Setting up a Business in Hong Kong
Having worked in several jurisdictions in Asia, I find distinct advantages in doing business in Hong Kong. Acclaimed as the gateway to Asia, Hong Kong enjoys several strategic advantages, with each industry finding their particular reasons to be in Hong Kong. The most important aspect of ease of doing business is the simplicity with which you can set up legal entities and the regulatory framework in which they operate.
To quote Startmeup.hk “Hong Kong was listed as the third most innovative location in South East Asia, East Asia, and Oceania in the Global Innovation Index 2019, and is a new entrant in the world’s top 25 startup hubs in the 2019 Global Startup Ecosystem Report. lnvestHK’s own 2019 startup survey reports a significant increase over 2018 on all key parameters, with a total of 3,184 startups {+21 %) employing 12,478 employees {+31 %) across 92 co-work spaces, incubators and accelerators. The group of multi-cultural startup founders, who are the backbone of Hong Kong’s startup ecosystem, continues to create job opportunities for the Hong Kong economy. The number of co-work spaces, incubators and accelerators, which is supported by a strong network of ecosystem builders and stakeholders, has also shown remarkable increase over the years.”
https://www.startmeup.hk/about-us/hong-kongs-startup-ecosystem/
I am listing five top reasons for incorporating a company in Hong Kong.
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Ease of formation
The Companies Registry (CR) in Hong Kong is one of the most efficient compared to corporate regulating authorities in any part of the world. Using the online company registration portal, a company can be set-up in a matter of a few hours. Even if you file the paper form, companies can be incorporated in just five days.The CR and Inland Revenue Department (IRD) interacts seamlessly, with the Business Registration certificate also issued by the IRD together with the incorporation. You do not have to file any separate application for this and; is made available to you at the CR itself. Can it get any easier than that?
A company in Hong Kong can be formed with one director and one shareholder and it can be totally foreign owned and foreign managed. In other words, Hong Kong does not make it mandatory for any local director or local shareholder, as is the case in some other jurisdictions.
You can even have a corporate director, though there should be at least one director who is a natural person.
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Low and efficient tax system
Hong Kong has one of the lowest tax rates in the world. There are no indirect taxes comparable to VAT, GST or Service Tax.Profit Tax can be just 8.25% of the profits at it’s lowest slab. Moreover, Hong Kong follows the territorial jurisdiction of taxation. Subject to certain conditions, if your business is entirely conducted outside Hong Kong, even if your company is registered in Hong Kong and you have a bank account in Hong Kong, you still end up with ‘zero’ tax in Hong Kong.The process of tax administration and management is very efficient and if I may say so, humane.
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Rule of law and simple regulatory framework
Hong Kong prides itself in its’ independent and competent judiciary. The legal framework is very easy to understand and follow. Absence of bureaucratic red tapism makes it easy for businesses to function. Dispute resolution mechanisms, comparable to the best in the world, are also in place.
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Talented English speaking population
Hong Kong’s education system and its colonial history has gifted it with a young, English speaking, educated and hardworking population. The talent pool is up for grabs for any businesses coming to Hong Kong.
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Efficient banking system
Well, this point is debatable. The horror stories of the painful bank account opening process in Hong Kong is almost a folk-lore.However, my experience has been that if you have enough documentation to establish a legal business and you can establish a genuine need to set up such a business, almost always you can set up the account successfully. Bankers are always on the lookout for dodgy businesses, indulging in corrupt business practices and hence, their diligence may be excused.
Once the account is set up, you would be amazed at the flexibility of the Hong Kong banking system, with several business friendly products.
Except for the periodic reviews that the bankers may do to your account, there is virtually no interference in conducting your banking transactions.
There are several other points that support my view that Hong Kong is one of the best jurisdictions in the world for setting up your company.
If you need to know more, you may contact this author at vinod@pinetree.hk or visit our website www.pinetree.hk
