Hong Kong Company Formation
Hong Kong is one of the world's most open economies, is a perfect location for setting up a business and form a company. Hongkong is geared up to enable a free enterprise and flourish with a minimum of bureaucracy and restriction.
Hong Kong combines a low tax rate regime along with free-market principles. No restrictions have been made on the inbound and outbound investment, and no nationality restrictions have been made on ownership. Foreigners are permitted to invest in almost all the businesses and own 100% of the equity.
The tax system in Hongkong is territorial. Profits from the Hong Kong business are subjected to profits tax. But an income from a foreign source is not taxable even if remitted to Hong Kong. There is no sales tax, capital gains, no withholding of tax on dividends or interests, and no tax on inheritance.
Hong Kong is a major financial and commercial centre. It also serves as regional headquarters and business hub for the Asia Pacific region. Hong Kong's main appeal is based on its political stability, the rule of law, and using the English language for business purposes.
Any person (foreign or local) above the age of 18 years can set up a company in Hong Kong. The most common type of business that is registered in Hong Kong is a private limited company.
Limited liability companies are treated as a separate legal entity. The owners' liability, strong public perception, and an enduring structure are the benefits of limited liability there.
You are advised to engage a professional firm's services irrespective of whether you are a local or foreign entrepreneur. You can contact Enterslice as our professionals are well-versed with the local legislation governing the companies and are also experienced in handling any ongoing compliance and regulatory requirements during Hong Kong company formation.
Advantages of Hongkong Company Formation
Many investors start their businesses in Hong Kong to get the benefit of this tax-friendly jurisdiction. Hongkong Company formation is beneficial because no value-added tax is charged, no fee is made on dividends or low taxes, or no tax on benefits.
The following are the main advantages of Hong Kong Company formation:
- Opening a business in Hong Kong is an inexpensive and easy process.
- You do not require being a resident of Hong Kong.
- A foreigner can also incorporate a Hong Kong Private Limited Company and own 100% of the Hongkong Company.
- A foreigner can become a sole director and shareholder in a Hong Kong company.
- English common law applies in Hong Kong; the legal system here is separate from Mainland China.
- You need not have a physical address for Hongkong company formation. An office registered address is sufficient.
- The companies in Hongkong are allowed to open multi-currency bank accounts.
- Hongkong also uses the territorial source of the principle of taxation, where the profits that are made outside of Hong Kong are tax-free.
- Revenue that is the director's fee or the employment salary income created inside Hong Kong under HKD 1,32,000 is not taxed.
- Hong Kong is also viewed as a global leader in business and banking.
- Hong Kong held the record for the world's freest economy for the last two decades.
Major Features of the Taxation System in Hong Kong Company Formation
The features of the taxation system in Hong Kong are enumerated below:
The taxation system in Hong Kong is based on the concept of source and not residency. Unlike other countries like Canada, the United States, and China, that charges tax on its residents worldwide. Hongkong has a simple tax system where the income derived in the country is only chargeable. Offshore income is not taxable.
Low Rate of Taxation
The profits tax rate charged in Hong Kong is 8.25% for HKD 2 million. For-profits exceeding 2 million taxes of 16.5% is charged.
Simple Tax administration
The tax administration system is very simple in Hong Kong. Hong Kong has only three types of direct taxes, namely, profits tax, salaries tax, and property tax. No turnover tax means no VAT or GST, which is common in many developed countries.
- No capital tax regime
- No withholding tax system
Major Types of Companies in Hong Kong Company Formation
The major types of companies in Hong Kong Company formation are as follows:
Limited companies by shares
The most common form of company in Hong Kong is the company that is limited by shares. Profit-making businesses generally use this form of company. Whenever you want to set up a subsidiary of your company, this is the best available option.
Limited companies by guarantee
The charities, trade associations, professional bodies, clubs, and religious bodies generally use this type of company. However, it is difficult to open a bank account for a limited company by guarantee in Hong Kong.
