Hong Kong is a dynamic economic hub and a popular destination for start-ups and investors. It is also a shopping paradise and one of the most beautiful tourist destinations in the world. These factors make Hong Kong a great place to start a business or incorporate an offshore company. Many investors dream of starting a business in Hong Kong, but the reality is that it is not easy. There is a lot of competition, and your business plan needs to be sound in order to succeed. However, the potential rewards are significant, with Hong Kong’s GDP rising high and its startup ecosystem ranking fifth globally.
This article will explain the necessary steps, requirements, and tips for incorporating an offshore company in Hong Kong, even if you are unfamiliar with the local laws and regulations.
Why You Should Start Your Business In Hong Kong
Hong Kong is a popular destination for businesses of all sizes, including offshore companies. Hong Kong’s jurisdiction, culture, and business environment are just as compelling reasons to open your business there as its endless attractions and stunning scenery.
- A wealth of investment prospects await
Hong Kong’s distinctive appeal lies in its unparalleled business-friendly ecosystem, marked by a seamless and economically efficient registration process. This magnetizes entrepreneurs armed with clear-cut business strategies, contributing significantly to the region’s economic dynamism. As a result, the city has witnessed a proliferation of startup ventures, infusing vitality into the local landscape.
Amidst this flourishing milieu, diverse sectors within Hong Kong have thrived, ranging from Information Technology and E-commerce to Hardware, Financial Technology, Professional Services, Healthcare, Data Analysis, and Education and Learning. These burgeoning domains present multifaceted investment opportunities, catering to a broad spectrum of entrepreneurial ventures.
- A thriving business hub
Hong Kong is the 3rd most competitive economy in the world, making it a strategic springboard for entrepreneurs to develop their businesses in the rest of the region. With a thriving start-up scene and a government committed to innovation, Hong Kong is the perfect place to incorporate an offshore company and launch your business.
In 2020 alone, the Hong Kong Government invested HKD100 billion in innovation and technology. This investment is supporting the growth of start-ups and helping to create a more competitive business environment.
If you are an entrepreneur looking to expand your reach into the Asia-Pacific region, Hong Kong is the perfect place to start. By incorporating an offshore company in Hong Kong, you can benefit from the city’s strong economy, strategic location, and supportive government policies.
- Favorable tax regime
Hong Kong offers a number of tax benefits for offshore companies, including exemptions from corporate income tax and capital gains tax. Offshore companies can benefit from Hong Kong’s low tax regime and exemptions from corporate income tax and capital gains tax. This can save businesses a significant amount of money on their tax bill.
- Access to the Chinese market
Hong Kong is a special administrative region of China, which gives businesses access to the country’s vast market of over 1.4 billion people. This is a valuable opportunity for businesses that want to expand their reach into China.
Read more about Why Set Up a Company in Hong Kong.
How To Start A Business In Hong Kong
The business registration process in Hong Kong is relatively straightforward, but it can be time-consuming, especially for those who are unfamiliar with the local laws and regulations.
Here are the steps involved in business registration in Hong Kong:
Step 1. Get Familiar With Local Organizations And Institutions
When incorporating an offshore company in Hong Kong, you will need to interact with three key players:
- Your company secretary: Your company secretary will be your primary point of contact for all corporate matters, such as appointing directors, changing shareholders, and increasing your registered capital.
- The Companies Registry: The Companies Registry is the government department responsible for registering companies in Hong Kong. It also monitors companies to ensure that they comply with corporate laws and regulations.
- The Inland Revenue Department (IRD): The IRD is the government department responsible for taxes and duties in Hong Kong. You will need to file your company tax return with the IRD every year.
Step 2. Select Your Company Name
The first step in incorporating an offshore company in Hong Kong is to choose a company name. The name can be in traditional Chinese, English, or both.
Step 3. Choose The Business Structure
Once you have chosen a company name, you need to decide on the legal form of your offshore company in Hong Kong. This is an important decision, as it will impact your business operations and tax filing.
There are three main types of company vehicles in Hong Kong:
- Limited company
- Sole proprietorship
- Partnership
Read more about Business Entities that Foreigners Can Set Up in Hong Kong
Step 4. Appoint a company secretary
Setting up an offshore company in Hong Kong requires you to appoint a local company secretary. This is a mandatory requirement, as the Hong Kong authorities need to have a “go-to” person in case they have any inquiries about your company. The company secretary’s name is also mentioned in the registration document of your company.
Your company secretary will be responsible for ensuring that your company complies with all applicable regulations governing the incorporation and maintenance of companies in Hong Kong.
