Why choose Hong Kong?
Hong Kong offshore company advantages and benefits are numerous if your firm is properly structured. A few of the major advantages and benefits of incorporating offshore are as follows:
Legally tax exempt
- A Hong Kong Offshore company is legally exempted from income tax for all its foreign-sourced income. Hong Kong does not impose capital gains tax nor withholding tax on earnings remitted overseas as well. In addition, there are no income tax expenses in Hong Kong.
- Your company will be able to enjoy all these benefits even if you open a Hong Kong offshore bank account. This sets Hong Kong apart from Singapore, where your Singapore offshore company is not allowed to open a Singapore corporate bank account in order to enjoy zero corporate taxes.
- Despite the above-mentioned advantages, Hong Kong is not perceived as a tax haven by foreign government, banks, customers and suppliers. As such, your company can enjoy these benefits without suffering any reputational damage.
- In addition, Hong Kong has also signed thirty-six double taxation avoidance treaties which makes the country a great place to set up an offshore company. Multiple global investors choose to create offshore company in Hong Kong instead of in traditional tax havens such as Belize or Cayman Islands due to Hong Kong’s tax-friendly policies.
Political and economic stability
- The Political and Economic Risk Consultancy (PERC) rated Hong Kong as the second best in terms of bureaucracy in Asia. Hong Kong retains its political, economic and judicial systems although it is a Special Administrative Region of China.
- A Hong Kong company will not be affected by any changes in legislation in China. The Hong Kong Dollar (HKD) is tightly controlled and pegged against United States Dollar (USD). As such, HKD is relatively a stable currency as compared to other currencies in the same region.
- Due to its location and easy access to the REMIMBI (the official currency of China), trading through an offshore company in Hong Kong is an attractive option for many international businessmen to enter the mainland China market. Hong Kong is also attractive for international trading as English is the second official language.
- As such, businessmen are less likely to face any communication barrier when speaking to local customers, suppliers, banker and government authorities. In addition, all documents are issued in both English and Mandarin. As such, this reduces the time and cost required to translate the documents for official use.
Minimal set up requirements
- Unlike certain jurisdictions which impose mandatory local shareholding requirements, Hong Kong allows a 100%, complete foreign ownership shareholding structure. By setting up a Hong Kong offshore company, you will not be required to appoint another local or third-person shareholders. This makes opening a business in Hong Kong as a foreigner.
- In addition, you are also not required to appoint a local director for your company. This is unlike Singapore, where it is mandatory to appoint a local Singaporean director, resulting in a lower offshore company cost in Hong Kong.
Different company structures in Hong Kong
The 3 most common company structures in Hong Kong are:
- Limited or Unlimited. Companies seldom opt to be unlimited since that would incur unlimited liability for the company. Instead, most opt to be limited by shares (maximum liability is the nominal value of shares bought) or limited by guarantee (maximum liability is a predetermined, guaranteed sum).
- Public or Private. Public companies find it easier to raise capital through stock market listings but face more stringent compliancy requirements and higher operating costs.
2. Sole proprietorship and partnership. Such structures are cheap and easy to incorporate and run but incur unlimited liability for owners and face a lack of continuity.
3. Foreign office.
- Subsidiary office. Behaves as per a private company limited by shares but requires investors to have a previously established parent company.
- Representative office. Extension of the parent company that can only be used for non-profit activities such as market research and cannot be used for any profit generating activities.
- Branch office. Does not constitute a separate legal entity from the parent company and thus the parent office is responsible for any liability incurred by the branch office.
With these points in mind, offshore limited company formation is one of the more popular options for expansion into Hong Kong as it offers protection against liability and continuity whilst requiring less compliance and operations cost as opposed to a public limited company.
Alternatives to Hong Kong offshore company setup
- As previously mentioned, Singapore is an alternative jurisdiction to set up an offshore company in. However, Hong Kong offshore company tax system is more favourable since a Singapore offshore company does not enjoy the same offshore tax exemption. Unlike Singapore, Hong Kong does not require a local director.
