Fascinated by attractive business environment and competitive tax regime, business people might be more desirable attentive to know how to set up a company in Hong Kong.
Due to its simplified incorporation process and requirements, applicants are able to register for a Hong Kong corporate and speedily get the ready documents within 24 hours to run their business immediately. Taking the procedure step by step, you should select a suitable entity type, choose a company name, decide on the company structure, and make an application with the Hong Kong Companies Registrar (CR). A license or permit is mandatory if your business sectors are required by the CR.
Why choose to incorporate in Hong Kong?
Ease of setting up a company: Foreigners are permitted to take complete ownership of their Hong-Kong-based corporations. The requirements for opening a company are simple and the registration procedure can be done shortly online within 24 hours.
Open-oriented market: As one of the freest economy, Hong Kong accept almost all legal business categories. Money transfer and currency exchange are permitted for any types. Additionally, Hong Kong companies are not limited by the Government to have bank accounts in any locations.
Business-friendly tax system: The corporate tax rates in Hong Kong are competitive as it follows a territorial principle system which exempts tax for all profit earned outside of Hong Kong, while the income derived from Hong Kong is charged marginally from 8.25% to 16.5% for the year of assessment of 2018/19 onwards. Furthermore, capital gain tax, dividend tax, HAT, VAT or sales tax and withholding tax are not applicable.
Accessible gateway to Mainland China and Asian countries: Hong Kong has a significant location advantage that it is possible to travel to China within one days and to most of Asian destinations with a five-hour flight.
>> Learn more: 06 Benefits of setting up a company in Hong Kong
How to set up a company in Hong Kong
1. Select the appropriate company type
Initially, investors should consider their company’s needs, its size, their financial ability, and features of each entity type before incorporating a business. Hong Kong entity types are usually divided into:
1. Limited Liability Company (LLC)
- Private Company Limited by Shares
- Public Company Limited by Shares
- Company Limited by Guarantee
2. Sole Proprietorship
- Branch office
- Representative Office (Liaison Office)
You can refer to Hong Kong Business Entity types for detailed features along with strengths and weeknesses of each company types.
The following instructions mainly shed light on the incorporation of a Private Company Limited by Shares in Hong Kong as it is most chosen by either foreign or local entrepreneurs.
2. Choose a company name
Unlike other offshore jurisdictions (BVI, Seychelles, Belize, etc.), the Hong Kong Companies Registry (CR) do not give provisional approval, or reservation, of company name. Under the Companies Ordinance, the CR has a power to change a company name in specified circumstances.
A company name can be in English (must end with “Limited”), or in traditional Chinese (must end with “有限公司”), or an English name and a Chinese name. The combination of English and Chinese characters in a name is rejected.
The proposed name might be declined once it:
- Is the same as or similar to a name appearing in the Companies Registry's ‘Index of Company Names' OR
- Is the same as a name of a body corporate already incorporated or registered under an Ordinance OR
- Infringes on trademarks OR
- Is considered offensive or otherwise contrary to public interest under the Registrar’s opinion.
The applicants will be asked for prior approval from the Registrar if their provided company names give the impression of connection between the company and the Government of HK SAR by consisting of words or expressions such as ‘Council', ‘Department', ‘Bureau', ‘Commission', ‘Government' etc.
In addition, name of a Branch or Representative Office must be the same as that of its parent company.
To save time, you should check the name availability first with a company registration agency to avoid any delay with the incorporation.
>> Learn more: Requirements for registration of a Hong Kong company name
3. Decide on the company structure
To set up a private company in Hong Kong, entrepreneurs must comply with the below requirements of a business entity:
- Minimum number: one person
- Maximum number: unlimited
- At least one director who is a natural person
- Either natural persons (from 18 years old) or body corporates (only allowed under strict circumstances)
- Either Hong Kong residents or non-residents
- Nominee directors allowed
- Minimum number: one
- Maximum number: fifty
- Either natural persons (from 18 years old) or corporates
- Either Hong Kong residents or non-residents
- Nominee shareholders allowed
- 100% foreign ownership allowed
- Sole director can act as a shareholder
- Mandatory by law
- Either a Hong Kong local individual or corporate
- Sole director cannot be the company secretary
Registered address: it is compulsory to have a local address for company registration in Hong Kong. A P.O box is not permitted.
