How To Open A Branch Office In Hong Kong

Hong Kong attracts a large number of foreign investors and entities to have their business presence. Branch, representative office, and subsidiary company are the most three common options for foreign company registration in Hong Kong. In this blog, we offer you a detailed guide on key features and requirements of the first business structure in this scope – opening a branch office in Hong Kong.

What is a branch in Hong Kong?

Branch in Hong Kong

Foreign corporations wishing to enter the Hong Kong market must conduct business entity registration in Hong Kong. There are three popular options for companies overseas to have their business presence, including a branch, representative office, and subsidiary.

A branch office in Hong Kong is an extension of its parent company, and it is one of the most common business structures for foreigners. Hong Kong branch offices bear some key features as the followings:

• It is a legal entity which is registered with Hong Kong’s Company Registry;
• It is not a separate entity in its own rights; as a result, it is NOT in charge of any debts and liabilities. Instead, the foreign parent company is fully responsible for such debts and liabilities of the branch office.
• It can take part in the same activities as the foreign parent company does, but is limited to those performed by a foreign company located in Hong Kong.

Branch vs Subsidiary Company

Some people often get confused between a branch office and a subsidiary in Hong Kong.

A subsidiary is primarily a private limited company in Hong Kong. Both branches and subsidiaries are treated as legally incorporated entities. But the main difference is that a subsidiary is a separate legal entity from its foreign parent company, meanwhile, the branch office is dependent on its parent company.

Another key to mention is that a branch is a preferred option for large corporations in Hong Kong markets, while a subsidiary or representative office is widely used by SMEs.

Why form a Hong Kong branch?

Foreign entrepreneurs are in favor of Hong Kong branch office by dint of its range of benefits as the followings:

The launch of a branch office in Hong Kong offers you tax advantages. Branch office in Hong Kong must only be subject to its Hong Kong profit tax. Other foreign-sourced income of the branch office will enjoy tax-free. In addition, Hong Kong has Comprehensive Double Taxation Agreements (DTAs) with over 40 countries, allowing the branch office to reap benefits concerning tax matters as well.

Hong Kong branch office is also a good option to expand your business presence with light registration and reporting requirements. The process of opening a Hong Kong branch office is quite easy and can be quickly done in a short period of time.

Having said that, notwithstanding, there are still some drawbacks for those choosing this structure, chief of which is the fact that the parent company will be accountable for all legal debts and liabilities incurred by its branch office.

Keep in mind that you need to well consider both pros and cons in terms of your foreign company’s plans and goals before deciding whether a branch office in Hong Kong is the best suited.

Requirements of opening a branch in Hong Kong

To register a branch office in Hong Kong, there are certain requirements that foreigners must comply with:

• Name

The branch name must be matched with that of the foreign parent company. Any name which is already used in Hong Kong, or deemed improper or misleading will be rejected for registration by the Companies Registry.

• Officers

There must be a minimum of one Hong Kong local resident who acts as the official representative in a branch office in Hong Kong to accept legal notices from competent authorities. This can be either an individual or a body corporate.

• Place of business

The branch office is required to have a physical location or a place of business within Hong Kong. This location will also be the place to keep all statutory documents of the branch.

• Constitution & activities

No need to have a Memorandum and Articles of Association (MMA) for a branch office, as its activities are directed by the parent company’s MAA.

Note that there is no minimum capital requirement to set up a Hong Kong branch office.

In addition, there are some required documents that must be submitted for its registration:

(1) Details of the branch office: Registered address, local representative, the parent company’s particulars, and other relevant information.

(2) A certified copy of the parent company’s MMA

(3) A certified copy of the parent company’s Certificate of Registration

(4) A certified copy of the parent company’s accounts, if the company is required to disclose its accounts

(5) Documents to identify the local representative of the branch office

How to register a branch office in Hong Kong

Branch office registration in Hong Kong includes two important steps as the followings:

Step 1: Choose a valid branch name

There are 3 standardized criteria for a branch name to get approval that you should follow:

• The name must be the same as that of the parent company, but the chosen name cannot be identical or similar to an existing name found in “the Index of Company Names” in the Companies Registry. For this reason, name checks should be done in advance
• The name must not infringe on trademarks
• The name should not be offensive or contrary to the public interest, as in the opinion of the Companies Registry

Step 2: Submit required documents for registration

After the name has been approved, the branch office must send all required documents to the Companies Registry for registration.

If there is nothing wrong with your documents, the Registry will then issue a “Certificate of Registration of Non-Hong Kong Company”.

The person presenting the registration documents (the presenter) will receive a notice of the Certificate issuance via fax. The presenter must then collect in person this Certificate at the Companies Registry.

In case the presenter cannot pick up the certificate, he/she should prepare in advance a written authorization to send a representative on behalf to collect.

It should be noted that the branch should apply for its registration one month after its establishment of the branch. Foreign corporations are required to hire a professional service provider for their branch office registration in Hong Kong.

Additional matters of post-registration

Once you have successfully registered your Hong Kong branch office, your branch needs to follow a set of formalities to ensure a smooth operation. Here are additional steps you need to take into consideration:

Obtain certificate of business registration

You need to apply for a “Certificate of Business Registration” with the Hong Kong Inland Revenue Department. This is a compulsory requirement and it must be completed within one month of the branch establishment in Hong Kong.

If the application is approved, the Certificate will then be issued on the following day and must be collected physically in person.

Apply for a proper business license

Not all businesses in Hong Kong require licenses. If you find that your branch activity falls into specific business categories that require a business license in Hong Kong, then you should proceed to make an application for it before operating your branch office.

Open a Hong Kong bank account

Once you have completed registering the branch office with government departments, you are allowed to open your Hong Kong business bank account. It would be a wise choice if your chosen service firm for your Hong Kong branch registration can support you to get a suitable local bank for opening a bank account.

In addition to the required documents, which may be different depending on each bank, an arrangement to interview with the bank is a must if you wish to open a bank account in Hong Kong.

On-going compliance requirements

It is very crucial to know that a branch office in Hong Kong must be liable to legal tax obligations as well as compliance requirements like other local companies. Here are a few:

• Notifying changes (if any) in the branch’s management structure
• Renewal of Business Registration
• Observing tax regulations
• Filling tax returns with IRD
• Filling annual returns with CR

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Conclusion

Branch is a popular choice for foreign companies to enter the Hong Kong market. A Hong Kong branch office is actually the extension of the foreign parent company. One stand-out feature of this structure is that it is NOT responsible for all debts and liabilities, but its parent company is.

Despite the fact that opening a branch in Hong Kong offers lesser reporting requirements compared to some other business entities, it is still liable to a set of tax regulations and compliance requirements for foreign companies located in Hong Kong, including branch offices.

Please note the above documents and requirements we have discussed in order for successful registration and maintenance for your branch office in Hong Kong.

Subsidiary companies and representative offices are the two other options available for foreign companies to set up their presence in Hong Kong. Deciding on which one is the best fit for your foreign company should be well examined in the scope of your company goals as well.

Wish to explore other options for doing business in Hong Kong? BBCIncorp’s dedicated support team is always willing to help you with practical advice based on your business demand and circumstances!

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