Examples of unlimited businesses are partnerships and sole proprietorships. The owners have unlimited liabilities over their debts. They have a lower profits tax rate and lower maintenance costs for the company.
Branch of a Foreign Company in Hong Kong
Setting up a branch of a foreign company in Hong Kong technically does not have any tax benefits as non-residents are subjected to Hong Kong tax profits. The Hong Kong branch of a foreign-registered company is not considered as a separate entity, and so the foreign company is entirely liable for all the obligations of the Hong Kong branch. An annual audit is not mandatory, and the tax bureau in Hong Kong usually accepts the unaudited branch management accounts whenever the branch submits its tax profit return.
A representative office is limited to conducting liaison and marketing activities. A representative office is not permitted to engage in any profit-making activities. This is a better option for companies to explore the opportunities in Hong Kong before making any particular investment. Unpopular options, such as unlimited companies, are also available in Hong Kong.
What is the Procedure to Get Hong Kong Company Formation?
The basic requirements to get Hong Kong Company formation are as follows:
It is essential to approve the company's name before proceeding with the process of the Hong Kong Company Formation.
Every company registered in Hong Kong, except for those listed in the Hong Kong Stock Exchange, needs to create and maintain a register of all the persons who have control over the company. All companies need to appoint a Designated Representative (DR) who will be responsible for reporting with respect to the SCR specified for local authorities on demand.
- A minimum of one director and a maximum unlimited number of directors are allowed.
- The director must be a natural person.
- He/ She can be of any nationality. It is not mandatory that he must be a resident of Hong Kong.
- Directors should be 18 years of age and must not be bankrupt or convicted for any malpractices.
- There is no requirement for the directors also to be shareholders.
- It is also possible to appoint nominee corporate directors in addition to the individual director.
- The Board meetings of the directors can be held anywhere in the world.
- A Hong Kong Private Limited Company is permitted to have a minimum of 1 and a maximum of 50 shareholders.
- There are no residency requirements for shareholders.
- A director and shareholder can also be the same or different people.
- The shareholder shall be of at least 18 years of age and from any nationality or country.
- The shareholder can be an individual or a company.
- Foreign shareholding of 100% is allowed.
- The appointment of the nominee shareholders is allowed.
- The meeting of shareholders can be held anywhere in the world.
- It is mandatory to appoint a Company Secretary.
- The secretary, if an individual must reside in Hong Kong.
- If the Company Secretary, if in the case is a body corporate, should have its registered office in Hong Kong.
- If the person is a sole director or shareholder, the same person cannot act as a company secretary.
- The Company Secretary has to maintain the statutory books and records of the company and also to ensure that the company restricts all the statutory requirements.
- A nominee secretary can also be appointed.
- There is no minimum requirement of the share; the usual norm for companies incorporated in Hong Kong must have a minimum one shareholder with an ordinary share that is issued in Hong Kong Company Formation.
- Share capital can be in any primary currency. It does not necessarily be restricted to the Hong Kong dollar.
- It is easy to transfer the shares, subject to the stamp duty fee. The bearer shares are not allowed.
- For Hong Kong Company registration, you need to provide a local Hong Kong address as the company's registered address.
- It is mandatory that the registered address be a physical address and not a PO Box.
Information about the company officers such as directors, company secretary, and shareholders is considered as a piece of public information as per the Law of Hong Kong.
Hong Kong Companies Registry
- It is compulsory to file all the company officers' details with the Hong Kong company registry during Hong Kong Company Formation.
- To maintain confidentiality, a corporate shareholder, a nominee, and an individual director can be appointed by taking a professional services firm's help.
- The corporate tax, which is also known as profits tax, is charged from 8.25% to 16.5% depending on the number of profits earned by the company.
- In the process of Hong Kong company formation, the territorial basis of taxation is permitted, i.e., only profits that arise or are derived from Hong Kong are subjected to tax in Hong Kong. There is no tax on the capital gains, withholding tax on dividends, or VAT or GST in Hong Kong.
