Know These 6 Things Before Setting Up A Company In Hong Kong

Hong Kong is one of the world's most popular jurisdictions for setting up a company in Asia. It has a small market, however, it is rich with business opportunities due to its key strategic location.

With a high-quality workforce and strong intellectual property protection, Hong Kong companies can provide critical components for multinationals based in China or South East Asia.

1. Limited Liability Companies (LLCs)

Limited Liability Companies

LLCs are the most popular form of company structure for foreign investors setting up a company in Hong Kong because they provide limited liability protection to business owners. Just like in the US, Hong Kong LLCs are pass-through tax entities, the company itself does not pay taxes on its profits and all taxes are paid by individual business owners.

A Hong Kong company secretary is required for companies with one or more responsible owners, but not for single-owner LLCs. Hong Kong single-member LLCs are exempt from the audit requirement if they keep proper books and records in English.

2. Register Your Business (Domestic & Foreign)

Register Your Business

Foreign companies can set up a domestic company with one or more Hong Kong responsible persons with an aim to engage in trading and other business activities. A foreign company is allowed to incorporate as a limited by shares, limited by guarantee, and unlimited company with the same legal requirements as local companies.

For non-Hong Kong residents, the incorporation process is more complicated than it is for Hong Kong residents. Because of this, when registering your business in HK it might be a good idea to use software specifically designed for this purpose. This way it will be easier, faster and cheaper for you.

Alternatively, you can also hire an international business services provider to set up your company there. This option is more expensive but it will surely save you time and effort, as everything will be properly arranged on your behalf.

3. Residency Requirements

Residency Requirements

To obtain a visa to start working in Hong Kong, foreign business owners need to obtain an employment visa by proving that they are either the sole director or one of at least two directors of their company.

Additionally, if you are not a Hong Kong resident, but at least one of your responsible persons is, then it's possible for you to get a business visa. A business visa is a visa that allows you to stay in Hong Kong for a period of up to six months. Alternatively, you can hire an HR company to provide you with the right documents.

Filing an application takes a minimum of 7 days and, in some cases, it might take up to 2 months. It's important to remember that Hong Kong has strict immigration laws, so make sure you do everything by the book.

4. Ongoing Annual Requirements

Ongoing Annual Requirements

Hong Kong companies must file an annual return in order to keep their documents up-to-date. It's important to keep in mind that Hong Kong companies are required to file their financial statements in English.

If your company is a single-person LLC, then you must submit an annual return every year even if you haven't made any transactions during this time. Generally speaking, it's always a good idea to know the laws of the country you are doing business in. If you're not a lawyer, this is one of the main tasks you should be delegated to a specialized international company.

Since this is a popular option for new entrepreneurs, you can always find some international company to do the job on your behalf. However, if you want more control over their performance and costs, then it's better to hire an in-house accountant to help with all the files.

5. Political & Economic Stability

Political Economic Stability

Hong Kong has an established political and economic system, which is one of the most important things for successful business owners because it promotes growth in all industries.

It's also a very good place to do business, as the government provides support to start-ups through various initiatives. Additionally, the government of Hong Kong is working on providing financing schemes to small businesses and encouraging them to apply for grants in order to start their business.

6. Taxation and Corporate Structure

Taxation and Corporate Structure

Hong Kong has a simple taxation system, which is beneficial to all types of companies. There are 5 different tax rates: 0% for the first HKD 2 million, 2% up to HKD 10 million, 7% for between HKD 10-20 million, 12% for between HKD 20-40 million, and 17% for HKD 40 million and more.

It's important to know that Hong Kong has a territorial taxation system, which means that all profits earned outside Hong Kong are not taxable in the country. It also provides various incentives for new entrepreneurs and foreign investors interested in investing in Hong Kong companies. This way they can benefit from favorable tax rates, which range from 0% to an average of 16.5%.

If you're willing to invest some time and money into getting started, then Hong Kong can be a really good base for your business. When deciding on setting up a company in Hong Kong, it's worth checking with an accountant whether your finances are ready for the challenge.

If you're not experienced with both business and legal matters, then delegating most of the work to a specialized international company is a good approach.

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