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Imagine if you could hit the pause button on your business operations and wait for a better time to restart? Dormant companies in Hong Kong offer precisely that opportunity. 

Often, businesses become dormant due to inactivity, but not everyone understands the responsibilities involved. This article explains what a dormant company is and guides you on how to become one.

Key Takeaways

• A dormant company doesn’t carry out accounting transactions 

• There are several benefits but not without obligations.

• Passing and filing a special resolution is key for dormancy/cessation

What Are Dormant Companies?

A dormant company is a registered private entity that doesn’t actively carry out any accounting transactions during a specified period. Under the Hong Kong Companies Ordinance, an accounting transaction is one that’s recorded in the company’s financial records. A non-trading company is not the same as a dormant company.

For instance, say ABC Holdings Pte. Ltd was registered as a real estate investment company in December 2019. Due to pandemic, the company was unable to purchase/sell any properties or conduct any financial transactions for the past few years. Although ABC Holdings Ltd. is a legal entity, it is dormant as it doesn’t carry out any transactions.  

Benefits of a Hong Kong Dormant Company

The key advantages of operating as a dormant company include:

1 – Better protection of assets

Opting for a dormant status is a great way to protect your assets and intellectual property  when you don’t want to carry out any business.

For example, you can retain the trademarks filed for your business to preserve the brand integrity. 

2 –  Reduced burden of compliance increases cost efficiency 

Compared to an active company registered in Hong Kong, a dormant company has a reduced burden of compliance since it is exempted from several annual/quarterly filings. 

Over time, this leads to reduced administrative and compliance costs.

3 –  Preservation of legal entity for future use 

Going through the process of setting up a new company can take weeks. Since you can revive the dormant status of a company, it is a great vehicle for future use. 

When you already have a company in existence, you can restart your activities whenever you are ready. 

For instance, a business awaiting further permits and licences from authority can continue to remain a dormant company to protect its  corporate status. 

Why You Should Not Make Your Hong Kong Company Dormant

From a commercial and logistics standpoint, opting to become a dormant company may not always be a beneficial move:

• If a company remains dormant for several years, it may be financially more efficient to wind up the operations permanently. A dormant company needs to fulfil obligations under the Hong Kong law such as appointing a company secretary and maintaining a registered office, all of which incurs a cost.
• As long as the company stays dormant, it must pay annual registration fees to the Hong Kong government and file tax returns with the Inland Revenue Department.
• Even if you eventually decide to close the company, you need to report changes to your company structure to the Companies Registry during dormancy. 

As a business owner, you still remain responsible to discharge your obligations under the Hong Kong Companies Ordinance.

How to Apply for a Dormant Company Status?

The only requirement for a company to qualify as dormant in Hong Kong is the absence of any relevant accounting transactions. 

This means:

• Except for mandatory payments, the company cannot engage in financial transactions or buy/sell any goods/services. 

Any payments due under any law are permitted. But if any interest is credited to the company’s bank account, it qualifies as an accounting transaction, making the company ineligible to apply for dormant status.

• Even though the company officials are exempted from responsibilities of running an active company, they still need to comply with the relevant requirements during the dormant period.

That said, what qualifies as an accounting transaction should be examined on a case-to-case basis by an independent professional. 

Becoming a dormant company is not a decision you can make in isolation. Here’s what you need to do to become one:

1 – Pass a special resolution 

Pass a special resolution (i.e., have at least 75% of the shareholders vote in favour of) declaring that the company wants to become dormant. 

This serves as a statutory declaration of the intention of business owners to enter dormancy. 

2 – File the resolution with the Registrar of Companies 

The company directors must file the special resolution with the Companies Registry within 15 days of passing the resolution.

The company becomes a dormant company on: 

• the day the special resolution to the Registrar of Companies is delivered; or
• any other date specified in the special resolution.

3 – Comply with obligations of a dormant company

Officers of a dormant company do not have the same obligations as officers of an active company which includes filing annual returns, holding annual general meetings, and preparing financial statements.

However, they need to comply with other obligations such as:

• Having a registered office address, at least one shareholder, an individual director, and a company secretary
• Reporting changes to company structure/appointment of director or company secretary to the Companies Registry;
• Filing for renewal of Business Registration Certificate (BRC); and
• Filing Profits Tax Return issued by the Inland Revenue Department, if any

Documents Required in Cessation of a Dormant Status

Here’s what you’ll require if you plan to revive a dormant company in Hong Kong:

• A special resolution stating that the company intends to make an accounting transaction. The resolution should be submitted to the Company Registry.
• If the company ceases to be dormant on or before the 42nd day after its incorporation anniversary, it needs to submit an annual return for that year.

As soon as the company conducts an accounting transaction, it ceases to be dormant. 

What Companies Are Not Allowed to Claim Dormant Status?

Not all registered businesses in Hong Kong can become a dormant company.

Only private companies are allowed to be dormant. If you are not a private company, the relevant provisions of the Hong Kong Companies Ordinance that allows an entity to become dormant do not apply.

Certain companies, as specified in Section 5, Sub-section 7 of the Hong Kong Companies Ordinance, are ineligible for dormant status. As  hey handle financial assets, they must remain active and engage in accounting transactions.These include:

1. financial institution under Banking Ordinance;
2. Insurer under Insurance Companies Ordinance;
3. a corporation licensed under Securities and Futures Ordinance to carry on a business in any regulated activity defined in that Ordinance
4. an associated entity under Securities and Futures Ordinance, of a corporation in paragraph (c);
5. an approved trustee of the Mandatory Provident Fund Schemes Ordinance ;
6. a subsidiary of a company that falls within paragraph (a), (b), (c), (d) or (e); or
7. a company that falls within  (a), (b), (c), (d), (e) or (f) any time during the 5 years immediately before the special resolution for claiming dormant status is passed.

The financial secretary of Hong Kong is at liberty to amend the list above and add more companies that cannot claim dormant status.

Bottom Line

Dormant companies in Hong Kong are an excellent option for business owners who want to temporarily halt their operations but want to preserve their corporate status. This flexibility allows them to restart their business in a favourable environment. 

If you are planning to become a dormant company, you need an expert who can guide you. As a seasoned service provider, Air Corporate can help you navigate the process of registering your company in Hong Kong and also apply for dormant status, if needed.  

To make an informed decision about applying for dormant status, reach out to Air Corporate today to learn more about how you can apply for a dormant company status.

FAQ

1. What is a dormant company?

 A registered private company that exists on paper but does not carry out any accounting or business transactions is known as a dormant company. 

2. Can a company cease to be dormant?

If a company starts re-engaging in business transactions, it can cease to be a dormant    company. A dormant company can also pass and submit a special resolution to the Registrar of Companies to show that it intends to enter into a commercial transaction.

3. Are there compliance requirements while a company remains dormant?

Yes, a dormant company continues to be a legal entity with obligations under Hong Kong law.  These include:

• Renewing business registration certificate 
• Filing profit tax return with the Inland Revenue Department
• Maintaining a registered office with at least one shareholder, director, and a company secretary 
• Informing the Registrar of Companies about any changes in the company’s officers or registered office

4. How can a dormant company be reactivated?

To reactivate a dormant company, a special resolution should be passed and delivered to the Registrar of Companies. The resolution must declare that the company wants to carry out accounting transactions once again.

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In today’s age, it is nearly impossible to build a business without relying on custom software solutions. Software that is tailored to address unique business needs is crucial if you want to deliver top-notch experience to your customers and improve internal efficiencies. If hiring specialists locally is not feasible, teaming up with an offshore software development company is a great alternative.

