Set up Business in Hong Kong as an Expat: A Guide

Hong Kong is regarded as one of the world's top financial centers due to its favorable tax environment, free-market economy and liberal regulatory system, making it one of the world's most dynamic places to start a business.

Hong Kong has a stable and bustling economy with a business culture that has made it on the 3rd easiest country in the world to start a business, according to the World Bank.

As a result, the city has attracted a significant amount of international capital through investors, entrepreneurs and expats looking to get into the Asian market. The country's healthy economic growth, coupled with its low tax rates makes it an attractive destination for businesses looking to set up shop abroad.

This article will take you through some of the things expats should consider when deciding whether this is the right place to start a business.

Why Start A Business in Hong Kong?

Hong Kong has a free liberal economy that remains one of Asia's busiest financial hubs. It still remains autonomous from mainland China, though that being said it is more politically influenced by China in recent years, however, it still retains a free enterprise system that still has minimal government involvement. The economy is left to function much like it always had, keeping Hong Kong in the ranks of one of the best places in the world to open a business.

Hong Kong makes it easy for foreigners to invest by having no restrictions on investment, allowing the free movement of capital, as well as no tariffs on imports/ exports, as well a foreign exchange and capital controls.

Hong Kong's strong economy, diverse culture and opportunities make it a desirable place to live and do business as it offers a strategic gateway to China markets, is a regional hub for the Asian market and is the most cosmopolitan city in the region.

Hong Kong Makes it Easy to Operate a Business

Hong Kong largely lets business owners operate with very little regulation, oversight and red tape. This has made it particularly attractive for foreign entities to come in to incorporate. If you compare the incorporation process in Switzerland, for example, Hong Kong is far easier, cheaper and has far less regulations.

Hong Kong offers intellectual property protection, as well as patents, trademarks, and other intellectual property-related laws, which are strictly enforced in comparison to other local centers where patent and trademark laws are difficult to enforce.

The immigration policy is very open with most nationalities able to visit Hong Kong without visas unless if they stay less than 180 days. If you intend to work or start-up company in Hong Kong, then they do require a visa, however, there is a special migration visa scheme called Entry for Investment that is targeted at foreign entrepreneurs that are looking to start their business in the country. This visa is very similar to a work permit whereby the owner of the business is able to be an "employee" of his/her business. 

Taxation

Hong Kong operates on a territorial basis, which means that only profits and income generated in Hong Kong are subject to taxation at 16.5%. Tax rates that are levied against local businesses are 8.25% on the first HK$2 million and 16.5% on anything above HK 2 million.

Hong Kong has three types of taxes:

• Profits Tax (for incorporated companies)
• Salaries tax (Personal Incomes)
• Property Tax (for income generated from Hong Kong Properties)

However, there is no sales tax, no capital gains, no VAT, and no withholding tax and no taxation of any profits that are generated outside of the country. 

Benefits

There are a number of benefits of starting a business in Hong Kong including:

• Ease of Obtaining Business License: Trading and consultancy businesses are not restricted (though financial companies will need a license).
• Free Business Environment: Hong Kong is ranked 3rd based on the World Bank ranking of  Ease of Doing Business
• Well-developed Banking and Finance Systems: The Hong Kong banking sector includes 70 of the world's top banks, from 35 countries.
• Strategic Location: Hong Kong is strategically located on the "Golden Corridor" (Nanjing-Hong Kong) and has easy access to many major East Asian and Southeast Asian markets.
• Free Economy: The special economic policy of Hong Kong, which is based on free trade, ensures that goods enjoy a competitive edge in international markets. In recent years, this city's export share has increased substantially from 35% to over 50%. It also enjoys preferential treatment as one of China’s Special Administrative Regions for over 200 years.

See other benefits of Hong Kong as a Tax Haven

Company General Requirements

Directors:

• One Director Minumum
• Natural person or corporate entity
• Nominee directors are allowed
• No residency requirements

Shareholders:

• 1-50 shareholders
• Natural persons or corporates entities
• Nominee shareholders are allowed
• Foreign ownership allowed
• No residence requirements

Company secretary:

• Required to be a local individual or corporate body

See the rest of the requirements to start a Hong Kong company formation

Types Of Commercial Entities

There are three main types of Hong Kong company formation business entities:

• Limited Liability Companies (LLC): This is both a public limited company and a private limited company. This gives individuals limited liability and separates the corporate entity from the person
• Sole Proprietorship: This is a single-owner company where the proprietor is the sole beneficiary and takes on full liability.
• Partnership: This is where there are at least two members that form a business entity either as a Limited Partnership and General Partnership.

How to start a Company as an Foreigner?

Choose a Company Name and Entity Type

Start by choosing a business entity. The most commonly used form of entity is an LLC, as they give you the most asset protection and tax savings possibilities. Although each circumstance is different and is dependant upon the business and your specific industry and goals. Once you have decided on an entity, you pick a name and get it registered by the Hong Kong registry.

Submit Incorporation documents

Submit your application together with all the necessary documents to the Companies Registry. In addition to the application form, you need to prepare and submit:

• Application form
• Articles of Association
• Passport copy
• Proof of address
• Memorandum

Open a Bank account

Opening a bank account is fundamental to using your business structure and can be the most difficult aspect of the whole incorporation process due to the strict guidelines and KYC policies that are not used by many banks. However, it just requires proper due diligence which often takes more time and comes with a few more formalities. The basic documentation is:

• Registered address of the company
• Details of company business owners
• Incorporation documents
• A certified copy of the company’s documents
• Business plan
• Bank Reference letter
• A certified true copy of the company’s Business Registration Certificate

Conclusion

Establishing a business in Hong Kong is a great option for foreigners, non-residents or expats. There are many advantages for deciding to incorporate in Hong Kong as it is a premier world-class destination with a thriving economy and has everything you might need to start and grow your company. Is Hong Kong right for you?