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Why should I invest in Hong Kong?

The great connection

to China and the rest of the world

Hong Kong Special Administrative Region (Hong Kong SAR) has become an international hub for business, wealth, commerce and financial markets. This reflects Hong Kong SAR position as one of the most free economy in the world, thanks to the numerous business and tax advantages offered to both locals and foreign investors, which guarantee labour, monetary, investment, financial and business freedom. Such freedom is enhanced by the great amount of DTAs currently signed with other countries in Hong Kong, which facilitates investments and trades. The non-enforcement of capital control makes it extremely easy to set up a business in Hong Kong and to make it thrive. Besides being a member of the World Trade Organization, Hong Kong has for many years consolidated its position as international hub for finance, business and trade. This is reflected by the international relevance of both Hong Kong International Airport and the Port of Hong Kong.

Download the complete guide to setting up a company in Hong Kong, including comparison table

Why is Hong Kong considered a financial hub?

As a major international financial centre, Hong Kong SAR provides a range of products and services to local and international clients and investors. One of most important reasons why Hong Kong is considered as a financial hub, is that no capital control is imposed on the market. The lack of capital control not only enhances capital flow in and out Hong Kong without particular restrictions, but it has contributed to make Hong Kong the world’s largest offshore RMB business hub, with the largest offshore pool of RMB liquidity and makes of Hong Kong the fifth largest Stock market in the world. Moreover, Hong Kong’s IPO raised seven times since 2009.

The link between Hong Kong and the world

Other than being one of the most important investment destinations in the world, Hong Kong is the main gateway to Mainland China, now the world’s second largest economy. This makes Hong Kong position crucial, as it is Asia’s largest international assets management centre. Hong Kong is not only the largest offshore RMB centre, but it also originates and intermediates most of China’s inward FDIs and Outward Direct Investments (ODIs) as well as most financial Investments.

How can I set up a company in Hong Kong?

Investors and foreign entities interested in expanding their business to Hong Kong usually proceed with the selection of three main types of entities: limited private companies, branch offices and representative offices.

Limited Company

The great majority of Hong Kong companies are set up as Limited Companies. There are two types of Limited Companies:
1. Company limited by shares – the liability of members is limited by the Article of Association to the amount unpaid on the shares respectively held.
2. Company limited by guarantee – there is no share capital and the liability of members is limited by the articles of association to the amount that the members respectively undertake to contribute to the assets of the company. 

Other entity structures in Hong Kong

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Partnership

A company can be registered under the form of a Partnership and this would require an easy and quicker procedure, since it would not involve the Companies Registry. Partnerships’ structures are quite flexible and can be freely regulated under the partnership agreement. However, because partnerships do not have any legal personality, partners are personally and severally liable for the company faults and debts. The time span to obtain a Business Registration Certificate from Inland Revenue Department (IRD) is usually 1-2 weeks.

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Sole Proprietorship

A company can be registered under the form of a Sole Proprietorship and this would require an easy and quicker procedure, since it would not involve the Company Registry. However, because Sole Proprietorships do not have any legal personality, the owner is personally and severally liable for the company faults and debts. The time span to obtain a Business Registration Certificate from Inland Revenue Department (IRD) is usually 1-2 weeks.

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Registration of a Non-Hong Kong Company

A non-Hong Kong company is a company incorporated outside Hong Kong which has established a place of business in Hong Kong. Non-Hong Kong companies are legal entities which are not legally disjointed by the company.
After sending the required documents with information related to the company registration to the Company Registry, the application will be processed within 3 weeks.

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Representative Office

Representative offices (ROs) are usually established by foreign companies that wish to gain market insight, exposure and a better understanding of the Hong Kong business environment before registration as a Non-Hong Kong Company. This entity is not taxed, since it does not generate profit from its Hong Kong activity.
An RO cannot engage in profit making activities and is not treated as a legal entity. It cannot sign nor be involved in any contracts or deals on behalf of the company and it cannot engage in any trading activities. Because it is not a legal entity, the parent company will be liable for the actions of the representative office.
After sending the required documents to the IRD, it will approximately take around 2 weeks to obtain a Business Certificate.