Step 5: Choose a registered address
The registered address of your company is the address where government departments will send correspondence. It is important to make sure that you receive this correspondence, as it may contain important information about your company.
For this reason, it is common (and recommended) to use your company secretary’s address as the registered address for your company. Your company secretary will alert you of any new mail sent to your company.
However, you can also use your own office address as the registered address for your company. If you do this, it is important to be diligent in collecting your mail and to inform the Hong Kong authorities of any change in your office address.
Step 6: Prepare the incorporation documents
Incorporation of a company in Hong Kong is a relatively straightforward process, and the required documentation is minimal. You will need to gather the following:
- NNC1 incorporation form: This form must be duly filled in and signed by one of the shareholders. You can download the form from the Companies Registry website.
- Copy of directors’ and shareholders’ identification documents: If you are a Hong Kong resident, you will need to provide a copy of your Hong Kong ID card. If you are a foreigner, you will need to provide a copy of your passport.
- Articles of Association: This is a legal document that sets out the rules and regulations that govern your company. Your company secretary will normally provide you with a template for the Articles of Association.
Once you have gathered all of the required documentation, you can submit it to the Companies Registry either in person or electronically. The Companies Registry will review your application and, if approved, issue you a certificate of incorporation.
Step 7: Submit the incorporation documents
Once you have prepared all of the required incorporation documents, you can submit them to the Companies Registry in either of the following ways:
- Online: Through the Hong Kong Companies e-Registry
- By mail: To the Companies Registry address
- In person: At the counter of the Companies Registry
Within 2 to 6 business days after submission, the Companies Registry will issue two documents evidencing the incorporation of your company:
- Certificate of Incorporation: This document is issued once and remains valid for the lifetime of the company.
- Business Registration Certificate: This document is valid for one year and must be renewed annually within one month of the anniversary date of the company’s establishment.
Both certificates can be collected in person at the Companies Registry or electronically.
Please note that the Companies Registry will impose fines if the Business Registration Certificate is not renewed on time.
Step 8: Pay the government fee
To incorporate an offshore company in Hong Kong, you will need to pay a government fee. You can pay the government fee online using a credit or debit card. If you are submitting your incorporation documents by mail or in person, you can pay the fee using a cheque, money order, or cash. The amount of the fee varies depending on the type of company you are incorporating and the number of shareholders. You can check the Companies Registry website for the latest government fees and waivers.
Alternatively, you can contact Iris International for more information about government fees and advice on establishing your company.
Step 9: Acquire appropriate permits and sub-licenses (if required)
It’s highly likely that your company won’t require any permits or licenses to conduct its operations in Hong Kong. In essence, Hong Kong, as one of the world’s most liberal economies, grants permission for anyone to participate in any business endeavor.
Exceptions come into play only when licenses and permits are deemed necessary to safeguard the broader interests, such as safety, hygiene, public health, and individuals’ financial well-being.
For example, if you intend to open a restaurant, you’ll need to secure a General Restaurant Licence, a Provisional General Restaurant Licence, and a Liquor Licence from the Food and Environmental Hygiene Department.
To determine the specific licenses, permits, certificates, and approvals needed for various businesses, you can refer to the government website.
Step 10: Stay compliant with taxation and financial reporting
Upon your company’s incorporation, the Companies Registry will automatically communicate your company’s existence to the Internal Revenue Department, eliminating the need for any action on your part in this regard.
Hong Kong stands out for its attractive tax incentives for businesses, including:
- A corporate tax rate of 8.25% is applied to the first HKD 2 million of profits and 16.5% for profits beyond that threshold, making it one of the lowest corporate tax rates not only in Asia but globally.
- A territorial tax system, meaning companies conducting their business outside of Hong Kong are exempt from profit tax.
- No capital gains tax.
- No value-added tax (VAT) to contend with.
For the latest updates and comprehensive information regarding tax regulations in Hong Kong, consult the Hong Kong Government’s official website. Typically, your company secretary will handle reporting and tax-related notifications. Depending on your company secretary’s level of service, it might be prudent to keep these obligations in mind, possibly noting them on a calendar.
Read more: How to open a business bank account in Hong Kong
The Simplified Approach To Establishing A Hong Kong Company
Embarking on the journey of setting up a company in Hong Kong, especially for first-time entrepreneurs, can often prove to be a cumbersome task. This is precisely why Iris International provides a streamlined Hong Kong company registration service, offering a straightforward process for individuals and businesses alike to register their companies.
Contact us today for a hassle-free and efficient experience when setting up your company in Hong Kong.
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