Setting up a company in Hong Kong

Hong Kong is a special administrative region of China. It is located on the Kowloon Peninsula, surrounded from the west, south and east by the South China Sea.

Hong Kong with its extraordinary landscapes attracts not only tourists but also businessmen from all over the world. This megacity is recognized as the fourth international financial center, after such giants as London, New York, and Singapore. Hong Kong is open to foreign investment, making it a popular jurisdiction for establishing businesses among foreign entrepreneurs targeting the Asian market.

Hong Kong's legal system is based on the English system of common law.

The most popular areas of business activity in Hong Kong include wholesaling, tourism, logistics, Fintech, and IT.

Registration of a business in Hong Kong offers prospects for successful businesses within the region and overseas. Hong Kong applies the so-called principle of territorial taxation, according to which only profits derived from sources in Hong Kong are taxed.

Before setting up a company in Hong Kong, it is necessary to decide which type of company best suits your needs.

TYPES OF COMPANIES

There are several types of companies in Hong Kong which accommodate the distinct demands of foreign business owners, businessmen and investors. However, the majority of people choose a Private Limited Company to start their business because of its advantages to the owner.

Below you can find out important aspects of the above-mentioned legal entities.

• Private Limited Company;
• Public Limited Company;
• Companies limited by guarantee without a share capital;
• Sole Proprietorship;
• Limited Partnership.

PRIVATE LIMITED COMPANY (LTD)

Limited Liability Companies remain the most widely incorporated entity for private, commercial enterprises and companies in Hong Kong. Each company must have at least 1 registered shareholder and 1 director who can be a legal or natural person of any nationality. Each Hong Kong company must also appoint at least 1 company secretary, who or which is a resident of Hong Kong.

KEY REQUIREMENTS FOR LTD REGISTRATIONS:

• One director is required of any residency. Director cannot be listed as company secretary – separate person is required;
• At least one shareholder of any residency;
• Annual shareholders' meeting (possible remotely);
• It is possible to incorporate a company with HK$1 of issued and paid-up share capital;
• Registered address is required;
• One secretary is required.

LIMITED PARTNERSHIP (LP)

Unlike an LTD company, a Limited Partnership is not a legal entity.

There must be one or more general partners who are responsible for managing the partnership and are liable for all of its debts, and one or more limited partners who are liable for the partnership's debts up to the amount they have contributed to the partnership's capital. The limited partner may not manage or control the partnership. A limited partnership must be registered with the Registrar of Companies and obtain a Certificate of Business Registration.

KEY REQUIREMENTS FOR LP REGISTRATIONS:

• At least one director at any residency;
•  At least two partners at any residency. One general partner and limited partners are required for LP registration. The number of members must not exceed 20 people. No residency requirement for partners;
• No requirement for the contributions to be paid up;
• Registered address is required.

TAXES IN HONG KONG

Hong Kong has a territorial tax system in effect, in which tax is imposed on income arising in Hong Kong or derived in Hong Kong. Only income derived from Hong Kong is subject to income tax. Branches are taxed the same as corporations. Dividends paid out of profits which are already

Dividends paid out of profits which are already taxed in Hong Kong, are not available for taxation in the hands of shareholders. Dividends received from foreign companies are not taxable as they are income from a foreign source.

• Characteristics of Hong Kong tax system:
• Simple tax system;
• Territorial source concept;
• No tax on dividends;
• No sales tax, consumption tax or value added tax;
• No withholding tax on dividends and interests;
• No capital gains tax;
• No estate tax.

REPORTS AND AUDITS

In accordance with Part 9 of the Hong Kong Companies Ordinance, companies incorporated in Hong Kong must keep proper books of account, as well as meet annual mandatory audit requirements.

COMPANY’S BANK ACCOUNT

Because of its reputation, Hong Kong is becoming one of the most popular banking locations for foreigners. But opening a bank account in Hong Kong for non-residents often involves some difficulties.

Due to anti-fraud measures brought in after 2012, Hong Kong banks increased their due diligence to levels where certain companies have found it difficult to open an account.  Banks are reluctant to go through their expensive due diligence process for a new business. The uncertainty of whether that business will become profitable plays a role in determining to onboard a startup.

We guarantee we will do everything in an effort to make you become an account holder(s) in a bank in Hong Kong. The procedure of opening an account in a bank of Hong Kong for a foreigner is always a risk and no one can guarantee a refusal. But objectively speaking, refusals in our practice are very rare, most often due to mistakes of the client who did not properly follow all our recommendations.

WHAT IS A COMPANY REGISTRATION FEE IN HONG KONG?

Company registration in Hong Kong takes from 2 weeks. You can find out the price of registration and other nuances of starting a business in this jurisdiction by signing a form on our website.

WHAT ISSUES MAY ARISE DURING THE REGISTRATION PROCESS?

Registering a company in Hong Kong can be very attractive, but it can also be an extremely difficult task, where mistakes can be costly.

There are many legal subtleties that will have to be considered. Problems may arise at the very first stage - choosing a name. The name of your company must be unique and different from any other company registered in Ireland. Complications sometimes arise at the stage of paperwork as well. To assemble the application package, fill out the owner's form and translate the documents, you need to consider many nuances known only to qualified professionals.

We have extensive experience in the procedure of setting up a company, opening bank accounts in any country and in the other ambitious business issues in Hong Kong. Our qualified experts will provide professional assistance in setting up a company and explain the advantages and disadvantages of different types of activities in Hong Kong. Similarly, we can help with the purchase and sale of existing companies in this jurisdiction.

In order to find out more information, you can use the opportunity to order a consultation on the regulation of activities in Hong Kong from our specialists. You can contact us using the feedback form or the contacts listed on the website.