How does your company distribute profits to its shareholders? How do you make money as a business owner? If your company is incorporated, the most common method is getting the profit from the distribution of dividends.

In this article, we will look at how dividend payment works, particularly in Hong Kong, and some of the crucial considerations you should make beforehand.

What is a dividend and how does it work in Hong Kong?

What is a dividend?

A dividend is a payment made to shareholders from your company’s profits. You can pay dividends in cash, shares, or other types of assets (i.e., property, stock, bond, etc.).

Hong Kong companies usually pay dividends twice a year, although some may choose to make quarterly or monthly payments.

Did you know annual general meetings are compulsory?

Did you know annual general meetings are compulsory?

The annual general meeting (AGM) is a requirement for all companies incorporated in Hong Kong. At the AGM, shareholders will likely vote on important matters such as the appointment of directors, approval of financial statements, or raising questions about the company’s plans.

Shareholders have several rights, including the right to vote on company matters, receive dividends, and inspect the company’s books.

They also have certain duties such as having to act in good faith or not disclose any material interests in transactions entered into by the company. Shareholders should be fully aware of their rights and duties in Hong Kong, as they can be held liable for contract breaches.

How do dividends work?

When a company makes an amount of profit, the board of directors can decide to share some of that profit with shareholders in the form of dividends.

Before paying dividends, the company will announce a record date and a payment date. The record date determines which shareholders are eligible to receive their amount. The payment date is the date on which the dividend is paid in reality.

Whether by using a cheque, electronic funds transfer, or reinvestment plan (DRIP), it is up to you to choose the most suitable and tax-effective way for your enterprise.

Another approach is issuing a dividend warrant, a certificate that entitles the shareholders to receive a dividend payment.

What are the benefits of paying dividends in Hong Kong

Most companies prefer paying dividends to shareholders because of certain reasons:

  • It is a way to return capital to shareholders without having to sell company assets
  • Dividend payments help companies attract and retain investors
  • Paying dividends to shareholders signals that your company is doing well

Moreover, if you’re the director of a company, paying dividends will help you to:

  • Avoid conflict with shareholders over how company profits should be distributed
  • Boost your chances of getting re-elected as a director
  • Reduce the amount of company tax you have to pay

However, you should also take into account these factors before paying dividends:

  • Whether your company can afford to pay a dividend
  • Impact of dividend payments on your company’s share price
  • Hong Kong tax implications of paying a dividend


Make sure to browse the Hong Kong general tax system guide for entrepreneurs for further instructions on dividend taxation in Hong Kong.

How to pay dividends in Hong Kong

Once your company is registered and obtains a tax identification number, you can distribute dividends to the shareholders. If not, you will need to set up a subsidiary in Hong Kong to do so.

There are a few things you need to determine before paying dividends:

  • Frequency of dividend payment – a one-time payment or an annual one
  • How much you will pay per share – determined by the company’s Board of Directors
  • The dividend payment date – the exact date you issue dividends

Step 1: Set up a Hong Kong bank account

As dividend payments are required to be paid in Hong Kong currency, you must set up a Hong Kong bank account. This helps remove the burden of currency exchange for your company and provides your Hong Kong shareholders with a more convenient way to receive dividends.

Along with that, dividend payments must be reported on your company’s annual return, so having a bank account makes it easier to record transactions and keep track of the cash flow.

Hong Kong has several reputable banks that offer excellent banking services. When opening a bank account in Hong Kong, you will need to provide the following information:

  • Company name
  • Hong Kong Company Registration Number
  • The name of the person authorized

Step 2: Determine the payment method

There are two means to pay dividends in Hong Kong: through a cheque or an electronic funds transfer (EFT).

If you are paying by cheque, you will need to print and send the cheques to the shareholders. However, today’s climate has highlighted the need for companies to consider alternatives to cheque payments due to stationery waste, postage costs, and environmental impact.

Many companies implement cheque-less or EFT for dividend payment, which proves to be quicker, and more environmental-friendly. Issuing dividends directly into shareholders’ bank accounts also removes any reliance on base stock suppliers and postal service providers.

If you are paying by EFT, you will need to provide the shareholders with your bank account information.

Step 3: Declare your dividend payment

You’ll need to declare the dividend payment by submitting a declaration form to the Inland Revenue Department (IRD), which includes the following information:

  • Company’s name and registered address
  • Date of the dividend declaration
  • Description of the dividend payment, including the amount and currency
  • Names and addresses of the shareholders receiving the dividend payment
  • Types of dividends (i.e. cash, stock, or asset)
  • Any other relevant information required by the IRD

The IRD will review the declaration and, once approved, will issue a dividend payment warrant to your company, allowing you to distribute the funds to your shareholders.

Step 4: Make your dividend payment

The final step is to pay the actual dividend. This can be done by transferring cash or shares to the shareholders’ bank accounts or issuing them new shares.

If you are paying a cash dividend, make sure that you have enough cash in your company’s bank account to cover the payments.

In case dividends are distributed in the form of new shares, you need to inform the shareholders in advance and carefully check the ownership as well as the number of shares in your company to avoid any internal conflict.


A dividend payment in Hong Kong can be a complex process. This is why you need to understand each of the various steps regarding the process. By following the guidelines in this article, you should be able to pay dividends in Hong Kong without any problems.

Get all the support and advice you need, plus all your questions about Hong Kong dividend payments answered with BBCIncorp immediately. Feel free to get in touch with us via, or chat with our friendly consultant in the chatbox below!

Disclaimer: While BBCIncorp strives to make the information on this website as timely and accurate as possible, the information itself is for reference purposes only. You should not substitute the information provided in this article for competent legal advice. Feel free to contact BBCIncorp’s customer services for advice on your specific cases.

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