- Companies must prepare their accounts and maintain them properly.
- The accounts need to be audited annually by the Certified Public Accountants in Hong Kong.
- The audited accounts must be attached to the tax return, and it should be filed annually with the Inland Revenue Department.
- Every company must file the annual returns with the Companies Registry and pay the yearly registration fee.
Business Registration Certificate
The business registration certificate must be renewed, one month before the expiry on an annual basis or once in every three years.
Annual General Meeting (AGM)
- In every calendar year, an annual general meeting must be held.
- The AGM must be held within a period of 18 months of the date of incorporation, after which no there must not be a gap of more than 15 months between one AGM and the next.
- A written resolution is permissible with regard to the Annual General Meeting.
Generally, it takes about 3-7 working days for Hong Kong Company Formation.
Points to be Considered by Foreigners in Hong Kong Company Formation
Foreigners willing to register an offshore limited liability company in Hong Kong should consider the following points:
- Foreigners can quickly become sole directors and shareholders after Hong Kong company formation. There is no such requirement of a local resident.
- Though there is no such need of the person to be physically present at the time of company registration, the physical presence is required at the time of opening a bank account based on the selected banks.
- Foreigners with no plan to relocate to Hong Kong are free to operate their Hong Kong off Shore Company from the overseas.
What are the Documents needed for Hong Kong Company Formation?
To set up a Hong Kong limited liability company, the following documents are required:
- A printed copy of the AOA or Articles of Association for the company. A standard document is generally provided by the professional services firm that assists in the process of Hong Kong Company Formation.
- Completed incorporation includes the following:
- Name of the Company.
- Registered address.
- A brief overview of the business activities.
- Particulars of the directors, shareholders, and the company secretary.
- Liability of its members.
- Share capital that is registered on incorporation.
- The total number of shares taken by subscribers.
- For Non-Resident Shareholders and Directors:
- Copy of Passport.
- Overseas Residential Address Proof.
- For Resident Directors and Shareholders:
- Copy of the Hong Kong Identity Card.
- Copy of Residential Address Proof.
- For corporate shareholders and directors
- A copy of documents parent company registration such as Certificate of Incorporation and Articles of Association.
- Certified translated versions for any non-English document should be provided.
How will Enterslice Help You in Hong Kong Company Formation?
At Enterslice, you will get professional services for Hong Kong company formation. Our experts will take care of all the necessary formalities from start to end. Hiring a competent and service-oriented firm is essential as it is a long-term relationship.
At Enterslice, we will:
- Collect all the essential details needed for Hong Kong Company formation and identification documents from you.
- Reserve the company's name as per your choice and prepare the necessary documents to be filed with the company register.
- File the documents for incorporation with the company register and obtain a certificate of incorporation.
- Obtaining of Business Registration Certificate from Inland Revenue Authority.
- Assist the client in the opening of a bank account.
- Preparation of the following for new company formation:
- Common Seal and stamp.
- Share certificate and share register.
- Statutory books.
- Provided assistance in filing of relocation visa, ongoing statutory compliance, business licenses, and appropriate annual filings.
Who Are the Authorities or Registry for Hong Kong Company Formation?
- It checks and enforces the Companies Ordinance as per Chapter 622, Laws of Hong Kong.
- It is responsible for local limited companies incorporation and Hong Kong business registration of non-Hong Kong companies.
Business Registration Hong Kong Office
- Under the Inland Revenue Department
- Administering the Business Registration Ordinance (Chapter 301, Laws of Hong Kong).
- It is also responsible for registering businesses that are carried on by an individual, partnership, local private company, or a non-Hong Kong company.
Trade Marks Registry
- Under the IPR Department.
- It has got the duty to provide trademark registration services to the members of the public under the:
a) The Trade Marks Ordinance (Chapter 559, Laws of Hong Kong), and
b) The Trade Marks Rules (Chapter 559A, Laws of Hong Kong).