Start a business in Hong Kong
Hong Kong's commercial success beckons investors, entrepreneurs and creative thinkers from all over the world. In order to fully tap into the city's business opportunities, you will need to establish a Hong Kong company. What's more, if you plan to do business with mainland China, having a Hong Kong company is a great gateway into China's large market thanks to the CEPA (Closer Economic Partnership Agreement).
With that, setting up a company in Hong Kong as a foreigner does come with a set of peculiarities that you should know about.
Benefits of doing business in Hong Kong
Before we get into the process of setting up a business in Hong Kong, here are a few reasons for why opening a Hong Kong company or representative office can be a good idea for your business:
- Hong Kong is a major business hub in Asia and is well-connected to other major cities in the region. This makes it an attractive location for businesses looking to expand into Asia. Setting up a company in Hong Kong will provide you with access to a wide range of markets in Asia and beyond.
- Setting up a company in Hong Kong is relatively straightforward and inexpensive — especially when compared to opening a business in mainland China. In fact, it can take you as little as 48 hours to set up a company in Hong Kong. Plus, you will not have to deal with a number of requirements, which are quite commonplace in other countries, such as minimum registered capital, local director, restrictions on foreign investment — and more.
- Hong Kong has some of the lowest tax rates in the world, with a corporate tax rate of just 16.5% and no sales tax or VAT. This makes it an attractive location for businesses looking to minimize their tax burden.
- Hong Kong is known for its vibrant entrepreneurial environment and is recognized by the World Economic Forum as one of the world's most competitive economies. Hong Kong is the 3rd most competitive economy according to the World Economic Forum's Competitiveness Index 2019.
- The city has a well-developed legal system that is based on English common law. This makes it easy for businesses to navigate and helps to provide a stable and predictable business environment.
- Hong Kong has a well-developed infrastructure with excellent transportation and communication systems. This makes it easy for businesses to operate and helps to increase efficiency.
Overall, setting up a company in Hong Kong can provide businesses with a number of advantages, including a strategic location, low tax rates, a well-developed legal system, strong infrastructure, a multilingual workforce, and access to markets.
Types of companies in Hong Kong
There are several types of businesses that can be set up in Hong Kong.
Sole Proprietorship consists of a single person who is liable for the company's debts and personal property. As the name suggests, it's best suited for small enterprises with one owner.
Private Limited Company is the most widespread option among expat entrepreneurs. To set up a limited company, you will need at least one director (up to 50 shareholders), a company's secretary, an office in Hong Kong and starting capital.
Note that there is no legally specified amount for starting capital — however, it is generally recommended that you have at least HKD$10,000 in your bank account in Hong Kong.
Other options include the Unlimited Company (you will need at least two partners with unlimited and combined liabilities) and the Public Limited Company (you can have many partners whose liabilities are limited to their amount of contribution).
General Partnership is authorized to have between 2 and 20 partners whose responsibilities are unlimited regarding the company's debts and bonds. You will also be responsible for your partner's actions.
Limited Partnership allows as many partners as in the case of the General Partnership. However, at least one partner is entitled to have unlimited liabilities while others' responsibilities are limited to their amount of contribution.
You can also set up a representative office in Hong Kong. This is the most “lightweight” way to establish a business presence in Hong Kong. A representative office is the best option when you need an office in Hong Kong for support or marketing activities. However, you won't be able to conduct any profit-making activities with a representative office.
Good to know:
You can run your Hong Kong company from anywhere in the world. You will just need to hire an agency to provide you with a secretary and a registered office in Hong Kong and pay fees of around HKD$ 6,000 annually.
How to set up a company in Hong Kong
Setting up a company in Hong Kong as an expat is a fairly straightforward process, but it does require some careful planning and preparation. Here are the steps you'll need to follow to get your business up and running:
Choose a business structure
The first step in setting up a company in Hong Kong is to decide on the type of business structure you want to use. The most common options for expats are a sole proprietorship, a partnership, or a limited liability company (LLC).
