Why Invest in Hong Kong?

Varun Hariharan

16 Nov, 2020

Hong Kong is considered as one of the largest financial centres in the world. The situation in Hong Kong has developed ever since the colonial era. The government of Hong Kong have brought out different initiatives for investors in Hong Kong. Entrepreneurs and investors want to invest in Hong Kong due to the different schemes and benefits offered by the government of Hong Kong.

Owing to its reputation as the third largest financial centres in the world, different companies from USA, UK and India want to establish their business centres in Hong Kong. Companies that register themselves in Hong Kong get different benefits such as world-class technology, digitisation, government support, development of entrepreneurial initiatives. Hence foreign companies want to invest in Hong Kong.

World Wide Statistics in Hong Kong

Individuals, as well as companies around the world, consider Hong Kong as one of the largest financial centres in the world. The financial services sector, as well as the technological sectors, contributes to the development of investment opportunities in Hong Kong.

The Gross Domestic Product of the financial services sector in Hong Kong adds up to more than 12% in 2004. This percentage has increased from 12% in 2004 to 20% in the year 2018. The colossal increase in the amount of GDP in Hong Kong is 8%. This is a significant improvement in the amount of GDP contributed by the financial services sector in Hong Kong. Due to these reasons, companies want to invest in Hong Kong.

Hong Kong acts as one of the largest business hubs in Asia. Many businesses want to invest in Hong Kong due to the vibrant business environment offered by Hong Kong. Apart from this, the Government of Hong Kong provides significant benefits to entrepreneurs and investors.

Demographics of Hong Kong (Invest in Hong Kong)

Hong Kong is set up as an island and a Special Administrative Region^[1] (SAR). Previously they were a part of the Mainland of China (People’s Republic of China). Ever since the colonial rule, the government have opened up foreign markets to boost foreign investment in the country. Owing to the Free Market Style of Economy followed in Hong Kong, more investment opportunities are present in this region.

Entrepreneurs benefit from the resources which are offered by the Hong Kong SAR. As per government statistics, more than over 1.3 million companies have been registered and are present in Hong Kong in the year 2020. Majority of companies would include public limited companies, international companies, limited liability partnerships and sole trader companies. Apart from this, the government of Hong Kong also regulates the financial services sector in Hong Kong.

Individuals want to invest in Hong Kong due to all these aspects. The topography offered in Hong Kong acts as a perfect destination for entrepreneurs to invest in Hong Kong. Due to all these reasons, companies want to invest in Hong Kong.

What are the main reasons to invest in Hong Kong?

It is well known that the government of Hong Kong offer different incentives for production, development and growth for businesses. Seeing the number of vibrant opportunities offered by the government, foreign companies want to set up their business hubs and carry out business from Hong Kong.

The following are the reasons to invest in Hong Kong:

• Different form of Incentives offered by the Government
• Tax Heavens
• Free Market Economy
• World Class Infrastructural Facilities
• Financial Centre in the World
• Multilingual and Cultural
• Vibrant Opportunities for Development
• Different form of Incentives offered by the Government- Government support is one of the main reasons for the development of any country. Going by the thumb rule, where there is more amount of liberalisation, there will be more amount of investment. This is one of the main reasons why companies and entrepreneurs prefer to invest in Hong Kong.

Without any form of support from the government, this region will not be advanced and developed when compared to Western Economies. Therefore different from incentives are offered in Hong Kong, which directly affects the growth opportunities of foreign companies.

The government offers the following incentives for a company that wants to invest in Hong Kong:

• Professional Services- Different types of professionals are engaged in providing services in Hong Kong. Hong Kong is considered as a one-stop-shop for all the professional services. For example, consider the legal sector. Hong Kong was under the British rule, and British common law would be applicable and followed in the courts of Hong Kong.  Multi-national laws firms from the US, the UK and Australia have set up offices in Hong Kong to carry out legal services for clients in Hong Kong. Not only the legal sector is regulated in Hong Kong, but professional services from accountants, chartered surveyors, pension experts and other businesses are regulated. Hence different businesses can carry out their services with consistent quality. Therefore companies want to invest in Hong Kong.
  
• Development of Creative Sectors such as Art and Drama- The government of Hong Kong has invested more than HKD 900 million for the development of different art sectors. Such sectors will include creative arts such as drama. All such investment opportunities are to sponsor other programs for the development of culture and drama arts in Hong Kong. This would be another reason to invest in Hong Kong.
  
• Opportunity for Talent- Owing to the number of individuals in Hong Kong, the talent received in Hong Kong would be opportunistic. Institutions in Hong Kong attract some of the brightest minds to carry out work in Hong Kong. Due to these different forms of professional opportunities can develop in Hong Kong. All these provide reasons to invest in Hong Kong.
  
