Benefits of setting up a company in Hong Kong

According to a survey by the Hong Kong Census and Statistics Department, more than a thousand multinational companies choose to set up regional headquarters or offices in Hong Kong each year, reflecting Hong Kong's enduring appeal as an international business hub. Why do so many companies choose to set up in Hong Kong?

Hong Kong's profits tax rate is low: only 8.25% on the first HK$2 million of profit, and offshore income and capital gains are tax-free.
Hong Kong has no restrictions on business scope; a company can be set up in almost any industry without prior approval.
There is no minimum registered capital; HK$10,000 is a common setting, and the funds do not need to be locked in for the long term.
Hong Kong is an important springboard for international companies entering the China market and for Chinese companies going global.
A sound common law legal system, comprehensive intellectual property protection and a mature mechanism for resolving commercial disputes.

Advantage 1 of setting up a Hong Kong company: tax benefits

Hong Kong's tax rates are relatively low and there are few types of tax. The profits generated by a company's operations are taxed at relatively low rates: profits tax is 8.25% on the first HK$2 million and 16.5% on assessable profits thereafter. Tax is payable only once actual profits are made, and a company's losses can even be carried forward to the following year to be set off.

In addition, Hong Kong does not tax offshore income or capital gains, and many international companies also make use of the cooperation agreements Hong Kong has signed with other countries to reduce their tax burden legitimately. This makes Hong Kong an ideal choice for international trade and multinational companies.

Further reading: Profits tax filing guide

Advantage 2 of setting up a Hong Kong company: shell companies are permitted

Hong Kong allows shell companies to exist. A shell company is one with little or no actual business activity. Shell companies can be used for various business activities, including capital operations and asset management, which makes company resources and operations more flexible, and a company that is not trading can simply file a nil tax return, so the cost of setting one up is extremely low.

Benefit 3 of setting up a Hong Kong company: no restrictions on business scope

There are basically no restrictions on the fields in which a company formed in Hong Kong can operate. When applying to form a company, there is no review of the type of business, goods or services, which means the company can operate in almost any field and can flexibly adjust its business scope as needed.

Advantage 4 of setting up a Hong Kong company: low registered capital requirement

There is no minimum or maximum amount of registered capital for a company in Hong Kong. A capital of HK$10,000 is commonly set, and the funds do not need to be kept in the company's account on a long-term basis, making it easier for start-ups and small businesses to form a company.

Further reading: Hong Kong limited company registration process

Advantage 5 of setting up a Hong Kong company: a superior financial system

According to the Global Financial Centres Index report, Hong Kong continues to rank among the top five financial centres in the world, which fully reflects its strength and advantages as a leading global financial centre. Thanks to its highly developed and stable financial system and good reputation, companies set up in Hong Kong can freely make remittances and carry out transactions domestically and overseas, which facilitates business operations and international trade.

Advantage 6 of setting up a Hong Kong company: a market springboard

Hong Kong is an international metropolis with extensive international connections and networks, which makes it easier for companies to expand into international markets.

Whether it is an international company entering the Chinese mainland market from Hong Kong, or a mainland Chinese company entering the international market from Hong Kong, Hong Kong is an important springboard, and through Hong Kong you can create closer economic ties and more convenient trading conditions.

Advantage 7 of setting up a Hong Kong company: a sound legal system

Hong Kong has an independent legal system and a stable rule of law, and enjoys strong business confidence. Companies operating in Hong Kong can rely on comprehensive legal protection to safeguard their rights and legal standing. For example, Hong Kong has strict rules on intellectual property, so you can rest assured when applying for design, patent, copyright and other intellectual property protection.

Further reading: Trademark registration guide

FAQ

Can a Hong Kong company do no business in Hong Kong at all?

Yes. Hong Kong allows offshore business models. A company can be incorporated in Hong Kong while its business is carried out entirely overseas, and such income can apply for an offshore exemption, so no Hong Kong profits tax is payable. This is one of the main reasons many cross-border businesses choose to set up a company in Hong Kong.

Can the shareholders and directors of a Hong Kong company all be foreigners?

Yes. Hong Kong has no nationality restrictions on shareholders and directors. Foreigners can own a Hong Kong company outright; you only need to appoint one qualified Hong Kong company secretary.

Do I need to pay value-added tax (VAT) when setting up a company in Hong Kong?

No. Hong Kong has no VAT, sales tax or consumption tax. You only pay profits tax (on profits arising in Hong Kong) and salaries tax (on employees' remuneration). The simple tax system is one of the key reasons Hong Kong attracts businesses.

Can a Hong Kong company open a foreign currency bank account?

Yes. Hong Kong's banking system is highly open. Companies can open accounts in many foreign currencies and freely exchange currencies and make international remittances. There are no foreign exchange controls, which makes cross-border business operations easier.

Summary

The advantages of forming a company in Hong Kong include low tax rates, a high degree of freedom in business scope, a superior financial system and springboard opportunities. These advantages make Hong Kong an ideal place for many businesses to set up companies and expand their operations.

If you have any questions about registering a Hong Kong company, feel free to contact the SetupHK team. We provide one-stop business consulting services, from registering a Hong Kong company and opening a company account to secretarial services, to help you launch your business plan.