- To enjoy the same level of exemptions in company taxes as Hong Kong, investors might also consider a BVI company with Hong Kong bank account. However, the British Virgin Islands are a much less reputable choice for your company than Hong Kong. Having topped the Tax Justice Network’s 2021 Corporate Tax Haven Index rankings, the BVI is strongly associated with tax havens and tax abuse, reducing the credibility of your offshore business activities, and increasing the potential scrutiny from tax authorities.
- Hence, it seems that Hong Kong company incorporation and merchant account remains a better option for most businesses. This can be done through two ways. Investors who prioritize speed may opt to buy shelf company in Hong Kong, otherwise they can take the conventional route of offshore business registration through the Hong Kong Companies registry.
Can a foreigner set up a company in Hong Kong?
Hong Kong company establishment requirements are relatively easy as compared to other jurisdictions.
- A Hong Kong company must obtain prior approval of the proposed name from the Hong Kong Companies registry. The name should not be offensive or connote criminal activity. Tetra Consultants will help you to do a Hong Kong company registry entity search to ensure that your proposed name is not similar to an existing registered company, ensuring its timely approval, and allowing you to proceed with the formation of the company.
- It is compulsory to appoint one director at least and there are no restrictions on the maximum number of directors allowed. The Directors does not have to be a Hong Kong resident. Non-Hong Kong residents can act as directors as well. Nominee directors are allowed under the law. This will also have the added benefit of hiding your name from the HK corporate registry’s Register of directors, granting you additional privacy and protection as your name would not appear on public records.
- It is compulsory for a Hong Kong registered company irrespective of whether offshore to secure a local physical address that is not a PO box or virtual office. Our client’s often use Tetra Consultants Hong Kong office address as their registered office address.
- It is also mandatory by the Hong Kong Law that a company secretary is to be appointed for all Hong Kong companies. While it is not a requirement to hire someone with a professional qualification, it is advisable for all companies to hire a qualified individual who is well-versed with the local regulations and requirements.
Shareholders and Share Capital
- There are no restrictions on minimum share capital. Shareholders can inject any amount starting from as low as US$ 1 dollar. The share capital is also not required to be paid up during the course of company registration. There can be anywhere from 1 shareholder to a maximum of 50 shareholders for a private limited company. Crucially, there are no nationality or residency requirements for shareholders, allowing a Hong Kong company to be wholly foreign-owned. This makes it an attractive jurisdiction for foreigners to set up a company in Hong Kong.
How do I start an offshore company in Hong Kong?
Step 1: Choosing an optimum company structure
- Hong Kong offers multiple company structures that suit a variety of purposes. For more clients, a private limited liability company would be most suitable. Regardless, prior to every engagement, Tetra Consultants will seek to understand your business plan and needs and advise on the most appropriate company structure.
Step 2: Reservation of company name
- Tetra Consultants will complete the name approval application forms and submit the same to the Hong Kong Companies Registry. We will also help you to do a name search to ensure your proposed name is unique and thus more likely to be approved.
Step 3: Preparation of supporting documents and application submission
- Upon successful approval from the registry, Tetra Consultants will prepare the required documents in the company kit including:
- Hong Kong Offshore Company Incorporation application form accompanied by the company’s articles;
- Passport copies, proof of address and other valid proof of identity documentation of the Hong Kong resident shareholders or directors.
- Passport copies, proof of address and other valid proof of identity documentation of the Hong Kong resident non-resident shareholders or directors.
- On average, Tetra Consultants will set up offshore company in Hong Kong within 2 business days. See this webpage for more information on the process of company incorporation. Once the company is successfully registered, the offshore company is now required to comply with all the applicable Hong Kong regulations.
- It is mandatory to submit the appointment notification of directors and secretary, consent to act as director, registered address notification and other applicable documents as required by the Hong Kong Company Registry.
Step 4: Opening a corporate bank account
- Once the above is completed, Tetra Consultants banking team will advance with the corporate bank account opening procedure. As part of the corporate bank account opening process, almost all banks will request a copy of all the above approved documents. While it is common for banks to request the directors to be physically present in Hong Kong for the bank account opening, certain banks do provide exemptions for the above requirements.