A quick Google search for an offshore software development company throws up a million results. The global population of software developers is expected to be 28.7 million by the end of 2024. But who stands out in the crowd? Here are the top 5 offshore software development companies you must check out in 2023:

• SumatoSoft
• Dev.Pro
• Kanda Software
• Itransition 
• BairesDev

What Is an Offshore Software Development Company?

An offshore software development company refers to an organisation that builds, designs, and upgrades software solutions for clients located in different geographical locations. For example, a  company in Hong Kong may hire a software development firm located in Eastern Europe, which is an offshore company. 

Offshore development teams are a natural choice to reduce operational costs without compromising on the quality of the end product. 

Why Do Companies Choose to Build Custom Software?

There are three key reasons for companies to opt for custom software for their business:

Seamless integration  

Every aspect of custom software can be tweaked to seamlessly fit the existing workflows. 

For instance, while you can rely on Microsoft Excel, a generic software, for tracking your appointments. However, a hospital may not find much use for it. They need software designed to integrate into their specific workflows with features relevant to healthcare and data confidentiality.  

Cost efficiency

Housing an in-house team is not possible for companies in early stages of growth.

In such cases, opting for a custom software solution is better than relying on generic software. Even though the upfront cost may be steep, you don’t need to pay licensing/upgrading fees on an ongoing basis that quickly adds up.

Plus, most firms offer a range of engagement options including working on blended rates, making it even more cost efficient for a business. .

Gaining competitive advantage 

Unlike off-the-shelf software, customised software can be developed to address the unique needs of your customers. This can help you swiftly adapt to the changing needs and deliver superior customer experience. 

Over time, better efficiency and productivity can help you to stay ahead of the curve and outrank your competitors.

Top 5 Offshore Software Development Company to Choose in 2023

Apart from building the software solution from scratch, an offshore software development company can also assist with managing the mobile/web app, provide upgrades, and help the in-house functions understand how to leverage  the custom software. North America houses the maximum number of offshore software development companies along with Eastern Europe and Asia. 

Here’s a look at the top offshore companies you can consider for your next project:

1. SumatoSoft – Shines as Technological Partner 

SumatoSoft features on top of the list with expertise in specialised solutions such as blockchain and UX/UI design. It has a wide sectoral expertise with clients in eCommerce, financial, entertainment, media, real estate, travel industries. 

SumatoSoft works with startups as well as established companies.

Founding Year: 2012

Location: Headquartered in Boston, US

Price: USD 50 – USD 99 per hour on average 

Rating: 4.8 (Clutch), 5.0 (Techreviewer), 5.0 (Capterra)

Pros and Cons of SumatoSoft Company

Here’s a look at the advantages and disadvantages associated with this company

Pros	Cons
– Customer oriented approach where the team proactively suggest new solutions  – Clients get round the clock access to project management system  – Qualified team well-versed with different methods and technologies  – High-quality code delivered on-time  – Reasonably priced	– Software maintenance may be charged on an hourly basis, making it difficult for the clients to work out the final cost

2. Dev.Pro – Works Like a True Team

DevPro houses 800 skilled  developers who are proficient in several programming languages and technologies. 90% of their business is through referrals or repeat clients that speaks for the quality of work delivered. 

Both startups and Fortune 500s rely on their expertise for building custom software. 

Founding Year: 2011

Location: Headquartered in Las Vegas, US with presence in Eastern Europe and Brazil

Price: USD 25 – USD 49 per hour on average 

Rating: 4.9 (Clutch), 4.7 (Techreviewer)

Pros and Cons of Dev.Pro Company

Here’s a look at the advantages and disadvantages associated with this company

Pros	Cons
– technically skilled team that delivers good-quality work – clients receive weekly reporting & frequent demos  – doesn’t function like vanilla outsourcing companies; committed to identifying creative solutions that work for all stakeholders – median time-to-hire is only 15.5 days, allowing clients to expedite time to market	– language barrier with junior developers – expensive compared to competitors

3. Kanda Software  – Unmatched Technical Knowledge 

Kanda Software is a full-service firm that provides software engineering and digital transformation services. They are respected by their clients for domain expertise and cost-effective products. 

Well-known for their Saas and mobile solutions, Kanda Software is the name behind apps such as MarketSpectrum and UPenn’s Rescufy. 

Founding Year: 1993

Location: Headquartered in Newton, US

Price: USD 50 – USD 99 per hour on average 

Rating: 4.9 (Clutch), 5.0 (Techreviewer)

Pros and Cons of Kanda Software Company

Here’s a look at the advantages and disadvantages associated with this company

Pros	Cons
– various engagement models you can choose from – management is always willing to support the changing needs of the client  – no security-related breaches till date – wide range of technical skills which is unusual for a mid-sized software development company	– onboarding may take longer than expected

4. Itransition – Exceptional Experience in Developing Mobile Apps

With more than two decades of experience, Itransition is a leading offshore software development company and has clients across 30 countries.

It features among the leading software outsourcing providers of the world, thanks to multiple recognitions and rewards from various industry doyens such as Inc 5000 and Software 500.  

Founding Year: 1998

Location: Headquartered in Denver, US with presence in United Kingdom

Price: USD 25 – USD 49 per hour on average 

Rating: 4.9 (Clutch), 4.9 (Techreviewer)

Pros and Cons of Itransition Company 

Here’s a look at the advantages and disadvantages associated with this company

Pros	Cons
– project management style is unmatched – clients get access to project tracking tools along with frequent demos and weekly meetings – developers, QA testers, and project managers are knowledgeable and smart – lot of flexibility for engagement models	– the development team may change frequently

5. BairesDev – Extremely Flexible 

BairesDev provides end-to-end software development solutions tailored to your needs. Whether you need a single developer or want to onboard a team, BairesDev is known for exceptional results. With startups, SMBs and Fortune 500 companies on its client roster, BairesDev can tackle your biggest technological needs.

BairesDev has won several industry awards and is well known for their exceptional customer service.

Founding Year: 2009

Location: Headquartered in San Francisco, US with presence in Brazil, Spain, Argentina, Mexico, and Colombia

Price: USD 50 – USD 99 per hour on average 

Rating: 4.9 (Clutch), 4.8 (Techreviewer)

Pros and Cons of BairesDev Company

Here’s a look at the advantages and disadvantages associated with this company

Pros	Cons
– easy onboarding process – senior developers with 10+ years experience who are 100 percent bilingual – project management is top notch with daily standup video-calls and communication on slack – incredibly accommodating and committed to delivering quality work even when some project attributes are unclear  – different types engagement models to suit client’s needs	–  may not have sufficient Salesforce developers on team –  expensive compared to competitors

Wrapping Up

Given the plenty of options out there, hiring the right offshore software development company may seem like a task. To ensure a good fit, spend time vetting the contenders on your shortlist. A thorough review of the portfolio and testimonials from previous clients is a good starting point. 

FAQs

1. How much does it cost to hire an offshore software development company?

The cost varies widely depending on the scope of work and complexity, technology employed, timeline, and expertise of the developer. 

It is impossible to lock down a single number. 

2. How to hire the best offshore software development company?

Researching and evaluating different companies based on client reviews, portfolio, and expertise is a good way to shortlist potential partners. 

Make sure to define your project requirements and goals clearly before you start preparing the shortlist.

3. What are the key challenges of working with an offshore software development company?

Differences in communication style and time zone are some of the common challenges most businesses encounter when working with an offshore company. 

4. How much time does an offshore software development company take to deliver?

On average, most firms take about 4-5 months to deliver custom software solutions. 

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A business registration certificate is critical for anyone who wants to do business in Hong Kong. But navigating the process of getting one can be challenging. Unless you follow the procedure to the T, it can delay your plans and prevent your business from taking off.

