Why Should I Choose Hong Kong as Investment Destination?

Hong Kong offers business opportunities to foreign investors while you can keep complete ownership of the company. Typically, prominent prospects of business you can pursue your success include:

• Finances: The solid banking landscape, deep capital market, and asset management system are what makes Hong Kong a perfect investment destination and international financial center globally.

• Trading: The conductive environment encourages free trading and growth opportunities, making it one of the most active trading spots

• E-commerce: Hong Kong maintains a great logistic infrastructure and a large-scale digital payment foundation with a total market value of more than 3.7 billion USD.

• Healthcare: The total public and private healthcare expenditure takes up a huge percentage of Hong Kong region’s GDP, leading to an enormous potential for booming opportunities.

• Education: Hong Kong has been recognized for its world-famous education atmosphere, where parents spend a great amount of money on their kids’ educational well-being.

• Travel and Hospitality: Tourism is one of the main growing factors in Hong Kong’s economic growth, attracting a vast number of visitors around the globe.

Major advantages of registering a Hong Kong company include:

• It is easy to obtain international credit and reputation by taking advantage of the popularity of Hong Kong;

• As an international financial center, Hong Kong has diversified financing channels;

• No foreign exchange control and free capital flow. Various foreign currencies can be exchanged and transferred at any time, and the letter of credit business is widely-applied; (You can read more about the foreign exchange control in the Chinese mainland in our blog).

• Unrestricted business scope and simple follow-up services;

• Simple taxation system and low tax rate (only profits tax is involved. The tax rate for the first HK$2 million profit is only 8.25%, while a rate of 16.5% for the excess section is applied);

• Profits tax declaration is required annually;

• Low income tax charged at a maximum of 15%;

• It is possible to apply for an offshore exemption for profits sourced outside Hong Kong;

What are the Differences between Opening a Company in Hong Kong and the Chinese Mainland?

What are the types of companies or legal entities in Hong Kong?

There are four common types of business forms in Hong Kong:

1.     Limited Liability Company: the most common form of legal entity in Hong Kong offering protection of personal assets from business risks, coming in two forms: private limited company and public limited company. The majority of small to medium-sized companies are established as private companies limited by shares. On the other hand, public limited companies by shares are incorporated when there are the number of shareholders is over 50.

Advantages: 

• Tax benefits and incentives: taxation benefit is the major advantage that a limited liability company can enjoy. There is no value-added tax (VAT) or sales taxes, and the profits tax is only 16.5% of the profits for the corporation. Since Hong Kong follows the territorial basis of profits, you may also enjoy offshore tax exemption.

• Ease of raising capital: you can expand your business by the ease of raising finances and bringing in new shareholders or issuing more shares to existing shareholders.

• Easier transfer of ownership: complete or partial transfer of ownership can be easily done by selling company shares or issuing new shares to additional investors, while your business operation is unaffected during processing.

Disadvantages:

• Complex to set up: a private limited company is more complex and expensive to establish compared to registration of sole proprietorship and partnerships.

• On-going compliance: there are numerous statutory compliance requirements that private limited companies must adhere to annually.

• Information disclosure requirements: a private limited company has to make required information (such as capital structure, personal particulars of shareholders, directors, and secretaries, etc.) available to the public by filing returns with the Company Registry.

2.     Sole Proprietorship: As its name suggests, the company is owned and operated by one individual alone. Although it is considered the simplest and the most accessible form of business, it is usually deemed as the riskiest business as there is no security of personal assets from liability. 

Advantages: 

• Ease of termination: closing and terminating the sole proprietorship is much easier and less expensive compared to other business forms.

• Sole beneficiary of profits: you don’t have to share profits and other incomes derived from the company and the money is all yours.

• Simple to establish: sole proprietorship is very easy to set up with simple and straightforward procedures.

Disadvantages:

• Unlimited personal liability: when facing business debts and risks, there is no security of personal assets including the owner’s individual property.

• No separate legal entity: sole proprietorship is not a separate legal entity, so the business and owner are deemed as one together.

• Low public perception: Investors are less confident due to the risks posed by the form of business, making sourcing for finance more difficult.

3.     Partnership: the company which is co-owned and built by two or more investors who get together with a plan of sharing profits and risks, governed by the Partnership Ordinance of Hong Kong.

Advantages: 

• Combined expertise: By combining expertise, knowledge, skills, and resources together, higher productivity can be accomplished.

• Greater Efficiency: A much better efficiency can be obtained since the general partner has the complete freedom to operate the company without any interruption and is liable for the day-to-day business affairs and the decision-making of the business. 

• Ease of Raising Capital: The partners do not only depend on personal sources for raising the capital. The other sources of finance involve loans from the banks and the partners extended by the combined assets of all the partners.

Disadvantages:

• Sharing Profits: Any profits in the business need to be shared with your partners.

• Divided Goals and Opinions: The partnerships could be split by those partners who oppose the operational procedures, business goals, and management strategies. 

• No protection of personal assets: Just like the sole-proprietorship, the partners can be personally accountable for the company’s losses and debts. 

4.     Foreign Company Office: the business presence of a foreign/overseas company in Hong Kong. It can be a branch office, a subsidiary, or a representative office in Hong Kong. It does not have legal capacity and can only be used for a limited scope of business, including promotional activities or market research.

What are the Requirements for Registering Companies in Hong Kong?

There are some general requirements for Hong Kong company incorporation:

• At least one shareholder and director aged over 18 years old to establish a company.

• Have a company secretary who can be either a Hong Kong permanent resident or a Hong Kong company (provided by Hongda).

• Once registered company house/office address in Hong Kong(provided by Hongda).

• Information about the company name and the registered capital (please click the link for forms for registration).

To successfully register your Hong Kong company, you should also prepare the following documents and materials. Hongda will handle the rest of the application process for you, 100% remotely and you don’t have to travel to Hong Kong yourself!

The documents required for Hong Kong company registration include:

1. Incorporation Form (Form NNC1): This form contains information about the company's proposed name, registered office address, business activities, share capital, and details of the directors, shareholders, and company secretary.

2. Articles of Association: This document outlines the internal rules and regulations of the company, including the rights and responsibilities of shareholders, directors, and officers.

3. Identification documents: Copies of identification documents, such as passports or identity cards, for all directors, shareholders, and the company secretary. Non-resident directors or shareholders may need to provide additional documents, such as proof of residential address.

4. Consent to Act as Director/Secretary (Form NNC3/NNO2): These forms are required to confirm the consent of the directors and the company secretary to act in their respective roles.

5. Registered Office Address Proof: Documents proving the company's registered office address in Hong Kong, such as a copy of the tenancy agreement or a utility bill showing the address.

6. Share Certificate: A share certificate is issued to each shareholder, indicating their ownership of shares in the company.

The Period and Method of Registering Hong Kong Company:

1. Only 1 working day is required by electronic application submission through “e-Registry” of the Companies Registry;

2. 10 working days for registering new Hong Kong companies, calculated after the preparation of documents and approval of due diligence.

Are There Supporting Services that Hongda Can Provide to Run My Company in Hong Kong?

Of course yes! There are many more services that Hongda can provide to help you run your company and keep your company compliant throughout the year, please click to read more about our services:

• Hong Kong bank account opening service;
• Singapore bank account opening service;
• Hong Kong company bookkeeping;
• Hong Kong company auditing;

Besides the services mentioned above, Hongda also provides comprehensive services to support your operation and maintenance of your Hong Kong company. If you want to know more, please feel free to leave a message through the form at the top or book a free meeting with us!

• Hong Kong company advisory services;
• Hong Kong company liquidation / deregistration;

• Changes in company ownership or directors;