Company Incorporation in Hong Kong
With its strong financial and business sector in Hong Kong is one of the most successful and richest economies in the world. Hong Kong is the world's 11th largest exporter of commercial services - the major export markets are the Chinese mainland, the US, the EU, ASEAN and Japan.
Hong Kong is the ideal location to set up an office, if you are considering doing business in China and/or Asia. The major reasons are Hong Kong:
- Is a Gateway to China and the rest of Asia
- Has a Sophisticated and stable legal system
- Has a Favorable tax system
- Has a World-class business infrastructure
Hong Kong as the Gateway to China and Asia
Hong Kong is a Special Administrative Region (SAR) with a lot of autonomy, despite its return to China’s sovereignty in 1997 and the close connection to the mainland is evident in the “one country, two systems” principle. This is strengthened further by the Closer Economic Partnership Arrangement (CEPA), which has made it much easier for Hong Kong companies to access the mainland market from this region than from other jurisdictions. Based on our years of experience at KAYRO, it is far easier to establish a company in Hong Kong than in mainland China.
Being located in the Pearl River Delta, Hong Kong is very close to the production sites of one third of China’s exports. The Pearl River Delta area has the largest output of electronic goods, toys, garments and textiles, plastic products and a range of other goods in the world. These sites are mainly part of the light industry sector, which needs machinery, primary products and other investment goods, of which only a small portion can be sourced within the domestic market. Therefore, most of these goods have to be imported, which often is done via Hong Kong. The Hong Kong Trade Development Council (TDC) estimates that about 80 per cent of preliminary and finished products needed, or produced, in the Pearl River Delta are being traded via the Hong Kong port or by a trader located in the city. Hong Kong is an important location for the onshore and offshore trade, with the goods produced in this region and shipped to other countries. This makes it an ideal hub to do business with mainland China.
And the SAR is a perfect location for doing business with other Asian countries, with most of the key markets reached within four to five hours by flight from the Hong KongInternationalAirport. KAYRO has the expertise on hand to ensure you can benefit and we take on board the administrative problems from the start to find a suitable solution for your situation.
Also the time difference between customers and suppliers in East Asia and Southeast Asia is, if there is any, a maximum of one to two hours, which makes business easy to handle.
So if you want to start doing business in Asia and may want to expand into more than just one Asian country over time, Hong Kong is exactly the spot to start; either to do business from Hong Kong or use it as your hub to establish more corporations in Asian countries. And our expertise at KAYRO is invaluable in maximising the city’s geographical advantages to help you tap your business potential in markets elsewhere in the region.
Hong Kong’s sophisticated and stable legal system
Since Hong Kong is a Special Administrative Region (SAR), it is not subject to mainland law. It has its own legal system, which is based on British common law and stands on democratic and free-market principles.
The courts in Hong Kong are considered reliable and law proceedings are fair. In general, the parties may amicably choose the language used in any lawsuit (English or Chinese). Verdicts are being reciprocally recognised and executed between Hong Kong and mainland China.
As a whole, the legal system in Hong Kong is very convenient and suitable for western companies that want to open a business here.
KAYRO has a solid foundation of knowledge in the legal requirements of establishing offices and companies in this environment for the sole benefit of our clients. Every employee in each of our departments is a dedicated, professional who puts the clients needs first and will always find a solution to your problems no matter how big or small.
Favorable tax rates in Hong Kong
Hong Kong regards itself as a low-tax centre rather than a tax haven. But still Hong Kong's tax rates are among the lowest of any major Asian location and among the lowest in the world. In total, Hong Kong has one of the most tax-friendly economies in the world. This is also because the system is very simple; in the SAR there are only three direct taxes. These are:
Hong Kong profits tax
The maximum tax on profits is 16.5 per cent. There are no further taxes or fees on top of that. All profits that are being realised by doing trade, profession or business in Hong Kong are subject to profits tax in Hong Kong. Profits not derived in Hong Kong and profits of offshore transactions are not subject to Hong Kong tax.
In general, all outgoings and expenses that are spent by the taxpayer in the production of chargeable profits are fully allowed as deductions.