So here’s the ultimate roadmap — a guide that tells you everything you need to know about obtaining a business registration certificate. You will learn about:

• The need for a business registration certificate
• How is it different from a business registration number
• Which businesses need to obtain the certificate and what’s the process
• When do you need to start the application process

What Is a Business Registration Certificate (BRC)?

A business registration certificate is a document issued by the Business Registration Office of the Inland Revenue Department (IRD), Hong Kong. It certifies that a business is registered with the Hong Kong government. 

The issuance of BRC proves that your business has complied with the relevant requirements to operate in Hong Kong. Important information you may find on your BRC include:

• Registered name of your business
• The nature of your business;
• Business registration number or BRN 
• Issue and expiry date of the certificate

Here’s a sample BRC:

Source: Inland Revenue Department of Hong Kong (IRD)

Once you receive your BRC, display it prominently in your place of business. Failure to apply for business registration attracts strict penalties— as of date, the fine is HKD  5,000, and you may also be imprisoned for one year. 

If you apply for your business registration certificate one year after commencing the operations, you have to pay the registration fees for the current year and the previous years

Is There a Difference Between BRC and BRN?

BRN or business registration number is an eight digit unique number assigned to every business entity by the IRD. You can find it printed at the bottom of your BRC.

However, it is not a permit for commencing trade or business operations. 

You can think of it as the social security number for your business — you need to mention it for all official business, such as filing tax returns, opening company accounts, or filling out different forms/documents issued by government departments. 

That’s why you don’t need to apply for a separate tax identification number in Hong Kong — the BRN is good enough.

Which Business Is Required to Get a Business Registration Certificate?

Obtaining a business registration in Hong Kong is mandatory for all businesses unless specifically exempted by the Companies Ordinance.

Both local and non-Hong Kong businesses need to apply for BRC, including:

• Subsidiaries of foreign companies in Hong Kong, even though the company may have subsidiaries operating in other countries;
• Partnerships and sole proprietorships
• Branches and representative offices of foreign companies 
• Any other business venture operated to earn profits, whether by opening up a brick-and-mortar shop or through the internet 
• A club that provides various facilities or services to its members for a fee
• Any  limited partnership fund registered under the Limited Partnership Fund Ordinance, irrespective of whether it is carrying on business operations in Hong Kong

However, if you are only an employee at these organizations, you won’t be regarded as carrying on business for business registration. That’s why you don’t need to apply for any BRC separately.

When Should Your Business Apply for a BRC?

The timeline for applying for your business registration certificate depends on the type of business:

Type of business	Timeline for application
If your business is a sole proprietorship, partnership (except limited partnership fund)  or you are an unincorporated body of persons, a non-Hong Kong company or a branch of a non- Hong Kong company	Within one month from its date of commencement of business.  IRD rejects registration applications for businesses that do not exist or haven’t commenced their operations yet.
If you are a limited partnership fund	Within one month from its date of registration
If you are a company incorporated or to be incorporated under the Companies Ordinance	You can use the one-stop service from IRD that allows you to make a single application to incorporate the company with the Companies Registry and also obtain business registration certificate

If you use the one-stop service, you will receive the certificates of incorporation and business registration together to begin your operations. So using the one-stop service is ideal, especially if you want to set up the presence of your non-Hong Kong company through a subsidiary.

How Do I Apply for a BRC?

There are several application channels for obtaining your business registration certificate:

By post

You can send your application via post. 

To obtain a copy of the application, you can e-mail [email protected], fill up form IRBR194 or send in your request by post or by fax (2824 1482) to the Business Registration Office. Make sure to include your name, address and the type of application form and required quanitiy.

The certificate is issued within 2 working days of Business Registration Office receiving a properly completed application.

In person

You can submit a physical copy of your application in person to the Business Registration Service Counter at Business Registration Office. A copy of the application is available at the Business Registration Office at 2/F of Inland Revenue Centre, Kai Tak.

Typically, the business registration certificate is issued within 30 minutes of the receipt of application. You can collect it over the counter. 

Online 

You can use the eTax service by the Government of Hong Kong and apply for your business registration certificate online.  The online service is available to:

• a sole proprietor 
• partners of a partnership
• the secretary, manager or any of the directors of a company
• principal officers of  a branch of a business 

Normally, the certificate is issued within 2 working days from the receipt of a duly filled application.

Before you begin, you can check out a specimen application form for business registration for body corporates. 

Regardless of the application method, you must pay the relevant business registration fee and levy and attach a copy of your proof of identity document with your completed application. Accepted documents include:

• For individuals – a copy of their Hong Kong identity card (for residents) or passport (for non-residents)
• For body corporates – a copy of the Certificate of Incorporation or its equivalent issued by the relevant authority of the original jurisdiction of incorporation.
• Partnerships (except limited partnership fund) – copies of every partner’s Hong Kong identity cards or passports for non-residents
• Limited partnership fund – a copy of the Certificate of Registration issued by the Companies Registry and a copy of the general partner’s Hong Kong identity card, if the partner is a resident. For non-residents, copy of passport or identity card or a certificate of incorporation or registration if the general partner is a limited partnership or a company 
• Unincorporated body of persons –  for residents, a copy of the principal officer’s Hong Kong identity card. For non-residents, a copy of passport/identity card. 

Can I Get a Business Registration Certificate with Air Corporate?

Completing the paperwork on your own can be overwhelming — even a single typo can result in your application getting rejected, forcing you to start the process from scratch. Even though it may seem like a minor inconvenience at that moment, it can quickly snowball into a bigger problem.

Don’t have someone to take care of your paperwork and work on your business registration certificate? Here’s where Air Corporate can step in and help. We can set up your Hong Kong company with a bank account in just two days. 

Our packages start from USD 90 only — Get in touch with us right away.

FAQs

1. How is a business registration certificate different from a certificate of incorporation?

A business registration certificate in Hong Kong is proof that the business is duly registered with the Hong Kong government and has fulfilled the requirements for operation.

A certificate of incorporation is the birth certificate of your company —  it confirms that your company has come into existence as a standalone legal entity. 

2. If I submit my application for a business registration certificate online, how do I know if it has been successfully submitted?

Once you successfully pay the business registration fee/levy online, you receive an acknowledgment with a Transaction Reference Number. This indicates that your submission was successful. 

3. What’s the easiest way to get a business registration certificate in Hong Kong?

While you can do the paperwork on your own, it is best to outsource to an external agency such as Air Corporate. 

This ensures you receive your registration certificate without breaking a sweat. 

4. Can I change any particulars in the application for a business registration certificate once it is submitted?

This is only possible if you have applied online.

You can write to the Commissioner of Inland Revenue with the details of the changes you need. Make sure to include your name, capacity, name of your business, and the Transaction Reference Number of the application.

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Private limited companies are among the most popular business structures entrepreneurs choose when setting up their business in Hong Kong. As the name suggests, the company is held privately, and the owners’ liability is limited.

As of 2021, Hong Kong locals have registered 1,361 241 private companies, and entrepreneurs from over 83 countries have registered 13,870 non-Hong Kong  private limited companies.

This article explains:

• What is a private limited company, its structure, and why they are popular in Hong Kong
• Which businesses benefit the most from setting up a private limited company 
• What are the pros and cons of setting up a private company in Hong Kong; and
• How to set up a private company in Hong Kong

What Is a Private Limited Company?

A private limited company is a company limited by shares. 

The liability of the shareholders is limited to the number of shares they have subscribed. Shareholders of a private company are not personally liable for any debts incurred by the company. 

