Hong Kong – the prestigious business-friendly tax system, the desirable open market for foreign investors. It is no doubt that Hong Kong is one of the top options when you want to take your business operation up a notch.
Is it amazing that Hong Kong company formation only takes 24 hours, then you’re all set to run your business? That’s how fast and simple the incorporation process can be. But don’t assume that the required documents and preparation are easy to gather. If you don’t know where to start or what to do, everything is as hard as it can get.
Here is a step-by-step guide to Setting up a Hong Kong company, from choosing a business entity to picking a suitable name and application process.
But First, Reasons You Should Opt for Hong Kong
Easy-peasy incorporation process: Not only can foreigners take 100% of ownership, but they also get their incorporation ready within 24 hours.
Open market: Hong Kong has gone out of its way to form a free market that can attract tons of foreigners. What this means is that Hong Kong accepts almost all legal business types.
Even money transfer and currency exchange are allowed for any type. Moreover, the government doesn’t permit companies to open bank accounts in any location.
Attractive tax system: The corporate tax rates in Hong Kong are relatively competitive as it obliges with a territorial principle system. This system exempts tax for all income earned anywhere outside of Hong Kong.
Further enhancing Hong Kong’s credibility as a financially viable business region is PwC and World Bank’s ranking of the country as the second most tax friendly place in the world in 2020 to Bahrain.
As for the income earned inside of Hong Kong, it is charged marginally from 8.25% to 16.5% for the assessment year of 2019 onwards. Plus, in terms of capital gain tax, dividend tax, HAT, VAT, and withholding tax, they are all inapplicable.
Convenient location to China and other Asia countries: You can easily travel to China or other Asian countries within hours by air.
An uncompromising approach to banking secrecy: While multiple offshore jurisdictions were under pressure to disclose information about foreign bank accounts and their owners amidst infamous financial misconduct expose called the Panama Papers, Hong Kong remained adamant on keeping its client’s information confidential.
This, in turn, led to the inclusion of Hong Kong into the EU’s blacklist of non-cooperating tax havens around the world. However, this solidarity towards banking secrecy helped Hong Kong ranked fourth on the Financial Secrecy Index, tailing behind strong competitors such as Switzerland, the US, and the Cayman Islands
The Company Incorporation Process
Decide on a Business Entity Type
The first thing to decide is which type of legal entity is suitable for you. The criteria you should consider include company size, financial ability, and features.
Here is a list of business entities that are available to foreigners in Hong Kong:
- Limited Liability Company
- Sole Proprietorship
- Partnership
- Others (mainly includes Branch and Representative Office)
*Be noted that this guide mainly focuses on the business type with the most popular being Limited Liability Company (also known as Private company limited by shares).
Decide on Your Business Name
When it comes to names, with other offshore jurisdictions, they offer provisional approval and reservation of the company name. However, the Hong Kong Companies Registrar has the right to change a company name (under some specific situations).
When choosing your company name, remind yourself that it can be in both English (ended with “Limited) and traditional Chinese (ended with “有限公司”). But a mix of English and Chinese in the same name is not permitted.
If your company name falls into the following cases, it can be rejected:
- It is the same or similar to the existing company names listed in the Companies Registry’s “Index of Company Names”
- It is the same as a registered company name under an Ordinance
- It breaches trademarks
- It is offensive or goes against the public interest
To branch and representative offices, the names must be the same as their parent company. A small but useful tip: check the name availability beforehand.
Choose a Company Structure
To the private company in Hong Kong, here are the compliance requirements:
- Directors
- A minimum of 1 person is required
- Both Hong Kong residents and non-resident are allowed
- Nominee directors are allowed
- Shareholders
- A minimum of 1 person is required
- The number of shareholders is at a maximum of 50 person
- Either Hong Kong residents or non-residents
- Company secretary
- Compulsory by the law
- Can be either a Hong Kong resident or a professional firm
- The sole director can’t be the company secretary
- Registered address
- A P.O box is also acceptable
- Share capital
- Must be at the minimum of HKD 100
- Bearer shares aren’t allowed
Incorporation Process
Without wasting words, the first step is to submit all the following documents to the Companies Registrar:
- Application form
- A copy of the Articles of Association
- A copy of each passport, residential address proof for foreigners
- Copies of all company documents for shareholders
The second step is to fill in the application for approval of the proposed company name with the Companies Registrar.
Last but not least, you should submit all the above documents to the Companies Registrar.
If you wish to outsource the entire incorporation process and focus on growing your business, BBCIncorp offers bespoke Hong Kong corporate formation services to expedite the entire process for you from start to finish. Our dedicated staff can also help you better navigate through all the noises.
Once a company has been set up in Hong Kong, it’s only natural for the founding member(s) to want to expatriate there to help with the management.
An Investment Visa HK can enable the investor to stay in Hong Kong as an employee of the business they own. Additionally, the holder will also be made eligible for applying for a permanent residency status after a set period of time.
Register for Business License and Permit
Most business fields are not restricted in Hong Kong as it is a business-friendly market. Still, the license or permit of any business field must be issued by an equivalent department of the Hong Kong department.
After setting up your company, you should apply for your permit within the first month. This permit can be attained in a period of 2 to 8 weeks.
Open a Corporate Bank Account
When registering for a business bank account, pay to mind to have these core documents in place. They include, but might not be limited to, the following:
- Account application form
- Corporate registration documents
- Copies of passports of all main members
- Personal resume
- A bank reference letter of each main member
- A bank statement of each main member, or related companies
- Proofs of business such as invoices, contracts, letters,… of the current firm, or any related one
All of the documents must be presented in English (or it depends on the bank). Also, be noted that you might need to submit additional documents while the bank is doing its compliance check.
Comply With the Annual Maintenance Filings
It is required for you to file the compliance of the government while running your company in Hong Kong. This can help you to stay away from a fine from the authorities or unexpected in-active status. The filing includes:
- Renew your Business Registration Certificate every year before it expires
- Organize an Annual General Meeting within the first 18 months after you set up your business, and within 15 months for each next time
- File an Annual Return with the Companies Registrar within the first 18 months after incorporation date, and within 1 year for each next time
- File Employer’s return with IRD
And that’s pretty much it! Now you got the answer to the big question: How to set up a company in Hong Kong. The simplicity of the set-up procedure always amazed foreign investors. Investors are promised lots of opportunities when doing business in Hong Kong.
Besides the business-welcomed tax system, this simple incorporation process is also a big perk for all entrepreneurs worldwide.
______________________________________________
Some other articles you might find of interest:
Marketing blogs you must follow as an entrepreneur:
29 Marketing Blogs Every Small Business Must Follow
Are you feeling cramped in your home office space? You might enjoy this article:
Home Office Design Ideas for Small Spaces