Hong Kong salaries tax
The maximum tax on salaries is 15 per cent. If one earns less than HK$1.62 million per annum, the tax is even below this rate. This tax is imposed on all salaries, wages and director’s fees arising in or derived from Hong Kong from any employment, office and pension. If an individual visits Hong Kong for only 60 days or less per year, no salaries taxes are due in Hong Kong. Also people whose services were performed only outside Hong Kong do not have to pay salaries tax in the SAR.
Hong Kong property tax
The tax on real estate in Hong Kong is 15 per cent. This tax is charged on owners of land or buildings in Hong Kong.
Dividends and Stamp Duty
Dividends or profits from overseas branches repatriated to the SAR are not subject to Hong Kong tax. In addition, dividends paid by a Hong Kong company to its shareholders are not subject to tax in the city nor is there any withholding tax on dividends paid to shareholders outside the SAR. Capital gains are also exempt from taxes.
For further information on taxation and deductions please visit http://www.ird.gov.hk/eng/tax/index.htm
For certain transactions the respective documents have to be filed for stamp duty. These transactions include share transfers, leases and sales of real property. The amount of stamp duty applied to such transactions is either fixed or calculated according to the value of the transaction.
For further information on stamp duty please visit http://www.ird.gov.hk/eng/tax/sdu.htm
World-class business infrastructure
Hong Kong has a physical infrastructure that is the envy of Asia. It has the third-biggest container port in the world, two other top 10 container ports are within 100km from Hong Kong, public transport is efficient and ubiquitous, and the MTR Corporation operates one of the few examples of a profitable and urban commuter rail system.In addition, Hong Kong’s airport is among the busiest by passenger traffic. Since 2010, it has been the world’s busiest airport in terms of cargo traffic, for which it is also known to have an excellent service.
The internet connection in Hong Kong is also among the fastest worldwide. With such reliable and fast connections,the city’s major internet companies locate their web hubs with server parks for Asia in the SAR.
Furthermore, Hong Kong offers a unique and highly developed business structure that provides all the support services necessary. This includes easy access to many important banks, consultancies, auditors, courier services, IT services and many more. Therefore, business in Hong Kong can be done quickly, easily and efficiently.
What legal form of company is the best set-up for Hong Kong?
The most common and convenient legal form for starting your business in Hong Kong is the limited company.If other legal forms could be useful for your purposes, our reliable experts at KAYRO will advise you on the best options that suit your needs or business plans and development. We are experienced solution providers with years of front-line duty on our books, so no problem is too small or too big. We have the means and the expertise to handle any issue.
Founding of a Limited Company in Hong Kong
To found a Limited Company, it must have a minimum registered share capital of HK$1 (usually the registered capital is HK$10,000). There is no obligation to subscribe and pay up further capital. There also has to be at least one shareholder and one director, both of whom can be natural or legal persons, who do not need to be residents in Hong Kong. In addition, a Hong Kong resident company secretary (also a natural or legal person) is required, who is responsible to the registrar of companies for administering the company’s statutory records. A proper registered office address is also required.
The incorporation of a limited company takes about two to three weeks and there is no need to be personally present in Hong Kong for this process. You can count on the experience of KAYRO’s experts to appropriately handle the process from the start and follow through until completion. But if you require a longer term commitment from us in the provision of services to conduct the administrative tasks required to run your company, we will work out a perfect solution for you.
The Limited Company can then be used as a proper firm to do business in Hong Kong and other jurisdictions.
A Hong Kong Limited company as a holding company for other Asian firms
As there are few restrictions for businesses in Hong Kong, it is handy to have a parent company for other firms in jurisdictions that are not as stable and easy to handle as Hong Kong. This also makes it easier and more reasonable to repatriate profits than,for example, in mainland China, and the taxes are alsoat an acceptable level.
Basically the holding in Hong Kong will be the parent company for your mainland firm. Thus liabilities that the mainland Chinese firm causes for the parent company do not affect your current company, but the holding in Hong Kong; you are protected against direct exposure to liabilities in China. At the same time, you will still be able to fully control the holding as well as the Chinese subsidiary.