Typically, private companies often restrict the transfer of shares. If the articles of association do not restrict the transfer, the company may still refuse to register the transfer.

Structure of a Private Limited Company

A private limited company is a distinct legal entity managed by a board of directors. The shareholders of the company appoint the directors. 

Directors are responsible for managing the company’s affairs and can appoint officers to oversee the day-to-day operations.

Here are the minimum requirements one must fulfil to set up a private company in Hong Kong:

• Appoint atleast one director (can be a resident or a non-resident)
• Have atleast one shareholder (can be individuals or corporate entities. There are no restrictions on residence or nationality). The total number of shareholders shouldn’t exceed 50.
• Even though no minimum share capital requirement is prescribed under Hong Kong law, the common practice is having a share capital of not less than HK$1,000. 
• Have a company secretary. It could be a person resident in Hong Kong or entity registered in Hong Kong.
• Have an auditor, registered as a firm of accountants in Hong Kong
• Have a register of significant controllers of the company ( those who have significant control/influence over the company directly or indirectly as they hold more than 25% of the shares /voting rights)

Additionally, the company should obtain a physical address in Hong Kong. PO Box addresses are ineligible  — addresses of a business center, co-working space, or residence work.

A capital duty of 0.1% is also payable on the authorised share capital (subject to a maximum of HK$30,000).

Why Private Limited Companies Are Popular in Hong Kong?

Here’s why such companies are popular:

1. Location 

Hong Kong is strategically located and offers easy access to the Chinese market along with other Asian Pacific markets. 

Thanks to the free trade agreement between the People’s Republic of China and the Hong Kong SAR, businesses in Hong Kong receive preferential access to the mainland China market.

2. Attractive trade and tax regime 

For a private limited company, the taxation structure of its jurisdiction of incorporation is a key factor. Hong Kong doesn’t disappoint on this front — it is regarded as one of the most tax-friendly systems in the world that doesn’t levy any indirect taxes such as VAT or sales tax.

Hong Kong also has a free trade policy which means there are no long-drawn customs clearances needed for beginning operations. 

3. Competitive economy

In 2022, Hong Kong ranked 5th most competitive out of 63 economies by the International Institute for Management Development. Private companies in Hong Kong get to operate in a favourable and efficient business environment.

Benefits of Setting up a Private Limited Company

Key advantages includes:

1. Ownership can be completely foreign

Hong Kong laws allow private limited companies to be set up with 100% foreign shareholding except in certain sectors such as broadcasting.

Even if you don’t want any local shareholders, you can still set up your company and carry out your business.

2. Liability of shareholders is limited

Shareholders are on the hook for the amount they invest in the company. This insulates their personal assests.

3. A distinct legal entity

Under corporate laws, a company is a legal person. It allows the company to execute contracts, sue and be sued, and also borrow money from banks or financial institutions. 

4. Efficient tax structure

A private limited company in Hong Kong has to pay tax on its business profits. 

There are no additional taxes payable on dividend declaration or capital gains, except for foreign sourced income on account of the Foreign Source Income Exemption which came into effect from early 2023. 

Disadvantages of Setting up a Private Limited Company

Key drawbacks include:

1. The costs of operations are high

Doing business in Hong Kong is not exactly easy on the pocket. Rent for office space, labour costs, paying company secretary and auditors, and other day-to-day expenses can quickly add up.

For a new entrepreneur doing business in a foreign location like Hong Kong with limited financial resources, this can be a potential bottleneck.

2. Incorporation is not straightforward 

Compared to operating your business as a sole proprietorship or a partnership, incorporating a private limited company in Hong Kong can be time consuming. For non-Hong Kong companies, it can take up to 10 working days.

This excludes the time spent on collating the necessary paperwork and completing the application. 

3. The competition is intense 

Even though the regulatory and business ecosystem of Hong Kong is extremely inviting, one cannot discount the intense competition in the market. 

With an increasing number of entrepreneurs globally considering Hong Kong as their dream destination for doing business, new entrants may find it challenging to establish their presence quickly.

Should I Structure My Company as a Private Limited Company?

There is no straightforward answer to this, as it depends on the nature of business, tax treatment, and your goals. Always consult a lawyer for professional legal advice to understand whether you should incorporate as a private limited company in Hong Kong. 

As a rule of thumb, if you want limited liability protection of shareholders and have ample scope for external investors, a private company structure  is definitely an option to consider.

Given that you understand what is a private limited company and the unique benefit it offers, this structure may be the best option for certain scenarios/businesses, such as:

• SMEs who want to set up a distinct legal entity with limited liability of  owners 
• Companies engaged in IT and other technological services including fintech
• Companies engaged in export/import and trading activities
• Media and creative businesses given Hong Kong is a hot spot for media companies. Incorporating a private company can help such businesses protect their IP rights 
• Any foreign company that wants to establish presence in Hong Kong or set up a subsidiary

How Can I Register a Private Limited Company in Hong Kong?

Below is a snapshot of registering a private company in Hong Kong:

• Pick a name for your company. It shouldn’t infringe any trademarks or be already in use. 
• Obtain a registered office address
• Decide your share capital and identify the shareholders. You should also appoint at least one director and a company secretary to oversee the registration process
• Prepare your incorporation documents such as articles of association, Form NNC1 and IRBR 1 and file them with the Companies Registry, either online or in-person.
• Once you receive the certificate of incorporation, you can file for a Business Registration Number for annual tax filing. 

Hong Kong government has also started a One Stop service that allows you to apply for business registration and also incorporate your company through a single application. 

•  Open a company bank account and obtain licenses/permits depending on the nature of your business. Businesses that need a regulatory license include banking, insurance, medical services, securities, food and beverage.

Given the number of steps involved in registering a private limited company in Hong Kong, it is natural to feel overwhelmed. If you are a foreign business looking to set up your presence in Hong Kong, you may not feel comfortable navigating the entire process independently. 

And that’s why a service like Air Corporate exists.

With Air Corporate, you can register your Hong Kong company and a bank account within just 24 hours.

FAQs

How is a private limited company different from a public company?

Unlike a private company which restricts share transfers and limits the number of shareholders, a public company allows its shares to be freely traded on a stock exchange.

Public companies also need to fulfil stringent reporting requirements. 

What are the annual filing requirements of a private limited company?

Companies in Hong Kong need to file an Annual Return that includes the updated particulars of its share capital, directors, shareholders, and assets over which any charge/security has been created.

What are the different classes of shares a private limited company in Hong Kong can issue?

You can issue ordinary or preference shares with special voting rights. 

Your Articles of Association should include the nature/class of shares and voting rights attached to them.

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Hong Kong is a dream destination for entrepreneurs across the globe. Setting up a new business promises a host of benefits. But that doesn’t mean you can land in Hong Kong and start doing business activities as you please. You must fulfill key requirements such as obtaining a business registration number or BRN from the Business Registration Office at the Inland Revenue Department (IRD).

In this guide, you’ll learn what is a business registration number, why it is important for you, and how you can obtain BRN in Hong Kong.

What is A Business Registration Number (BRN)?

As per the Business Registration Ordinance, anyone who wants to carry out business in Hong Kong or an activity to make a profit must register their business within one month of commencing operations.

This includes:

• Non-Hong Kong company that wants to register in Hong Kong  or set up their representative/liaison office in Hong Kong
• Companies incorporated in Hong Kong
• Non-Hong Kong company that wants to rent out a local office

A business registration number is a unique number the IRD assigns to a business entity. It is printed on the registration certificate issued by the Business Registration Office. 

Every company in Hong Kong should display its business registration certificate at their registered office address. The company should display a printed copy if the certificate is in electronic format. 

