Setting up a company in Hong Kong: what you need to know

Setting up a company in Hong Kong: what you need to know

HOW TO: Setting up a company in Hong Kong

Thinking of establishing a company in Hong Kong? Expanding into a new international market is exciting for any business, but it also presents its own set of significant challenges. For many executives, the first hurdle is understanding how the company formation regulations and processes work in the new jurisdiction.

Our guide below makes it easier to take the leap with an overview of everything you need to know about setting up a company in Hong Kong.

Hong Kong Market Profile

Hong Kong is an important financial hub within the Asia Pacific (APAC) region that is renowned for its business-friendly taxation and regulatory environment. Some of the key characteristics of the Hong Kong market include:

  • Office rental pricing: Average monthly rent for grade A office space in Hong Kong’s central district was $HK 1,807 per square metre for the first quarter of 2021.
  • Average office space density: 1sq m per person
  • Fixed internet download speed: 59 megabits per second in July 2021
  • Mobile internet download speed: 06 megabits per second in July 2021
  • Gross Domestic Product US$ bn: 344.7
  • Population: 7.5 million
  • Official languages: Chinese, English
setting up a company in hong kong

Benefits of setting up a company in Hong Kong

As one of the largest financial centres in Asia, Hong Kong offers many benefits to companies looking to establish a presence in the region, including:

  • Strategic locational advantages: Hong Kong’s central location is beneficial for companies that want to enter the mainland Chinese market or expand their business within the APAC region.

The Hong Kong market also has many cultural similarities to mainland China, making it ideal for foreign investors to develop a footprint in the Chinese market.

  • Attractive tax structure: Hong Kong’s corporate tax rates between 8.25% and 16.5% (subject to the amount of profit earned) are considered some of the lowest in Asia.

In addition, Hong Kong has no capital gains tax, sales tax, consumption tax, value-added tax, estate duty or withholding tax on dividends and interests.

Further, the ‘territorial source’ concept applies, meaning that residents pay no tax on incomes earned beyond Hong Kong’s borders. Income earners within Hong Kong are taxed at between 2% and 17%, depending on salary. This is considered significantly lower than other jurisdictions in the West.

  • No foreign ownership restrictions: 100% of the shares of incorporated companies in Hong Kong can be owned by foreigners or foreign companies. The market also operates on free trade principles, with no onshore or offshore investment restrictions, import or export tariffs and foreign exchange controls.
  • Bilingual business communication: in Hong Kong, English is widely used in a business context, making it easier for foreign investors to establish companies within the region.

How to establish a company in Hong Kong

To help you start enjoying all of the above business benefits, we have compiled a step-by-step process for how to create a company in Hong Kong:

Step 1 - Choose a company type

The two most common company types for businesses operating in Hong Kong are:

  1. Limited Liability Company: This entity type means that a business is set up as its own legal entity. Foreign investors often prefer this type because it offers limited liability for business owners. Companies can be limited by shares or by guarantee.
  2. Foreign Company Office: Foreign companies can register in Hong Kong as either a representative office or a branch office. Neither option creates a separate legal entity, however, so all liability extends to the parent company.
Step 2 - Give your company a name

Your company name must not:

  • be the same as a name already approved on the Companies Register; or
  • infringe upon any third party’s intellectual property rights.

You can search the register for free using the Companies Registry search sites: Cyber Search Centre or Company Search Mobile Service.

The name you choose must comply with the Guideline on Registration of Company Names for Hong Kong Companies, which states that:

  • Company names can be registered as either an English name, a Chinese name or both. However, combining English words/letters and Chinese characters is prohibited.
  • An English company name must end with the word “Limited”, and a Chinese company name must end with the characters “有限公司”.
  • A Chinese company name should contain traditional Chinese characters (繁體字) that can be found in the Kang Xi Dictionary (康熙字典) or Ci Hai Dictionary (辭海) AND also in the ISO 10646 international coding standard. Simplified Chinese characters are not acceptable.
Step 3 - Set up your company structure

An essential part of Hong Kong company formation is determining the structure of your company per the following requirements:

  • Directors: a minimum of at least one person. One director needs to be a natural person (ie. an individual). Directors do not need to be residents of Hong Kong, but they must be aged 18 or older.
  • Shareholders: a minimum of at least one shareholder. They can be either an individual aged 18 or older, or a corporate. 100% of shares can be foreign-owned. Sole directors can also act as shareholders.
  • Company secretary: a sole director must not act as the company secretary. To register a company in Hong Kong, you must appoint a company secretary who is either:
    • a person who lives in Hong Kong; or
    • a body corporate with a registered office or place of business in Hong Kong. We provide expert company secretarial services so that your company can meet all of its statutory obligations in Hong Kong.
  • Share capital: no minimum share capital is required. However, most companies choose to issue at least one ordinary share to one shareholder. Bearer shares are not permitted.
  • Registered address: must be a physical address in Hong Kong, not a P.O. Box. If your business does not yet have local office space, professional service firms like BoardRoom can provide your company with a registered office location.
hong kong company formation
Step 4 - Submit company registration documents