• Government Policy of 2019-There are schemes offered by the government of Hong Kong. These schemes include the following:
  
  • Procurement of Technology for the improvement of business centres, financial hubs, transport facilities and other opportunities present in Hong Kong.
  • The government of Hong Kong has brought out key initiatives for the promotion of entrepreneurship and the development of business opportunities. For this, the government has injected more than HKD 500 million in Hong Kong for the development of entrepreneurship opportunities for start-ups and technology firms. This has been put in a separate fund for carrying out entrepreneurship activities. Such incentives will attract more firms to invest in Hong Kong.
  • Apart from this, more than HKD 900 million is invested in a separate fund for budding entrepreneurs. This is present under bilateral agreements with other countries and the development of Mainland of China programme for trade activities. Different bilateral agreements have been negotiated between different countries government for this.
  • Around more than HKD 800 million is allocated for the development of export-import activities in China. Owing to its region where Hong Kong is present, it connects different parts of the world. It connects the two largest continents for trading activities. These respective continents are the United States of America and Mainland China. Export and Import activities have been promoted in Hong Kong. For example, the fisheries industry in Hong Kong has developed, and different variety of fish are exported all around the world. Export opportunities in Hong Kong attract different forms of industries to invest in Hong Kong.
  • Tax rates in Hong Kong are respectively at the rate of 8% and 16%. These taxes would apply to entities such as companies, partnerships and other forms of businesses.

• Tax Heavens- Jurisdictions such as Hong Kong are considered tax heavens. Tax heaven is an island or a region where an individual investor can save a lot of tax within the country. This benefit attracts investors and entrepreneurs to invest in Hong Kong. Domestic as well as international companies present in Hong Kong are charged tax. However, there is no form of double tax present for international companies. Hence companies want to invest in Hong Kong.

The following taxes are present in Hong Kong:

• Corporate Tax- As mentioned earlier, the rate of corporate tax charged in Hong Kong stands at 8% and 16%. Out of these taxes, the tax which is charged at the rate of 8.25% is considered as profits tax. This form of tax is charged on individual businesses whose annual turnover is more than HKD 2 million. Any entity or organisation which is charged more than 8.25%, i.e. 16% earn revenue of more than HKD 2 million per annum. The amount of tax charged on companies would also vary according to the standards. For example, unincorporated entities and businesses would be charged a different tax rate from registered entities.
  
  • Collateral Taxes- As Hong Kong is a tax haven, there is no form of indirect tax such as sales tax or value-added tax. Goods and Service Tax (GST) is also not charged on the goods and services. Shareholders are entitled to receive dividend from corporations. However, there is no form of dividend charged on the shares held by the shareholders. This is one of the main reasons to invest in Hong Kong. The status that Hong Kong offers as tax heaven is one of the reason for a company to invest in Hong Kong.
  • Duty-Free Laws and Free Trade Area- Customs and Excise law is not very strict in the HK SAR region. Hence, companies and traders can carry out their business with minimum disruptions to the business.

• Free Market Economy- Hong Kong has one of the largest free-market economies in the world. As per statistics, it is one of the best regions for ease of doing business in the world. The seamless registration process is one of the main reasons for a company to invest in Hong Kong. Ever since the British era, the markets developed in Hong Kong to promote all form of free trade activities. Apart from this, all regulatory systems are well developed. Institutions follow precedent and procedures for various processes. Added to this, various incentives are offered by the government of Hong Kong to make it a free-trade economy.

The following reasons make Hong Kong one of the largest free-trade economies in the world:

• No restrictions for the development of policy regulation and foreign direct investment development.
  • The environment offered for business development is present in Hong Kong. Foreign companies have access to varied talent, multicultural environment and other resources that are offered in Hong Kong.
  • There is freedom of movement of four services within Hong Kong and outside Hong Kong. These four freedoms include the movement of capital, people, services and goods within Mainland China.
  • International reputation is offered for companies that set up global international centres in Hong Kong. All these reasons make more companies invest in Hong Kong.
• World Class Infrastructural Facilities- Foreign companies want to invest in Hong Kong because of the world-class infrastructural facilities offered by the region. Hong Kong is one of the largest commercial centres in the world, offering a varied amount of services in the region. Apart from this, connectivity is one of the main reasons for companies to invest in Hong Kong. Hong Kong serves as a central hub between the USA and China. Goods and services which are sourced from these continents will be linked to channels which involve Hong Kong. Apart from this, Hong Kong has also developed international ties with Far Eastern countries such as Singapore, Indonesia and Vietnam.
• Financial Centre in the World- Hong Kong is currently the third-largest financial centre in the world. This region will keep its place as one of the largest financial centres in the world due to international recognition. All these benefits make it worthwhile to invest in Hong Kong. Apart from being called the financial capital of South East Asia, Hong Kong is also known for its development of digitisation and other forms of services such as agreements with financial centres around the world.
• Multilingual and Cultural- As mentioned earlier, the population of Hong Kong comprises of different cultures around the world. This makes the region one of the most multi-cultured in the world. Apart from this, the region also has different languages.
• Vibrant Opportunities for Development- All businesses that want to set up international hubs in Hong Kong are allowed to. Seamless integration and fast-paced registration allow business set up offices in Hong Kong.

Conclusion

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