If you cease the operations of your Hong Kong business, you must notify IRD to cancel your business registration certificate. To do that, you can either:

• fill up Form IRC 3113 to cancel your registration; or 
• send a letter to the Department along with the name and address of the business, your business registration number and the date you have ceased operations. 

Not obtaining BRN or failing to cancel your registration certificate attracts imprisonment and heavy fines.

Why is Business Registration Number Required in HK?

BRN is not a permit or license for trade or regulating business activities.

It is a unique number the IRD assigns and functions as your tax identification number (TIN).

You need to refer to your BRN when filing tax returns, company returns, opening bank accounts, or even filing forms/documents issued by various government authorities.

Format of Business Registration Number 

BRN is an 8-digit number. There are no special characters or alphabets used. 

Typically, the format of BRN is 1XXXXXXX – 000-04-11A. You can find it printed on your business registration certificate.

It is usually located at the bottom of the certificate under the title certificate no.

Source: Inland Revenue Department of Hong Kong (IRD)

Apart from BRN, the registration certificate also contains other information, such as:

• The name and nature of your business
• Date of commencement of business operations
• Address
• Whether it is incorporated by an individual or partnership
• Date of issue and expiry of the certificate

The certificate does not include the details of the proprietor/partners of the business. You must obtain an excerpt from the business register to find relevant information. 

Difference Between a BRN and CRN in Hong Kong

Apart from BRN, obtaining a company registration number or CRN is another key requirement business entities must fulfil. 

CRN is also known as the social security number of your company and establishes its legal identity. Even though BRN and CRN  may sound similar, they are different. Here is a snapshot of the important differences:

	BRN	CRN
Format and issuing authority	An eight digit number; issued by the IRD	A seven digit number; issued by the Companies Registry
Purpose	Used for daily operations of your business such as filing tax returns or official forms	Used to legally identify a company in various legal and official documents such as company contracts
Applicability	All types of businesses including sole proprietors and partnerships are eligible for BRN	Only companies that are incorporated in HK and registered with the Companies registry are eligible for CRN. This includes LLCs and foreign companies registered in Hong Kong.
Validity	Doesn’t expire even though the Business registration Certificate is valid for 1 or 3 year period	Expires and should be renewed
Where can you find it	Business Registration Certificate	Certificate of Incorporation

How Can Your Business Benefit from BRN?

Here are a few benefits of getting a business registration number:

1 – Helps with tax compliance 

Your business registration number functions as your tax identification number. 

When filing your tax returns, you need to quote your BRN.   

2 – Helps you open bank accounts for your business 

A business registration number is important for your business’s day-to-day operations, such as opening a bank account, borrowing loans, and conducting other financial transactions. 

3 – Simplifies the management of company information

You can add your business registration number as a  reference number when you submit official documents in connection with your business. 

This allows the relevant authorities to obtain information about your company without additional correspondence.

4 – Creates a unique identity for your business 

Since it is a unique 8-digit number assigned only to your business, it helps distinguish it from other businesses in the market, especially those with a similar name. 

How to Get a Business Registration Number in HK

You can apply for business registration number in Hong Kong in the following ways:

One stop company services

IRD allows a one-stop service where a person can make single application to incorporate their company with the Companies Registry and obtain business registration. 

• If you are a local company, you can submit Form NNC1 or NNC1G along with a copy of articles of association for incorporation and Form IRBR1 as a notice to the business registration office for obtaining BRN. You also need to pay the applicable fees. 
• If you are registering a non-Hong Kong company, you can submit Form NN1 along with relevant documents for incorporation and Form IRBR2 as a notice to the business registration office. 

You also need to indicate if the business name is different from the company name, the nature and description of your business, the date of commencement of operations, and whether you want a certificate valid for three years or one year. 

You need to pay applicable registration fees. For non-Hong Kong companies, the fee is HKD 250 for one-year validity and HKD 3,950 for a certificate valid for three years.

Making a joint application saves you time as you don’t need to commence business operations before applying for BRN. However, you must notify the Commissioner of IRD once you receive your BRN. 

But this option is not available for businesses that want to operate as a sole proprietorship, partnership, or through a branch office.

Applying after starting operations

IRD also allows application for business registration numbers after you have commenced operations. This option is available for all business structures including:

• sole proprietorships, 
• LLCs,
• branch, subsidiary or representative offices of a foreign/non Hong Kong company  

You can fill out Form IRBR 37, pay the applicable fees, and submit it within a month of starting your business operations. You can submit the form in person to the Business Registration Office or apply online on the e-Tax portal. 

For sole proprietorship, the applicant must submit proof of identity, such as a copy of the Hong Kong identity card in case of local residents or a copy of a passport for foreign residents.

LLCs can submit a copy of their Certificate of Incorporation (along with a  certified translation if the certificate is not in Mandarin or English). You don’t need to furnish any identity documents to get the business registration number of a foreign branch office, subsidiary or representative office.

Is that a lot of work you need help with? Opt for a hassle-free registration process with Air Corporate and incorporate your company within 48 hours.

Air Corporate can also  help you get your business registration number and assist with other company secretarial services.

FAQs

Do I need to apply for TIN in Hong Kong after I receive business registration number?

You don’t need a separate TIN, as the business registration number functions as a TIN in Hong Kong.

Do online businesses need to obtain BRN in Hong Kong?

As per IRD, any person who conducts trade or provides commercial services through internet in Hong Kong should apply for a  business registration number.

Failure to comply with the requirements attracts imprisonment/fines. 

How can I check my business registration number in Hong Kong?

If you want to look up the BRN of a business registered with IRD, use eTAX service online. 

You must enter the business’s name in English or Chinese and the location/address. 

Are there any businesses exempted from obtaining business registration number in Hong Kong?

The Business Registration Ordinance exempts certain businesses from obtaining BRN in Hong Kong. These include:

• Charitable institutions
• Hawkers carrying out a business outside a building
• Businesses engaged in agriculture, breeding or rearing livestock, provided the company is not incorporated in Hong Kong
• Shoe polish business

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For many entrepreneurs, Hong Kong is one of the most preferred destinations to set up a business. It is where many opportunities lie – supportive government, banking environments that are ideal, low tax rates, and much more.

On the same token, setting up an offshore company in Hong Kong provides plenty of advantages for entrepreneurs.

This guide will help you understand what is an offshore company, its benefits, and how you can easily register an offshore company in Hong Kong.

What is a Hong Kong offshore company?

An offshore company refers to a type of company incorporated outside of its original location or origin country with one or more headquarters in a strategic location.

In Hong Kong, offshore companies are often set up by entrepreneurs who wish to promote or run a business in other countries while gaining the most out of elements such as low taxes or the ease of setting up a business.

Why set up an offshore company in Hong Kong?

Before we get into the benefits of offshore companies, there are many reasons why entrepreneurs set up an offshore company in Hong Kong.

• Hong Kong has a flexible economy and few to no political interruptions, while also being supportive of more companies being formed.
• The process of setting up an offshore company is straightforward, and this benefits many entrepreneurs.
• There are several business-friendly policies in place, apart from Hong Kong being a strategic location for businesses to thrive.

Benefits of setting up an offshore company

Setting up an offshore company offers many benefits for entrepreneurs on an international level. Let’s explore the benefits of setting up an offshore company in Hong Kong.

1. Ease of setting up

There’s a reason why Hong Kong is ranked as the ‘number one business destination in the world. The country has a great, business-friendly environment for entrepreneurs to operate within and beyond, while also having reliable tax regimes.

Whether you’re setting up an offshore company or other types of companies, Hong Kong allows for 100% foreign ownership of companies. This makes the set-up process even more appealing to entrepreneurs worldwide.