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Set up of a Branch

When a company already has a Business Registration Certificate and would like to carry out business in another place in Hong Kong, it may set up a branch. After sending the required documents to the IRD, it will approximately take around 1-2 weeks to obtain a Business Registration Certificate.

What is the tax framework in Hong Kong?

7.5-16.5%

Corporate Tax

0%

VAT

15%

Standard rate for salary tax

In Hong Kong taxes are levied on the “territorial principle”: taxes are only levied on income “derived from or arising in” Hong Kong.

Corporate Tax

There is a two-tiered tax rate, which applies as follows:

Corporations (and branches):
- 8.25% on the first HKD 2 million of assessable profits.
- 16.5% on the remainder assessable profits.

Unincorporated:
- 7.5% on the first HKD 2 million of assessable profits.
- 15% on the remainder assessable profits.

Foreign-sourced income exemption (FSIE) regime

The Hong Kong Government amended their foreign-sourced income exemption regime, with effect from 1 January 2023 (without grandfathering arrangements). Four types of passive income fall under the scope of the amended regime: foreign interests, dividends, sale of equity interests in an entity (disposal gain) and royalties (IP income), when received in Hong Kong.

Read all about the FSIE regime here.

 

Stamp Duty for transfer or sell of Hong Kong shares

On transfer of Hong Kong share, stamp duty is 0.26% of the consideration or value of the shares (which is higher), i.e. 0.13% each for the bought and sold notes). If certain conditions are satisfied, intragroup transactions may be exempted.

Salary Tax

Individuals are subject to salaries tax on income from employment, an office or a pension derived from Hong Kong. This can be calculated in two ways, depending on whichever is lower:

  • Progressive rate - which ranges from 2% to 17%
  • Standard rate - 15%

Employment

 

How much does an employee cost?

Employments in Hong Kong need to comply to the Employees’ Compensation Ordinance, the Labour legislations and the parameters set out by the Labour Department. Hong Kong established a Statutory Minimum Wage (SMW) for non-domestic workers of 40 HKD/hour.

How can I onboard foreign staff in Hong Kong ?

All foreign workers require a visa to work in Hong Kong. There are several types of visas in Hong Kong, however, for this scope of work we will be principally focus on the employment and the investment visas.

The Employment Visa

The applications for an employment visa under the General Employment Policies (GEP), needs to comply with a number of parameters, which could slightly vary depending on the applicants’ citizenship. The duration of the visa is two years, after which this can further be extended for three years.
Eligibility Criteria
Demonstrate that the employee has knowledge or experience that is not readily available in Hong Kong. 

Applying
Main documents required from the applicant
are the ID Documents (e.g. Passport/HKID and Application form) and  some documents attesting the applicant’s academic and work experience (e.g. academic qualification, job reference).
On the other hand, the company must provide documents specific to the applicant’s employment, a business plan, and more. The timeline required to approve the visa is usually around 6-8 weeks after all documents have been received.

The Investment Visa

The requirements for the investment visa are comparatively higher than the employment visa. The investment visa applies to self-employed persons, working for a Hong Kong company in which they have substantially invested. The duration of the visa is two years, after which this can further be extended for three years.
Eligibility Criteria
1. This visa is for Director position, it does no need to have actual job duties.
2. The applicant has financial standing of significant amount of liquid assets.
3. The applicant must prove that his business will make a significant contribution to the economy of Hong Kong.
4. The applicant must have relevant experience and a strong educational background.

Eligibility criteria for the investment visa may be different depending on the applicant’s citizenship (i.e. Mainland Chinese).

Application
1. Main documents required by the applicant are ID Documents (e.g. Passport/HKID, Application form) and documents attesting the applicant’s academic and work experience (academic qualification/job reference copy) in addition to evidence of applicant’s funds to be used for the proposed investment.
2. Main documents required by the Sponsoring Company are specific to the applicant’s employment and regarding specific information on the Sponsoring Company’s, Business Registration, background (e.g. business activities) and business plan in addition to other detailed information (e.g. contribution to local, job opportunities to local, etc.).
In addition to the above-mentioned set of documents, the Immigration Department may require further information to approve the visa application. The above-mentioned required documents could slightly vary depending from the applicants’ citizenship. The processing time needed by the Immigration Department is usually around 6/8 weeks after all documents have been received.

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