Choose a company name
Once you've decided on your business structure, you'll need to choose a name for your company. This should be a unique name that reflects the nature of your business and is easy to remember. The name should also be in English, as this is the official language of Hong Kong. Note that this step can be performed online. You just have to request a name from the Companies Registry.
Register your company
The next step is to register your company with the Companies Registry. This can be done online or in person, and you'll need to provide a copy of your business plan, your company name, and the names and addresses of your directors and shareholders. You'll also need to pay a fee to register your company.
Obtain a business license
After you've registered your company, you'll need to obtain a business license from the Hong Kong government. This will allow you to legally operate your business in Hong Kong. You can apply for a business license online or in person, and you'll need to provide proof of your business address and the type of business you'll be operating.
Set up a business bank account
Once you have your business license, you'll need to set up a business bank account in Hong Kong. This will allow you to manage your company's financial transactions and keep your personal and business finances separate. You'll need to provide proof of your business registration and business license to open a business bank account.
The leading banks in Hong Kong include:
Obtain any necessary permits or approvals
Depending on the nature of your business, you may need to obtain additional permits or approvals before you can start operating your business in Hong Kong.
For instance, if you plan to export goods, you will need to first obtain a license from the Hong Kong Customs and Excise Department. And, if you plan to run a food-related business, you'll need to obtain a food hygiene permit. If you plan to hire employees, you'll need to register with the Employees' Compensation Insurance Scheme and the Inland Revenue Department. You'll also need to follow all local labor laws and regulations, including those related to minimum wage, working hours, and employee benefits.
Setting up a business in Hong Kong: taxes
If you are planning to open a company in Hong Kong as an expat, you will need to be aware of the taxes that may apply to your business. While Hong Kong is generally known as a tax haven for businesses and individuals, it is not entirely a tax-free zone. Here's what you need to know.
Hong Kong has a simple and low tax system, with a tax rate of 16.5% for profits earned by a company. There is no capital gains tax or wealth tax in Hong Kong.
In addition to the profit tax, you may also need to pay salaries tax if you are an employee of your own company. Salaries tax is a progressive tax that is based on the amount of salary you receive. The tax rates range from 2% to 17%, depending on your income level.
You may also need to pay goods and services tax (GST) if your company provides taxable goods or services. GST is a value-added tax that is levied at a rate of 0% on most goods and services, but some goods and services are taxed at a rate of 5%.
It is important to note that the tax laws in Hong Kong are constantly evolving, so it is advisable to seek professional advice to ensure that you are in compliance with all relevant tax regulations.
Visas for setting up a business in Hong Kong
If you want to start a company in Hong Kong, you will need to obtain a work visa. There are several types of work visas available for foreign nationals who plan to live and work in Hong Kong, such as the work visa, the investment visa and the entrepreneurial visa.
The investment visa is meant for foreign nationals who want to invest in a Hong Kong business and work in the city on a full-time basis. This visa requires the applicant to invest a minimum of HKD 6.5 million (approx. USD 830,000) in a Hong Kong business and create at least 3 new jobs for Hong Kong residents.
The entrepreneur visa is meant for foreign nationals who want to start a business in Hong Kong and work there on a full-time basis. This visa requires the applicant to submit a business plan and demonstrate that the business is viable and will create at least 1 new job for a Hong Kong resident.
It is important to note that the requirements and eligibility criteria for these visas can vary and are subject to change, so it is advisable to check with the Hong Kong Immigration Department or a local immigration specialist for the most up-to-date information. You can also learn more about other types of visas to Hong Kong.
Good to know:
Note that if you are only planning to set up a representative office in Hong Kong, you may not need to apply for a long-term visa. The exact immigration and other requirements depend on your nationality and the nature of your business.
Useful links:
Hong Kong Immigration Department
Hong Kong Customs and Excise Department
Employees' Compensation Insurance Scheme and the Inland Revenue Department
