in Hong Kong are considered local ones.

Hong Kong’s Inland Revenue Department (IRD) also recognises the mixed status of a corporate taxpayer. Parts of its revenue received outside of Hong Kong is tax-exempt. The revenue received in Hong Kong is subject to corporation tax. If you plan to benefit from the mixed status, you would need to keep track of all your revenue streams and their origin.

Besides, some types of revenue are not taxed in Hong Kong:

  1. No capital gains tax, which is important for a company with Hong Kong assets.
  2. No dividend tax.
  3. No value-added tax, which allows both trading companies and companies providing knowledge-intensive services to save significant amounts of money. It is especially beneficial for the latter as they do not have an option of refunding VAT since there are almost no production costs.

Being an autonomous region, Hong Kong has signed 40 double taxation treaties.

What Kind of Company Can I Register in Hong Kong?

Most frequently, companies are set up in Hong Kong to trade with China. The legal status of the region implies that the tax authorities consider China to be “a foreign country” and the revenue earned there to be foreign-sourced. Even if you ship Chinese goods from Hong Kong,  an enormous international port, you will still profit from it as you will not need to pay any VAT.

Another reason why you should consider Hong Kong is a simplified incorporation process and opportunities to run your business in English, unlike in China.

Apart from trading activities, Hong Kong companies provide the following services:

  • consulting and brokerage;
  • IT;
  • trademark and copyright registration.

It is easy to register a company in Hong Kong; you will not need to describe the scope of your business activities in great detail (like in mainland China). It means that your Hong Kong company can become your tool for a wide range of business activities. Other advantages include proximity to Asian markets, freedom of capital movement, a reliable financial market and a dynamic investment climate.

In Hong Kong, you can run a business as

  1. A sole trader;
  2. A commercial partnership;
  3. A limited liability company.

We would focus on the latter as it is the most frequently chosen type of company registered in Hong Kong.

In a limited company, as the name suggests, the liability of shareholders is limited to their contribution to the share capital. There are no requirements regarding the amount of share capital, currency or the number of shares. However, a limited company cannot issue bearer shares.

A company can have an unlimited number of directors but cannot have more than 50 shareholders. As mentioned above, founders and directors can be both natural and legal persons of any nationality, but at least one director in the company should be a natural person.

There must be a secretary to make adjustments to the articles of association, and this role can be taken by both natural and legal persons.

Your company must be registered at a physical address, no P.O. box companies are allowed.

How to Register Company in Hong Kong?

There are five stages of setting up a Hong Kong company.

  1. First, you will need to define the scope of business activities for your company. As a rule, foreign entrepreneurs come to Hong Kong after having carried out several business ventures back in their countries. They bring their expertise bearing in mind the regional context. Ideally, you would need a well-developed business plan for your company.
  2. Then, you should choose a suitable name for your Hong Kong company. It cannot be the same that already exists in the region and imply any connection with the governmental structures of Hong Kong. You can use both English and Chinese in the company name (you can even combine the two languages in one name). If your company name is in English, you will need to use the “Ltd” abbreviation. The company name should be agreed upon with the authorities before you apply for the registration of your company. You can check if a company name has already been taken on the official Companies Registry’s website.
  3. Set up the structure of your new company, and appoint a director, secretary, shareholders and beneficiaries in the articles of association. Note that according to the current regulations, the same natural or legal person cannot be a director and a secretary at the same time. Like in the UK, information about beneficiaries, founders and directors of Hong Kong companies is public. However, same as in Great Britain, you can appoint a nominee director and use nominee shareholder services. Technically, the nominee director has a legal responsibility for the company; however, in practice, this role does not entail any liability even if international founders lose their interest in their Hong Kong business and abandon it altogether.

The name, type of activity, and structure of your company as well as information about the amount of share capital and number of issued shares should be correctly included in a registration form.

  1. Prepare the required documents: the package should include your articles, and certified copies of identification documents of shareholders, beneficiaries and directors of your Hong Kong company. Documents provided in languages other than English and Chinese should be accompanied by certified translations.
  2. Register your company in Hong Kong. It is better to hire a local licensed agent who would apply for registration with the SFC (Securities and Futures Commission) after receiving all the documents from you. Using professional services, you can expect that your application will be approved sooner. The registration is confirmed in a certificate, but some companies might need to obtain additional licences depending on their activities.

How Much Time Does It Take to Register Company in Hong Kong?

The overall process does not take more than two weeks – it includes the preparation of the supporting documents, and approval of the name and the structure of your Hong Kong company.

The registration process in Hong Kong might take 5 working days or less if you have prepared all the documents beforehand and already have a name and identified what its activities will be and how the roles should be distributed between the stakeholders.

How to Register Offshore Company in Hong Kong?

There are no special regulations for setting up an offshore company. The Hong Kong tax authorities give aspiring international entrepreneurs 18 months to run their business and only then submit a Profits Tax Return form (PTR) – the company reports its profits using this form.

Based on your filed PTR, the Inland Revenue Department decides whether your business should be regarded as local or offshore. On the official website of the Hong Kong tax authorities, you might find the most recent requirements for offshore companies.

Your company should be considered offshore, i.e. benefiting from tax exemption on the foreign revenue, in the following cases:

  1. It performs business activities abroad.
  2. All its revenue comes from clients based abroad.
  3. It does not use the services of local contractors.
  4. It does not have a brick-and-mortar office in Hong Kong.

If the IRD does not consider your business offshore for some reason, you can file an appeal.

How to Register Company in Hong Kong Quicker and With No Additional Costs?

If you want to start benefiting from numerous opportunities in Hong Kong today, experts from a London-based law firm Imperial & Legal can support you every step of the way.

During the first consultation, we will offer you the most beneficial option for setting up a company in Hong Kong which would meet all your needs. With our support, you will be able to quickly collect all the documents, correctly fill in the registration form and become a founder of a Hong Kong company from the comfort of your home.

We will also assist you with tax optimisation, set up a document management system so that you do not have any problems with the first audit, and advise how to report your revenue correctly in your tax return.

FAQs about Registering Company in Hong Kong

Must all Hong Kong companies be audited every year?

Indeed, both local and offshore companies in Hong Kong must be audited every year to confirm the accuracy of annual reports. The mandatory audit rules and the English law can be considered a hallmark of Hong Kong, famous for its impeccable business reputation. Companies must submit financial reporting to the tax authorities and annual tax returns to the SFC. Besides, they must also hold yearly shareholders and Board meetings.

How to open a corporate bank account in a Hong Kong bank?

Hong Kong inherited the English law and the status of the international business hub from the former British Empire that facilitates business processes. But at the same time,  financial institutions inherited vigilance when it comes to opening a bank account for potential international corporate clients. The process in a traditional Hong Kong bank might take several weeks. You will most likely need to arrange a personal meeting with a bank manager who will check how well you speak English or Chinese and perform other background checks.

If you are registering a company in Hong Kong, it would be much easier to open a corporate account in a local online bank. It offers the same business services as a conventional bank but without a brick-and-mortar office. However, even in this case, it will be easier to open an account for a local company and not an offshore one.

If trading through a Hong Kong bank is not a must for you, you might as well consider European banks that are no less reliable, or use international payment systems.

Are there any requiremen?ts for the currency of the share capital in Hong Kong companies

Since there are no foreign exchange regulations in the region, the share capital can be expressed not only in Hong Kong dollars but also in British pounds, Chinese yuan, US dollars, euros or any other recognised currency.

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