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Company registration in Hong Kong

The stable legislation and business-friendly tax policies of Hong Kong attract investors and entrepreneurs from around the world. Opening a company in Hong Kong is considered one of the best ideas for conducting international business for a number of reasons. In this article we will cover the key advantages of company registration in Hong Kong and the types of companies that can be registered in the territory, delve into the company registration process, and discuss the intricacies of taxation and reporting requirements in the country.

Company registration in Hong Kong

Posted 2 October 2023

Summary

No minimum capital requirement

The recommended amount is HKD 10,000

It is not mandatory to pay it upon company registration

Territorial

For non-resident companies, the tax rate is 0%

For local companies, it is 16.5% (in some cases reduced to 8.25%)

 

 

 

 

 

 

Relative to other countries

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Diane

Diane, partner of GFLO Consultancy

Advantages of company registration in Hong Kong

Starting a business in Hong Kong offers the following advantages:

  1. Economic stability and a developed trading environment. Hong Kong’s policies are geared towards fostering global cooperation, allowing it to maintain its position as a global financial hub.
  2. Stable banking system. Banks in the country are known for their reliability, with most having a network of branches worldwide.
  3. Information confidentiality is a fundamental principle in Hong Kong’s legal framework.
  4. Conducive business environment. Even in cases where a chosen business activity requires a license (e.g., tourism agencies, currency exchange operators, financial organizations, real estate businesses, etc.), the application process is streamlined and efficient.
  5. Freedom of investment. Investors are welcome to engage in investment activities both within and outside the country.
  6. Advantageous location. Hong Kong is situated in the heart of business activity, providing access to major Asian markets.According to reputable publications and organizations, Hong Kong consistently attains high positions in various rankings:
CategoryRankingSource
Best financial system in the world2World Economic Forum: The Global Competitiveness Report 2018
Top global financial center3 (1 in Asia)The Global Financial Centres Index 25 2019
World’s Leading Investment Hub for FDI inflows in Asia2United Nations Trade and Development (UNCTAD):
World Investment Report 2018
Best jurisdiction for IPO (Initial Public Offering) and M&A (Mergers and Acquisitions) deals in Asia1Baker Mckenzie & Oxford Economics: Global Transactions Forecast 2019

As seen in the table, Hong Kong has much to be proud of.

Legal forms of business organization in Hong Kong

The following organizational forms of companies are most common:

  • Limited Liability Company

In this type of company, participants are only liable for the company’s obligations up to the extent of their share. This form is most common for small and medium-sized businesses.

  • Private Limited Company

The number of shareholders in this type of company is limited. Company shares cannot be publicly traded, and any transfer of shares must adhere to the company’s Articles of Association.

  • Public Limited Company

There are no restrictions on the maximum number of shareholders in this type of company, and shares can be freely traded on the stock exchange.

  • Public Company Limited by Guarantee

This type of company does not divide its capital into shares. The liability of participants is limited by guarantee, not by the number of shares.

The process of company registration in Hong Kong

Company registration in Hong Kong is carried out with the Companies Registry. To initiate the registration process, you need to provide identification documents as requested by our specialist.

After gathering all necessary documents and information the registration process can commence. The whole procedure from gathering the required paperwork to preparing the final package of corporate documents involves the following steps:

  1. Checking the company name for availability and selecting an acceptable name. The name check process takes no more than one day.
  2. Preparing forms and documents for submission to the Companies Registry, including filling out Form NNC1 and drafting the Articles of Association.
  3. The company registration process.
  4. Preparing corporate documents for the registered company and ordering the corporate seal. The documents will be ready on the same day or the following day after the company appears on the Registry’s website.
  5. Notarizing and apostilling the documents. The notarization process takes 1-2 days, and apostilling takes 1 to 8 days.

Having a registered address in Hong Kong is mandatory for communication with the Companies Registry. Additionally, to complete the registration and fully operate the company, a company representative — a physical or legal entity physically present in Hong Kong — is required to fulfill the role of the company secretary. This role is included in the company registration cost. Nominee services in Hong Kong are allowed.

Tips to keep in mind when conducting business in Hong Kong

  • The country operates on a territorial taxation type, which is a significant advantage and a key reason why company registration in Hong Kong is so popular. Under this system, taxes are only levied on profits earned within Hong Kong. Profits generated outside of the country are exempt from taxation. However, this is only possible if the company obtains a Tax Exemption Certificate. It can be issued only to companies that do not plan conducting business in Hong Kong, do not have an office there as the center of management, do not have a workforce or business partners, and do not plan engaging in transactions within Hong Kong.
  • Auditing in Hong Kong. Every company registered in Hong Kong must maintain proper accounting records and undergo an annual audit.
  • Nuances of opening bank accounts. Hong Kong banks often have unpredictable policies when it comes to opening accounts for companies with foreign shareholders or directors. To increase the chances of opening a corporate bank account in Hong Kong, it’s necessary to prepare an extensive document package, which may vary depending on the bank’s requirements. Providing a comprehensive package of documents with detailed and transparent information can help demonstrate the potential client’s financial capability. Additionally, if the founder or director has an account with a major financial institution, it may be beneficial to obtain a bank reference letter from that institution and provide it to the chosen Hong Kong bank. Most banks also require an apostilled set of documents for the company. Having a local director in the company plays a significant role in the account opening process. Companies in Hong Kong can also open accounts outside of Hong Kong.

Taxation in Hong Kong

As mentioned earlier, Hong Kong follows a territorial taxation type. This means that profits earned by a company registered in Hong Kong from sources outside of the country are completely exempt from taxation within Hong Kong.

For profits earned within Hong Kong, a two-tiered progressive tax rate of 8.25% and 16.5% applies, depending on the amount of profit. Additionally, an annual levy is imposed. The 16.5% profit tax rate is considered one of the lowest in Asia.

Goods and services in Hong Kong are not subject to VAT or GST.

There are also no capital gains taxes or dividends taxes.

Preparation and submission of reports in Hong Kong

Every company that conducts business in Hong Kong or is registered in Hong Kong is required to prepare and file audited financial statements with the tax authorities annually.

In Hong Kong, the following types of reports are filed:

  • Profit Tax return. This document is a tax return for profit. It is filed with the Inland Revenue Department (IRD) of Hong Kong annually at the end of the financial year. The financial year is typically 12 months, but for the first financial year a period of 18 months is allowed. Depending on the date of the company’s financial year-end, a specific code is assigned to help track the filing deadline easily.
  • Annual return. Filed annually, this report should contain information about the structure of the Hong Kong company, information about the directors and shareholders, and the registered address. The filing deadline is within 42 days of the anniversary of the company’s registration date.
  • Employer’s Tax Return. This report must be submitted to the IRD of Hong Kong regardless of whether there are employees in Hong Kong or whether the company’s business has commenced or ceased.

Conclusion

Hong Kong is attractive due to its highly convenient conditions for company registration and business operations. The Hong Kong government tends to simplify various corporate procedures and aims to attract investors and entrepreneurs from around the world. Hong Kong is widely recognized as a powerful financial center with favorable tax conditions.

This jurisdiction embodies economic stability, which is of special significance to entrepreneurs in today’s realities.

GFLO Consultancy experts are pleased to assist and help you with any inquiries, just get in touch or leave a request through the form right below.

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