2. Tax benefits

Hong Kong is well known for its flat-rate corporate tax. Based on Corporate Income Tax, the standard profit Tax Rate in Hong Kong is 16.5%.

However, what’s even better for offshore companies in Hong Kong is that some of these taxes are exempted completely. This is known as an OTC. According to the IRD, offshore companies are exempt from any sort of income earned outside of the country.

6 steps to incorporate an offshore company in Hong Kong

It’s surprisingly simple. As mentioned earlier, China is keen on attracting foreign companies, so the entire process is extremely streamlined.

There are really only four basic steps:

1.   Come up with a valid name for your company. Hong Kong’s Company Register Office released a pdf with naming guidelines to help. 
2.   Decide whether or not your company will be limited by shares or guarantees. 
3.   If your company will be limited by shares, the liability of members is limited by the articles of association to the amount unpaid on the shares respectively held by them. This is a rather legal topic that is outside of the scope of registering your company, however, it’s logistically fairly simple.
4.   If your company is 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 in the event of its being wound up. Non-profit-making organizations are usually registered as guarantee companies. Again, this is directly from the official Hong Kong Company Registry website.
5.   Register these forms electronically using this link:

•   Form NN1 – Application for Registration of a non-Hong Kong company
•   A certified charter or equivalent
•   A certified copy of the company’s certificate of incorporation or equivalent
•   A certified copy of the company’s latest published accounts
•   Notice to the Business Registration Office (IRBB2)

Now just collect your Certificates of Registration upon approval.

Register your offshore company with Air Corporate

Registration typically takes no more than a week once these steps have been completed.

There are companies in Hong Kong whose sole business is guiding foreign companies through the incorporation and/or registration process, but the process is simple enough that most companies can do it on their own.

For more information, check out the Hong Kong government’s official Company Registry Website, found here.

Does this seem like a bunch of busy work you don’t want to deal with?

Register with Air Corporate and get a registered offshore company approved in under 48 hours.

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The process of registering a company does not have to be so daunting, especially if you plan to incorporate it in Hong Kong.

There are many reasons why many businesses are registered in Hong Kong. According to HSBC, Hong Kong ranks 6th in Global Competitiveness Index (GCI). This can be for many reasons, including low taxation, its business-friendly environment, intellectual property protection, and a stable legal and political environment. 

All of these factors make Hong Kong a strategic location to do business. 

Incorporating your business in Hong Kong is simple. You only need to know a few steps and understand some requirements.

In this post, we will go over the steps you need to take to register your business in Hong Kong, the benefits of company incorporation, and finally the simplest and most effective way to register your company in Hong Kong.

Let’s get started!

What Should You Know Before Registering a Business in Hong Kong?

Before we get into the steps on how to register your business in Hong Kong, let’s take a look at some of the things you should know about.

Companies around the world choose to incorporate a company in Hong Kong due to its ease of doing business and the country being the financial economy hub. Because of this, you must understand how local organizations and institutions work in Hong Kong.

When you start a business in Hong Kong, you will be associated with the three main interlocutors, including:

1. Your company secretary
2. The Companies Registry
3. The Inland Revenue Department

The three interlocutors will be key persons, especially the companies registry and IRD, whereas your company secretary will be your primary contact person regarding your company maintenance and establishment.

Now that we know the requirements, let’s dive into how you can incorporate your business in Hong Kong.

How to Register a Company in Hong Kong in 5 Easy Steps

Understanding how to register a company in Hong Kong will be helpful to start a business in one of the world’s most popular economies. 

Here are the 5 steps to register your company in Hong Kong.

Step 1: Choose Your Company Name and Business Structure

The first step is the most obvious, as every company needs a name.

This, however, may be more difficult than one may think considering that over 1.3 million companies have been listed in total on the companies registry in Hong Kong.

Finding a name that hasn’t been taken by another company may therefore be more difficult.

It would be advisable to come up with important considerations when naming your company or brainstorm several name ideas for your new Hong Kong company.

Remember to ensure that the name does not infringe any intellectual property rights or “IPR.” In other words, the company name must be original.

Here are some tips to consider:

• Go to the Intellectual Property Department’s website to find out if your potential company would infringe on any intellectual property rights.
• Check Cyber Search Centre – public Hong Kong for records of all registered companies – to check the existing company names using their search function.

The next thing, which is as crucial, would be to choose the legal structure of a company. This will affect factors such as filing for taxes and even how business is done in general.

Below is a list of possible legal structures to choose for your company:

• Company limited by guarantee
• Company limited by shares
• Limited company
• Branch Office
• Sole proprietorship and partnerships

It is advisable to familiarise yourself with the features of each legal structure, as choosing a structure is highly dependent on the nature of your business.

Once you have researched each legal structure, you can then choose which type best suits your company.

Step 2: Get a Company Secretary & Register Your Company Address

Having a local company secretary is something that every company in Hong Kong is required to follow. Therefore, appointing a company secretary is one of the mandatory steps in establishing your company.

A company secretary acts as the main contact person for your business whenever Hong Kong authorities require any information about your business. They will be able to reach this person for that purpose. 

Although appointing a company secretary is mandatory, having one would be quite beneficial in many ways as this particular role will help your company maintain compliance with the authorities in Hong Kong without fail.

Read more: Here’s why you need a company secretary for your business in Hong Kong

Another important factor that you must ensure to get along with a company secretary is the registered address of your company. With your company’s registered address, governmental departments will be able to reach you and send you correspondence.

For this reason, you should use your company secretary’s address as your registered business address to avoid complexities in communication, due to a company secretary being the main contact person for your company. This is a recommended step to take.

If your company is remotely registered, see how you can get a business address remotely in Hong Kong.

Step 3: Prepare and Submit the Incorporation Documents

There are incorporation documents that need to be provided when you set up a company in Hong Kong. These documents will be necessary for you to get approval before you can start your business operation.

Let’s take a look at all the required documents, and how you can prepare each one.

1. NNC1 Incorporation Form – This is the form provided by the Companies Registry of Hong Kong. You will need to download the form and fill them out accordingly. This form must be signed by at least one of the shareholders of your company.
2. A copy of identification documents (HK ID card or passport) of a shareholder and a director.
3. Article of Association of the Company – This is a standard legal document that serves as the company’s constitution when it was established. This document outlines internal affairs elements such as the transfer of shares, the appointment of directors, and more. You can take a look at the example of the Article of Association of a Private Company Limited by Shares represents the components that are included within the document.

Once you have these documents prepared, the next step is to submit them. This is a straightforward procedure, which can be carried out through the Companies Registry.

Here are some ways you can submit incorporation documents to the Companies Registry:

• Using Companies e-Registry’s online portal platform, which is available 24/7
• Mailing your document to the Company Registry address; and
• Going to the Company Registry and submitting the documents in person

While you submit these documents, you will also need to pay the applicable government fee. These fees are often paid on a yearly basis, however, make sure to keep yourself informed of the fees as there can be changes by the HK government.

Step 4: Get Relevant Certificates and Documentation

Once you have submitted all the relevant documents, you will receive your business registration and incorporation certificate within 2-6 business days, which can be collected at the Companies Registry office or online.

You will need to renew your BRC annually from the date you were incorporated, whereas, for an incorporation certificate, you must keep them safe as it is valid throughout your company’s lifetime of operation.

Read more: Here’s what you need to know about Business Registration Certificate (BRC) 

Step 5: Stay on Top of Taxation & Financial Reporting Requirements

When your company is successfully incorporated, you will be automatically reported of existence by the IRD. However, it’s important that you keep up with the updated tax information to ensure your company’s compliance.

