Doing Business in Hong Kong? Here’s some things you need to know!
Despite COVID and some recent political changes, Hong Kong remains a global centre for trade and commerce, as well as a great place to do business. But as with any commercial endeavour there can be just as many pitfalls as there are pearls….
Entrepreneurs love Hong Kong. For so many reasons. Here are just a few:
Strategic location. Hong Kong sits at the heart of the Asia Pacific region, adjacent to China, one of the world’s major marketplaces.
An open economy. In Hong Kong, foreign investors are granted tons of benefits thanks to a free trade policy, no restriction for onshore or offshore investment, free movements of capital, no tariff on goods import/export, no foreign exchange controls.
Ease Of Doing Business. Hong Kong ranks highly as a great place to do business. Especially if you’re a foreigner.
Attractive tax system. Only income derived within and from the country is taxed. In addition, Hong Kong uses a two-tiered profits tax regime: the first HK$2 million of assessable profits for both corporations and unincorporated businesses is only taxed at one half of its current tax rate.
Transparent Regulatory Framework. Despite recent political upheavals, Hong Kong maintains a business-friendly set of rules regarding taxation, trade, and commerce and employment.
Educated and productive Workforce. Hong Kong’s employees generally are hard-working and competitive, highly skilled, trained, and educated, and speaks several languages.
Is it easy for businesses within Hong Kong to trade with other countries?
Yes. Hong Kong provides preferential trade access for companies doing business from within its borders. The Closer Economic Partnership Agreement (CEPA), for instance, creates a virtual free trade deal between Hong Kong and mainland China. In addition, Hong Kong-based service providers across dozens of industries receive preferential treatment in providing services to the mainland.
Hong Kong also has a free trade agreement with all 10 members of the Association of Southeast Asian Nations (ASEAN).
What industry sectors in Hong Kong offers the most potential to foreign entrepreneurs?
Though great opportunities exist right across the economic spectrum in Hong Kong, observers generally agree there are four business sectors with the most potential:
Financial services. In 2020, financial services accounted for 23.3% of Hong Kong’s GDP (1)
Trading and Logistics. This sector comprises for 19.8% of the city’s GDP (2)
Professional and Technology Services. Hong Kong’s advanced economy has been a catalyst for growth in these sectors
Tourism. Though it has taken a knock recently, tourism has long been one of the four major sectors in Hong Kong and will recover.
As a foreigner how do you start a company in Hong Kong?
There are six basic steps involved in Hong Kong’s company incorporation process that you need to know:
Step 1: Select type of company
The first step is to decide what type of Hong Kong company will suit your business most. For example:
Limited Liability Companies (LLC)
Sole Proprietorship
Partnership
Other registration options for overseas entrepreneurs are:
Branch: An extension of the parent company.
Representative office: Setting up a representative office can enable you to test the market before penetrating
Step 2. Choose a company name
In Hong Kong naming A Company is not as straightforward as in other parts of the world.
A company name can be in English (must end with “Limited”), or in traditional Chinese (must end with “有限公司”), or an English name and a Chinese name.
Step 3: Determine the company structure
Corporate structures in Hong Kong are closely monitored by the Government and must satisfy a number of set requirements, including having at least 1 director who is a natural person and at least 1 member who can be either natural person or corporate representative, and more
Then you can go and register your business in Hong Kong.
Step 4: Submit documents for incorporation
The final step in the incorporation process is to submit your application with all required documents to the Companies Registry
Step 5. Apply for business licenses and permits
With some business types in Hong Kong it is compulsory to have a license or permit issued by a corresponding department of Hong Kong Government.
Step 6. Open a corporate bank account
It is recommended that you open a corporate bank account in Hong Kong itself, especially if you are going to use reputable, global payment gateway providers like Paypal, Stripe and Swift.
Are there any annual compliance requirements for doing business in Hong Kong and are they onerous?
When doing business in Hong Kong, there are some annual compliance requirements that every Hong Kong company must follow:
- Renewing company secretary, registered office, and business registration
- Holding Annual General Meetings
- Filing annual return and profits tax return
- Filing employer’s return
- Financial statements audit
- Keeping of internal records
What are some of the pitfalls of establishing a business in Hong Kong?
When setting up a business in Hong Kong there are a few things to watch out for. For example,
- Unfamiliar regulations
- Tax laws: Hong Kong’s tax regulations can be complicated. Failing to comply could earn your company stiff financial penalties
- Labor costs: Labor is relatively expensive in Hong Kong and the cost of living is high
- Opening a bank account can be complicated. And different banks will have different requirements.
Is there a smarter, simpler way to establish and register a business in Hong Kong?
Yes. Today, sophisticated and streamlined global workforce management solutions make international expansion easier than ever before. Companies like CXC specialise in this field and can set up an Employer of Record (EoR) structure to streamline the hiring process and ensure that you, as an employer, are in full compliance.
They have expert teams on the ground in places like Hong Kong, and in addition to payroll and onboarding, and extensive local knowledge, they can also support you with:
- tax administration and Government liaison
- Ensuring all employment contracts meet local standards
- Foreign exchange and in-country money movement
- Insurance, local laws and regulations
- Arranging work permits and visas for expat employees
Like to know more about how best to plan your business expansion into Hong Kong? Or any other country in Asia? Or do you need assistance to either start a business in Hong Kong or to register it with the Hong Kong authorities. Then do not hesitate to contact us for more information!