You must submit the following registration documents to the Companies Registry:

  • the Incorporation Form;
  • a copy of the company’s articles of association; and
  • a copy of the Notice to Business Registration Office.
Step 5 - Make other permit and business licence applications (if applicable)

You may need to apply for other permits and business licences, depending on the type of business you operate. Find more information about permits and licences here.

how to register a company in hong kong

How to successfully open a business in Hong Kong

While it can be complex, the process of opening a business in Hong Kong as a foreigner doesn’t have to be difficult. Our team of company incorporation experts at BoardRoom can guide you through every step of the incorporation journey to make it as smooth and seamless as possible.

Not only can our team help you incorporate with ease, but we can also take care of your company secretarial needs. Our comprehensive range of company secretarial services helps you to ensure that your company remains compliant with all legal and regulatory requirements in Hong Kong. As a result, you have more time to focus on what really matters: growth and profitability.

Speak to one of our specialists today to get started in setting up your business in Hong Kong.

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5 Ways accounting outsourcing services add business value

5 Ways accounting outsourcing services add business value

5 ways that accounting outsourcing services can help your business to grow

Many companies outsource their tax and bookkeeping responsibilities, but still use in-house teams for all other accounting functions. If your company is among them, it may be worth reconsidering. What if you could outsource all of your accounting functions in a way that not only reduces costs and minimises risk, but also increases revenue growth potential?

An expert accounting services provider can help you do just that by offering strategic accounting services.

Specifically, here are five ways that outsourcing accounting services can help your business to flourish.

01 Facilitate business growth and expansion

Outsourcing accounting services can help to clarify your company’s financial health status. A complete picture of your company’s finances enables you to make more informed decisions. This becomes critical when you are planning for business growth and expansion.

Our team of professional chartered accountants at BoardRoom can help by painting a clearer picture of your company’s current cash flow and seasonality. They have the expertise to critically analyse your receivables and collections, so you can more effectively assess organisational performance. With this information, you can then make the best strategic decisions to achieve greater success for your business.

02 Identify all the tax breaks your company may be entitled to

Navigating Hong Kong’s complex regulations can be challenging. Without expert accounting support, it can be easy to miss out on the tax breaks and exemptions your business is entitled to. The best way to maximise your company’s savings and deductions is to work with professional accountants who understand Hong Kong’s regulations. 

Our team of tax experts at BoardRoom are not only well versed in local tax regulations, but they also have in-depth knowledge of international tax treaties. With their advice, your organisation can avoid any double tax issues. What’s more, our team will go the extra mile to apply for any tax incentives that could benefit your business.

outsourcing accounting

03 Flag potential risk oversights

As your company grows, the compliance regulations only become more complex. A single oversight in payroll, tax statements or your company’s profit and loss statements could result in hefty financial penalties.

Mitigate these risks and reduce your team’s administrative burden by working with a professional accounting firm that has extensive experience in Hong Kong’s tax laws and procedures. Your company will gain access to a team of experts who will flag any irregularities to ensure compliance.

In short, your business will avoid any costly compliance pitfalls, and you will get to enjoy greater peace of mind.

04 Store and organise your data

Accounting generates a lot of paperwork. When records are still analogue (paper-based), they can quickly overrun your office storage space. This can also make efficiently finding and retrieving data difficult.

The good news is that you can take advantage of outsourcing accounting services to guide your company’s digitisation efforts. As well as storing your accounting records electronically, many full suite firms offer complementary services that can assist you in digitising your company’s payroll and claims submission functions.

As a result, staff will be able to easily find records, submit expenses and locate the reports they need in real-time from anywhere across the globe.

05 Free up resources by reducing salary overheads

Having one or two experienced full-time accountants in-house can cost many thousands of dollars a month. Then add to that the costs involved in hiring, inducting and training these employees.

By contrast, outsourcing accounting functions to a professional services provider like BoardRoom means you might not need an in-house accounting team at all. Reducing salary overheads frees up company resources that could be better spent elsewhere in the business.

Not only that, but your company will also gain access to an entire team of accounting experts. Our team can do it all for you, from providing strategic advice on sustainable cost-cutting strategies to managing bookkeeping and tax.

Are you looking for a trusted accounting firm in Hong Kong?

BoardRoom is a regional accounting firm in Hong Kong that caters to large corporations and fast-growing SMEs. Our expertise extends from strategically outsourcing accounting services to managing statutory compliance reporting for companies across the Asia-Pacific Region.

Speak to one of our accounting experts today about how your company can regain precious resources and refocus them on what matters – growing your business.

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