Starting a business in Hong Kong

As a leading financial centre in Asia, Hong Kong is a great location to start your business, especially to leverage the city as a gateway into the Mainland China market.

Why choose Hong Kong?

There are many reasons why Hong Kong is an attractive destination to start your business venture in Asia.

Central location in Asia

If you are looking to tap into the Mainland Chinese market, Hong Kong’s location on the southeast coast, within the Greater Bay Area (GBA), can provide a strategic advantage. This enables transport to Shenzhen, Guangzhou and the other key cities of the GBA within a single day.

Hong Kong also offers convenient access to major cities, such as Beijing and Shanghai – which may support business growth in the long term – while most Asia-Pacific markets are accessible within a three to five-hour flight.

World-class infrastructure

To meet the growing needs of businesses, Hong Kong is continuously improving its infrastructure. The region is known to have one of the best airports and busiest ports in the world.

Hong Kong is a key hub for conventions and exhibitions in the region. For many businesses, the Hong Kong Convention and Exhibition Centre (HKCEC) is a preferred venue for Meetings, Incentives, Conferences and Exhibitions (MICE) events. The centre has received several international awards and accolades for its service standards.

With world-class industrial and business parks like Cyberport and the Hong Kong Science and Technology Parks (HKSTP), Hong Kong delivers integrated infrastructure in a single location. These parks provide extensive business support, while offering highly conducive spaces.

Efficient business setup process

Recognised for its straightforward business setup process, it takes only a few working days to incorporate a company in Hong Kong.

With clear regulations governing areas like trade, commerce, employment and taxation, Hong Kong is an appealing destination for establishing and operating a business. To ensure a strong start, government funding schemes are also available to provide the necessary resources tailored to your industry.

Low tax rates

Taxes can be a concern when setting up in a new jurisdiction. Hong Kong is a major draw in this regard, having one of the lowest tax rates globally. Personal income tax, also called salaries tax, starts at 2% and increases progressively to 17% for income over HK$200,000.

There are two types of profits tax rates applied to companies in Hong Kong. The single-tier option taxes corporations at 16.5% on assessable profits and unincorporated businesses at 15%. Alternatively, the two-tier option reduces the tax rate for the first HK$2 million of assessable profits for both corporations and unincorporated businesses down to 8.25% and 7.5% respectively.

Additionally, Hong Kong does not levy capital gains tax, withholding tax on dividends and interest, sales tax, or value added tax (VAT).

Pro-business environment

Hong Kong imposes no barriers on inward and outward investments, has no foreign exchange controls, and allows 100% foreign ownership. Your business may also benefit from the Closer Economic Partnership Arrangement (CEPA) – a one-of-a-kind free trade agreement between Hong Kong and Mainland China.

Under this agreement, all products deemed to be of Hong Kong origin can be exported to Mainland China tariff-free. If your service sector is covered under the CEPA, you may also be eligible for preferential treatment in the mainland market.

The legal system in Hong Kong also supports intellectual property rights (IPR), with strict rules for patents, copyrights, trademarks, and registered designs. Its dedicated Intellectual Property Department is experienced in managing intellectual property issues.

Bilingual workforce

In Hong Kong, English is widely used in business settings, facilitating international trade and communication. Many workers are also proficient in Cantonese and Mandarin, providing a vital link to Mainland China and other Chinese-speaking markets.

This linguistic versatility can give your company an edge when expanding within the Asia-Pacific region.

Tailored work visas

If you are travelling to Hong Kong for a short period, you may enter on a visitor visa or entry permit to conduct specific business activities. You might also be eligible for visa-free entry to Hong Kong for up to 180 days, depending on the country of origin.

To support your business endeavours, the government has introduced various types of work visas. These are aimed at attracting entrepreneurs, high net worth individuals, helping you relocate to Hong Kong or hire specific skilled workers and talented foreign professionals. You may also apply for dependent visas for family members, allowing them to live, work and study in Hong Kong.

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Business vehicles

Before setting up in Hong Kong, it is crucial to assess the features of each business vehicle against your goals. Doing so will enable you to select the most suitable option that matches your financial, regulatory and strategic requirements.

For several of the business vehicles outlined below, Hong Kong does not require directors to be locally resident. This can be advantageous when compared to other Asia-Pacific jurisdictions, offering greater flexibility to investors.

Private limited company

Most small to medium-sized companies in Hong Kong are established as private companies limited by shares and are also referred to as private limited companies.

It is treated as a separate legal entity from its owners, where their liabilities are limited to the share capital subscribed and their personal assets are protected from business’ liabilities.

A company limited by shares has its share capital divided into shares of certain value. These are held by shareholders who are entitled to a portion of the company’s profits.

Dividends are distributed to shareholders based on their shareholding percentage. The number of shareholders should not exceed 50. This is the most common structure for conducting business and trade in Hong Kong.

Public limited company

A public company limited by shares is a locally incorporated entity in which the number of shareholders can exceed 50. This structure allows you to offer shares and debentures to the public.

Most public companies are listed on a stock exchange, enabling you to raise capital. Consequently, you must adhere to stringent rules and regulations to ensure transparency and protect investors.

Public company limited by guarantee

A company limited by guarantee has no share capital. It consists of members, rather than shareholders, who guarantee to contribute a predetermined sum to cover the company’s liabilities if it is wound up.

This structure provides members with limited liability and allows them to retain democratic control over all matters. This form of entity is suitable if you are a non-profit organisation looking to incorporate in Hong Kong.

Branch

A branch operates as an extension of the foreign parent company and not as a separate legal entity. This means that as the parent company, you will be accountable and responsible for the debts and liabilities of the branch. The registration of a branch in Hong Kong allows it to engage in the same activities as the parent company.

Representative office

For those interested in gaining market insight before setting up a full-fledged structure in Hong Kong, you can start by establishing a representative office. As a representative office, you are not permitted to engage in profit-making activities. This means you will be unable to sign sales contracts, close deals on behalf of the company, raise invoices, issue letters of credit, or participate in trading activities.

Instead, your representative office can focus on promotion and liaison activities, conducting market research, and coordinating tasks for the parent company. A representative office usually has foreign managerial personnel and locally appointed support staff. Since a representative office has no legal standing, the parent company is liable for its activities.

Sole proprietorship

As the name suggests, a sole proprietorship is owned and operated by one person. Since it is not a separate legal entity, you and your business will be considered one and the same.

Registering a sole proprietorship in Hong Kong is relatively easy. However, bear in mind that as a sole proprietorship, your personal assets are not protected against the risks of the business. While you may accrue the profits from the business, you would also be solely and personally responsible for its liabilities.

Partnership

Partnerships are defined as businesses that are established and co-owned by two or more people who join to carry on the business with a view of sharing profits. Partnerships in Hong Kong are governed by the Partnership Ordinance and are of two types:

General partnership:

Like sole proprietorships, general partnerships make every partner in the firm personally liable for the debts and liabilities of the business. Additionally, each partner can be held responsible for the actions of another partner if they were carried out during the partnership.

Limited partnership:

Limited partnerships comprise general and limited partners. A general partner has unlimited liability for the firm’s debts and is responsible for the day-to-day running of the business, while limited partners’ liability is limited to the amount of their unpaid share capital. Limited partners cannot participate in the management of the partnership.

“We’ve been working with Hawksford since 2012 when we decided to set up our own entities in Asia. The team is very professional and helpful. They took care of every step of business formation, giving us advice and responding to our needs in a timely manner."

Sophia Zhou, APAC Finance Controller, Moleskine China