The good news is Hong Kong offers several benefits when it comes to taxation. As you are incorporated, here are some of the benefits you may be eligible to:

• a Corporate Tax rate of 8.25% (on the first HKD 2 million of profits); and
• a Corporate Tax rate of 16.5% thereafter.
• If your company operates outside of Hong Kong, you will be eligible to receive Territorial tax regime
• No capital gains tax
• No VAT

These are just some benefits you’re eligible to receive as an incorporated business in Hong Kong. Nevertheless, things can change depending on economic or political trends, as well as other factors. 

Thus, it’s important that you keep yourself informed of any updates that may come your way. You can always check on the website of the Hong Kong Government to check on the benefits you may be missing out on for your business.

Benefits of Company Incorporation in Hong Kong

Now that you are familiar with how to register a company in Hong Kong, let’s explore some of the core benefits you can expect from your company.

• Operate from anywhere in the world with ease – Yes! One of the main benefits of incorporating a company in Hong Kong is that you can run your company from anywhere in the world. So whether you have a physical store in Thailand or an online store in Singapore, your business can be on the global scale radar.
• Access to global clients – Hong Kong is considered a Special Administrative Region or a ‘golden’ gateway that links to Mainland China, and what does that do for your business? You can easily gain access to selling, promoting, and delivering your service or products to over 1.3 billion people. 
• International talent pools – With its multicultural environment and flexibility in work, your company can gain access to many unique, talented individuals who are diverse and highly skillful. Their expertise will come in handy depending on what you need for your business.
• Solid Intellectual Property Protection – Hong Kong’s government authorities highly regard IP as one of the most important mechanisms for businesses. They see innovative ideas and creations as something that should be treasured. Thus, these institutions set up a comprehensive framework to help businesses protect its intellectual ideas, properties, innovations, and more.

The Best Methods to Register Your Hong Kong Company

You may be wondering “If I know everything on how to register my business in Hong Kong, should I get started?” The answer is definitely yes, but the other question you need to ask yourself is “how”

In this section, we’ll look at some of the most common methods that are used as a process to incorporate a business in Hong Kong.

1. Register on your own

You can register a company in Hong Kong as an individual. All you need to do is ensure to follow the steps we outlined above and prepared the necessary documents you need to submit to the IRD and the Companies Registry.

Pros: You can save costs on hiring someone else to register your business for you and every confidential information will be controlled by you.

Cons: This process can be time-consuming to start with. You will need to prepare every document yourself and this can be a daunting task.

2. Register your company in Hong Kong with an agency

If you choose to incorporate your Hong Kong company with an agency, you will save plenty of time in not only the preparation of incorporation documents but at times, the money you spent to do it.

There are many agencies you can choose from, like Air Corporate, which offers a full-service incorporation package with three tiers of pricing with no hidden fees that are affordable and provide you with the right options that fit your needs.

Pros: Fast, simple, and efficient solution to register your business, as you will get to work with experts who are in the industry, who will help you prepare the documents needed on time, and deliver the work without you figuring out if you miss anything if you conduct the process by yourself.

Cons: Not all agencies will be experienced and updated with Hong Kong’s compliance rules and regulations. Some agencies may also charge you more than you need to pay to register a business in Hong Kong.

Register Your Company in Hong Kong – The Simplest Way with Air Corporate

If you’re looking to register your business in Hong Kong, Air Corporate offers you more than just a service for incorporation. 

Here are some things you can expect from Air Corporate incorporation services:

Pre-incorporation service:

• Verify your company’s name and availability
• Prepare all the documents necessary for incorporation
• Register your business in Hong Kong
• Fill out the incorporation application with the Companies Registry
• Receive Certificate of Incorporation
• Receive Business Registration Certificate (valid for 1 year)
• Other company necessary tools, including business documentation, professional templates, Articles of Association, company chop stamps, and more.

Post-incorporation service:

• Company secretary services
• Business bank account opening
• Significant controller register
• Registered office address
• Designated Representative (DR)
• Virtual office services
• General advisory and consulting

Consult with an expert at Air Corporate to see what you need to make your company incorporation successful and cost-effective. 

FAQ

1. What are the minimum statutory requirements for incorporating a company in Hong Kong?

The minimum requirements for registering a company in Hong Kong are:

• Any person or organization can register a company in Hong Kong.
• Minimum of one shareholder, who can be local or foreign, aged 18 or above.
• At least one director, who can be local or foreign, aged 18 or above.
• One person can serve as both the director and shareholder.
• No minimum share capital is required, but common practice is around HKD 10,000.
• A registered address is necessary.
• Company secretary required, who must be a Hong Kong resident or an incorporated entity with an office in Hong Kong.
• A designated Representative (DR) is needed to assist with the Significant Controllers Register (SCR) of the company.

2. Why set up a company in Hong Kong?

Hong Kong is considered a financial hub and it connects to Mainland China, which means it is the gateway to global clients access.

Other reasons to set up a business in Hong Kong are generally its business environment, culture, low-tax rate, and more.

3. Can a foreigner register a company in Hong Kong?

Yes, Hong Kong’s law accepts 100% foreign-owned companies. Thus, as a foreigner, you can register a business in Hong Kong.

4. How long does a company registration in Hong Kong take?

Company incorporation in Hong Kong usually takes 5-7 working days. However, in some cases, it can also be from 2-6 working days.

5. Should I relocate to Hong Kong to run my registered company?

No, you can run your business from anywhere in the world despite it being incorporated in Hong Kong. However, if you wish to relocate to Hong Kong to manage your registered business, you can do so by applying for an Investment Visa. You will be eligible to apply for an Investment Visa only when your company is successfully incorporated.

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Thanks to the pro-business policies and a free-market economy, doing business in Hong Kong is incredibly attractive.

But that doesn’t mean businesses get a free pass to treat their customers — consumer protection regulations ensure customers don’t get the short end of the stick due to unfair business practices.

Whether you are an established business or toying with the idea of registering a company in Hong Kong, it helps to know:

• how consumer protection laws apply to you,
• what are your legal obligations toward customers; and
• the best practices to follow that keep your customers satisfied and sustain your business

This guide simplifies the law for you and offers all the key insights about Hong Kong’s consumer protection regulations. Bonus: you also get a cheat sheet to get a head start with legal compliance. So dig in!

Key Consumer Protection Regulations in Hong Kong

Consumer protection regulations ensure every consumer in Hong Kong is treated fairly and also provide legal protection from businesses taking advantage of them.

Here’s an overview of the important consumer protection laws:

Trade Descriptions Ordinance (TDO)

Trade description is an umbrella term for any information about a good or service that helps a customer’s decision-making process.

TDO makes it punishable for businesses to provide any false, misleading, or incomplete trade description. The Customs and Excise Department enforces TDO.

It applies to:

• all goods and services sold/provided in Hong Kong even if they are manufactured outside Hong Kong;
• traders who operate out of Hong Kong but sell to overseas customers.

As a business owner, you should provide accurate information about anything you sell — whether the price, origin, quality, or features — so that your customers can make an informed decision.

Penalty: A fine of HKD 500,000 and a jail term of 5 years.

Competition Ordinance

Say you want to open a trading company in Hong Kong to sell mobile phone accessories.

But a group of other small businesses selling mobile phone accessories in the same location as yours decide to charge the same price for all the products. This would make it impossible for your business to compete and take off.

The Competition Ordinance prohibits such anti-competitive conduct and ensures that all businesses enjoy a level playing field. It also protects consumers and gives them access to a wide range of goods and services.

