Hong Kong is ranked as the fourth-easiest country to do business according to World Bank in 2019. There are many benefits of setting up a company in Hong Kong. It is not only strategically located, it has other benefits such as employment, trade, taxation, etc. This makes Hong Kong an attractive place to start a business In this article, our team at Tetra Consultants has highlighted 8 benefits of setting up a company in Hong Kong to help understand whether you should register company in Hong Kong.
1. An International Junction:
Hong Kong is strategically situated at the heart of Asia and has access to most of the largest and robust economies. It is not only a gateway to enter the Chinese market but also provides convenient access to Asia and the rest of the world. Hence, it is a perfect connecting point between the West and East providing an ideal environment to start a business.
2. Free Trade Policy:
In January 2004, the mainland China and Hong Kong Closer Economic Partnership Arrangement (CEPA) came into effect. CEPA is a bilateral free trade agreement where all Hong Kong-made goods that are exported to mainland China will enjoy zero tariffs.
In order to enjoy zero tariffs, each consignment of goods that is exported to mainland China must be attached with a Certificate of Hong Kong Origin. This is issued by the Trade and Industry Department or one of the five Government Approved Certification Organisations. The five Government Approved Certification Organisations are the Hong Kong General Chamber of Commerce, Federation of Hong Kong Industries, Chinese Manufacturers Association of Hong Kong, Chinese General Chamber of Commerce and Indian Chamber of Commerce, Hong Kong.
Apart from benefiting from the zero tariffs, CEPA allows quick and easier access to qualifying Hong Kong-based service suppliers. This helps in facilitating trade and investment between Hong Kong and mainland China in areas such as customs clearance facilitation, trade and investment promotion, transparency in laws and regulations. Therefore, the Free Trade Policy facilitates trade and investment, allowing for an ideal environment to start a trading company.
3. Low and Simple Tax:
The tax system in Hong Kong is low and straightforward whilst the financial management system is simple and straightforward. Tax consideration would be one of the main concerns when setting up a company in Hong Kong.
The personal income tax in Hong Kong starts from 2% and reaches up to 17% above HKD 132,000. The corporate tax rate is 15% which is relatively low compared to other countries. In addition, there is no withholding tax on dividends and interest, collection of social security benefits, capital gains tax and VAT in the jurisdiction of Hong Kong.
For trading companies, custom fees will not be imposed on imports or exports. Moreover, Hong Kong does not impose any value-added tax (VAT) or goods and services tax (GST). However, excise duty is still applicable on four types of goods, regardless of whether they are imported or locally manufactured. The goods are liquors, tobacco, hydrocarbon oil and methyl alcohol. The excise duties are charged at specific rates per unit quantity for tobacco, hydrocarbon oil and methyl alcohol. Whereas for liquors, the excise duty is charged at different rates based on the alcoholic strength of the liquor.
Hong Kong’s tax-friendly system will undoubtedly attract foreign investors to start a business in Hong Kong.
4. Limited Liability Company (LLC) setup:
The option of Limited Liability Company (LLC), is the most popular incorporation in Hong Kong. Operating a LLC will protect you from lawsuits in both Hong Kong and China. Since it is a separate entity, the directors and shareholders are not faced with unlimited liability. They are only liable for their capital invested in the company.
A wholly foreign-owned enterprise, (WFOE), is the most popular investment vehicle for mainland China-based business leaders. In this enterprise, foreign parties such as corporate entities or individuals can register a foreign-owned limited liability company in China.
In addition, incorporation can be done in both languages, English and Chinese. Hence, the process of Hong Kong company registration is easily accessible.
5. Availability of Productive Workforce:
The workforce in Hong Kong is highly-trained, flexible, and energetic. Hence, there would be the availability of skilled labor. Since English is their second official language, there would be less language barrier when setting up a business in Hong Kong.
6. Intellectual Property:
Hong Kong has stringent regulations in place for the use of the intellectual property for business owners. These regulations include registered designs, patents, copyrights, and the protection of Intellectual Property Rights (IPR).
The special department, the Intellectual property department of Hong Kong is highly reputable for handling such matters. Hence, the regulations in place create an ideal environment to protect the intellectual property rights of business owners.
7. Relatively Hassle-Free Setup:
Setting up a company in Hong Kong is relatively simple and fast compared to other Chinese enterprises. The legal system of Hong Kong is separate from Mainland China’s, and the English common law prevails where it offers an open economy, free trade, a general bureaucratic process, and intellectual property registration. The setting up of a business entity in Hong Kong is a more straightforward and consistent bureaucratic process. For instance, contrasting to China, the changing of business structure will take about two months in China. However, it only takes about one week to reallocate shares in compliance with regulations.
8. No Requirement for a local Director or Shareholder:
There is no requirement for a company to have a local director or shareholder. This reduces the cost to start a company and simplifies management since a local director is not required to be part of the decision-making process in the company. Most of the Southeast Asia countries such as Singapore would normally require a local resident director or shareholder. Hence, setting up a business in Hong Kong will bring you the benefits of not requiring a local resident director.
After this article, you would have understood that the benefits of setting up a company in Hong Kong include the low taxes, incorporation process, accessibility, workforce productivity, etc. If you are unsure of the process of Hong Kong company registration, you may engage the service of Tetra Consultants. With Tetra Consultants by your side, the registration process of your business in Hong Kong will be smooth and hassle-free. Our comprehensive service package includes planning and strategizing with our clients to select a suitable business entity, completing the registration process, obtaining required licenses, opening a corporate bank account, and ensuring your compliance with the government regulations.
Contact us to find out more about how to register business in Hong Kong and our dedicated and experienced team will revert within the next 24 hours.