- On average, Tetra Consultants will complete corporate bank account opening within 4 weeks after company registration.
Step 5: Tax registration
- Despite being tax exempted, an offshore company in Hong Kong must still register with the Hong Kong Inland Revenue Department. The deadline to complete this is within one month from the incorporation date. Upon registration, the Inland Revenue Department will issue a business registration certificate with their company trade register number. See our page on accounting and tax services for Hong Kong for more information.
- Further information on tax, financial reporting and bookkeeping requirements are listed below.
Is Hong Kong a tax free country?
Regardless whether a Hong Kong company is conducting onshore or offshore business, it is mandatory for all Hong Kong companies to comply with the local accounting and tax obligations.
- Hong Kong onshore companies are subject to a corporate income tax rate of 16.5%. On the other hand, offshore companies are legally tax-exempt if the income are generated outside of Hong Kong. Tetra Consultants recommends our clients to ensure that their offshore companies are properly structured so as to avoid any tax penalties or fines.
- All Hong Kong companies are required to file annual audited financial statements. Annual corporate income tax must be filed before 1st April. Tetra Consultants will ensure our clients meet these deadlines set out by the Hong Kong government by submitting accurate filings.
- It is mandatory for Hong Kong companies to file annual tax return with the Inland Revenue Department within one month from the date of notification and hold their annual general meeting. In order to file annual tax returns on time, Tetra Consultants will assist you to prepare and submit balance sheet, auditor’s report, profit and loss account and company taxes computation.
- It is compulsory for Hong Kong companies to do proper bookkeeping. Examples including keeping proper records of business transactions. You are required to keep records of financial transactions and retain the source documents, accounting records and schedules, bank statements and any other records of transactions connected with your business.
Difference between onshore and offshore company
- A company which was incorporated with the sole purpose to conduct business domestically is considered an onshore company. These firms, however, will not be able to enjoy the preferential tax treatments offered to an offshore company.
- An offshore company is essentially a company with minimal presence in the country. The management and operations are conducted outside from the country in which the company is incorporated.
How can Tetra Consultants help?
- Tetra Consultants is ready to be your Hong Kong company registration guide to ensure that your offshore business registration goes smoothly. We are experienced in setting up offshore firms in Hong Kong and ensure our clients are able to enjoy the numerous tax benefits while staying legal and compliant.
- Tetra Consultants will register the Hong Kong company and secure a corporate bank account for the newly established company. Our team of qualified Chartered Accountants will also prepare audited financial statements and file annual returns on behalf of your company.
- In addition, Tetra Consultants can provide nominee director or nominee shareholder services if required by our clients.
- Contact us now for a free consultation if you are keen to find out more about our Hong Kong company incorporation services. Our team of experts will revert within the next 24 hours.
How much does it cost to start a company in Hong Kong?
- The engagement fee depends on the services you require from Tetra Consultants. Prior to each engagement, our team will fully understand your business needs and inform you of the exact services you require.
- For example, you may not require nominee director services if you have a local business partner or family member. Alternatively, you may not require our bank account opening services if you already have one with some banks.
- Tetra Consultants’ fees include government fees such as business name reservation charges, company registration fees and tax registration costs.
Is Hong Kong a good place to start a business?
- Hong Kong ranks as the third best place to do business and offers a quick and easy incorporation process for both locals and foreigners.
What is the best business in Hong Kong?
- Hong Kong is best known for its financial industry and is host to the third-largest stock exchange in the world. It also has a well-regulated and large capital market, which will be attractive to investors.
Who can register a company in Hong Kong?
- Anyone who is at least 18 years of age, not currently bankrupt or previously convicted may do so.
Can foreigner open bank account in Hong Kong?
- They may do so a s there is no requirement for residency. They simply need to present proof of a home country address. With our extensive network of banking partners, Tetra Consultant can assist with corporate bank account opening service.