- Minimum: HKD 1.00
- Maximum: unlimited
- Bearer shares unallowed
4. Proceed to open a company in Hong Kong
The following documents are required to submitted to the CR to set up a company:
- Hong Kong application form;
- A copy of Articles of Association;
- A copy of each passport, residential address proof for foreigners;
- A copy of each Hong Kong ID card for Hong Kong residents;
- Copies of all company documents for corporate shareholders.
There are two main steps in the process of company formation in hong kong:
- Filing an application for approval of the proposed company name with the CR.
- Submitting all required documents to the CR.
Recently, services of setting up a company in Hong Kong is offered by many professional firms like BBCIncorp Limited. Foreigners are able to register a Hong Kong company without a visit. All you need to do is providing personal documents via email, and the digital corporate documents are ready in one day for company with simple structure. Regarding a company with corporate shareholders, the CR ask for a form NNC1 signed by the directors and returns to them physically. This process often takes from 5 working days.
5. Apply for business licenses and permits
Most of business activities can be operated in Hong Kong freely. However, the particular types are compulsory to have a license or permit issued by a corresponding department of Hong Kong Government. The license or permit must be registered within one month after setting up the company to run the business. It can be attained in 2-8 weeks from the registration date.
The below table shows popular business sectors that must be licensed by the listed departments:
|An employment agency||The Labor Department|
|A travel agency||The Commerce and Economic Development Bureau|
|A restaurant||The Food and Environmental Hygiene Department|
|An education business||The Education Bureau of Hong Kong|
|Financial & Insurance services|
|Investment services:||The Securities and Futures Commission|
|A money lending business||The CR and IRD|
|The Office of the Commissioner of Insurance|
|A firm taking deposits from clients||The Hong Kong Monetary Authority|
|A pawnshop||The Hong Kong Police Force|
|A money/currencies changer, exchange broker, dealer|
|A trading company (specific import/export goods)||Depending on goods you are dealing with|
|Event Related Activities|
|The Television and Entertainment Licensing Authority|
|To sell liquor during an event||The Liquor Licensing Board|
|To operate a food stall during an event||The Food and Environmental Hygiene Department|
|A pets and accessories retail shop||The Agriculture, Fisheries and Conservation Department|
|The Department of Health|
6. Open a corporate bank account
Though you can have a corporate bank account in any countries for the Hong Kong company, banks in the same territory are most recommended if you are going to use reputable payment gateway providers (like Paypal and Stripe). It is sometimes a difficulty with banks in Hong Kong because they need the presence of directors at the branch, while some offshore banks only make a phone interview.
>> Learn more: Best banks in Hong Kong that you must know in 2021
No matter which country, the basic documents for an account opening process are:
- Account application forms;
- Corporate registration documents;
- Copies of passports of major members;
- Personal resume;
- A bank reference letter of each major member;
- A bank statement of each major member, or any related corporates;
- Proofs of business such as agreements, invoices, contracts, etc. of the current company or any related one.
The above list is not exhaustive, perhaps there are additional documents requested by the bank while they are doing the compliance check. Definitely, the provided paper must be in English (or Chinese for Hong Kong banks, or French for other offshore banks).
>> Learn more: How to open a bank account in Hong Kong
It is suggested that the applicant should arrange the requirements as detailed as possible in order to avoid confusion and incurred problems. Almost all banks are formed to work with transparency; therefore, the clearer information you provide, the higher rate of success your application will have.
>> Case study: 3 Reasons why Hong Kong banks may reject your application
7. Do the annual maintenance filings
To maintain the active status and prevent unexpected fine from the Government, a Hong Kong company must oblige to the on-going compliance which includes:
- Annual renewal of the Business Registration Certificate: Applying for the renewal one month before the expiry date.
- Annual General Meeting (AGM): Holding the meeting within 18 months from the set-up date and no later than 15 months for each next time.
- Annual return with the CR: Filing with the CR within 42 days from the incorporation anniversary.
- Annual tax return with the IRD: Filing a profits tax return together with audited accounts in the 18th month from the formation date, then periodically every next 12 months.
- Employer’s return with IRD: Filing each associated form in a specified prescribed period.
This post Hong Kong Annual Compliance Requirements will give you a thorough review of annual compliance for a private company.
Not only the attractive tax regime, and the world-class financial market, but also does the simplicity of Hong Kong company formation make this country one of the largest business centers for startups and business of all sizes. This article clarifies how to set up a company in Hong Kong, and it is a pleasure for us, BBCIncorp Limited, to serve your convenience with a fast and easy incorporation process.