In particular, the Ordinance penalizes the following anti-competitive behaviors:

• Restrictive agreements and concerted practicesBusinesses cannot enter into a contract that restricts competition.
• Abuse of market powerIf you enjoy a dominant position in the market, you cannot use it to reduce competition.
• Anti-competitive mergers and acquisitionsYou cannot merge with a business or acquire it if it potentially reduces the competition in the market.

Penalty: Businesses can face fines of up to 10% of their total turnover for every year of violation, with a maximum duration of 3 years. Directors also face disqualification for 5 years. The Competition Tribunal decides the penalty based on the conduct.

Product safety regulations

Two key legislations deal with product safety:

(i) The Sale of Goods Ordinance

SGO gives business owners the right to sell their goods only when they meet the following conditions:

• Merchantable quality

The goods should be free of any defects that would make them unfit for use.

• Fit for purpose

The goods should serve the purpose for which the seller sells them.

• Correspond with the description or sample

The goods should match the description that the business owner provides.

For example, you have a shoe business and advertise that you sell shoes made of nubuck leather. If a buyer orders a pair and receives shoes made out of recycled plastic, the product you sell doesn’t match the description.

Buyers can reject goods that do not fulfill the SGO requirements and sue the seller for damages.

(ii) Consumer Goods Safety Ordinance (CGSO)

CGSO deals with the safety requirements of consumer goods for private use or consumption in Hong Kong.

CGSO does not cover goods such as food, water, electrical products, pharmaceutical products, children’s toys, etc.

As a business owner, you should ensure the following for legal compliance with CGSO:

• Fulfill the safety requirements of consumer goods set out by the Secretary for Commerce and Economic Development
• Inspect all consumer goods for safety prior to supplying them
• Provide relevant safety warnings about potential hazards, whenever necessary, in English and Chinese
• Determine the safety of your goods by testing them in an approved laboratory
• Maintain a record of the consumer goods you supply along with safety warnings

Penalty: CGSO provides both civil and criminal penalties.

First-time offenders face a fine of HKD 100,000 and/or a jail term of 6 months. Subsequent offenders face a fine of HKD 500,000 and/or a jail term of 2 years.

A consumer can also sue a seller of unsafe goods in civil courts and recover damages for pain and suffering.

Apart from SGO and CGSO, Hong Kong also has specific product safety ordinances, such as:

• Toys and Children’s Products Safety Ordinance.
• Public Health and Municipal Services Ordinance for food and drugs sold for human consumption

Data privacy and protection laws

The Personal Data (Privacy) Ordinance (PDPO) protects the privacy of individuals in Hong Kong by regulating the collection and retention of personal data.

Here are the key aspects of PDPO that business owners should comply with:

• Obtain consent before you collect any personal information of customers
• Tell your customers the purpose and use of the data you are collecting
• Use the data only for the purposes for which it was collected
• Retain data only for as long as you need it
• Publish a privacy policy on your website
• Handle data securely and have systems in place to prevent any unauthorized access
• Allow individuals to access their personal data
• Use the personal data of deceased individuals for research or statistical purposes but only if it is in the public interest and you implement appropriate privacy safeguards

Penalty: The Privacy Commissioner for Personal Data can initiate an enforcement action against anyone collecting/using personal data violating PDPO. The severity of the act determines the amount of financial penalties.

For serious offenses, the penalty is HKD 1,000,000.

Understanding Consumer Rights in Hong Kong

Businesses need a clear understanding of consumer rights to ensure legal compliance with consumer protection laws.

Consumers in Hong Kong enjoy the following set of rights:

A. Right to information

Consumers should have full information about the goods and services they buy.

This includes complete transparency about the price, features, warranty, safety warnings, quality, and quantity of the goods or services.

B. Right to choose

Consumers can decide what’s best for them from a range of products and services available. They are free to compare prices, features, and quality before deciding what they want to purchase.

C. Right to fair trade practices

Consumers have a right to be protected against unfair or deceptive trade practices by businesses.

D. Right to safety

Businesses cannot sell goods or services that are hazardous to the health or safety of consumers. Consumers also have a right to privacy of their personal data.

E. Right to redress

Consumers can seek compensation if they suffer any harm or loss due to the goods or services sold.

Fair Trade Practices for Business Owners

Adopting fair trade practices benefits you in numerous ways:

• you gain the trust of your customers
• you comply with legal obligations
• you avoid potential legal disputes that cost both time and money

Implementing fair trade practices isn’t rocket science, though.

You can start with this checklist:

Accurate product descriptions and marketing

Providing accurate information makes it easier for customers to make an informed decision.

So don’t make any misleading claims. Always clearly highlight the benefits and limitations.

Lastly, never influence or pressurize your customer to buy your product.

Transparent pricing and terms

Maintain complete transparency about the pricing of your product. If there are any additional fees payable, be sure to inform consumers.

Ensure that it is easy for a prospective buyer to locate the price of the product or service.

Ethical advertising and promotions

Never promote your product/service using any false advertising.

Your advertising campaign also shouldn’t hurt any culture or religion. Be mindful of using sustainable methods of promotion to reduce your environmental impact.

Quality assurance and product safety

Whatever you sell should be of high quality for your consumer’s safety.

Implement a quality assurance program to test the products and services against your quality standards before launch. You can also set up testing labs to identify whether your product poses any safety concerns to prevent potential accidents.

Don’t skip training your employees about the various safety and quality checks and keep updating the processes regularly.

Ensuring Legal Compliance for Your Hong Kong Business

Complying with Hong Kong consumer regulations is critical for operating your business smoothly and avoiding lawsuits.

Consider these steps for legal compliance:

Familiarizing yourself with relevant regulations

Several organizations in Hong Kong conduct seminars and send newsletters to help business owners understand consumer protection laws.

You can also check government websites like Commerce and Economic Development Bureau to learn more.

Implementing internal policies and procedures

You can also come up with a clear rulebook of do’s and don’ts to minimize the chances of violating any consumer law.

Start by identifying the key risks, such as data privacy, product safety, and marketing strategies. You can implement policies that lay down the industry-standard benchmarks to aim for and provide guidelines to follow when things don’t go as planned.

Regularly monitoring and reviewing business practices

Schedule regular audits and reviews of internal policies and practices to identify gaps. Set up a dedicated team to monitor your business’s compliance with Hong Kong consumer protection regulations.

Train your employees to make them aware of the importance of consumer protection.

Seeking legal advice when necessary

Speaking to a lawyer specializing in consumer law can help you to stay up with legal developments.

Regulations applicable to your business may vary depending on your industry and the products/services you offer. A lawyer can provide inputs to ensure appropriate legal compliance.

Handling Consumer Complaints and Disputes

Failing to manage consumer complaints and disputes can tarnish the reputation of your business. You also run the risk of facing legal action and financial penalties.

Here’s what you can do to avoid running into any legal problems:

Developing a comprehensive customer service policy

A comprehensive customer service policy is the bedrock of every successful business.

89 percent of consumers come back when they experience a positive customer service experience.

A strong customer service policy also increases customer satisfaction and loyalty, boosting sales and improving your bottom line. And the more efficiently you resolve issues your customers face, the better your chances of minimizing negative feedback.

Here’s what can go in your customer service policy:

• your customer service standards and goals
• expected timeline for addressing customer queries/complaints
• how your employees should handle customer complaints and inquiries, particularly when customers are being difficult
• The training and support you will provide to employees for customer service
• your metrics for tracking the success of your company’s customer service

Managing and resolving complaints effectively

Legal problems are unavoidable when business owners fail to resolve customer complaints effectively.

Here’s a cheat sheet for effective complaint management and resolution:

• Start by acknowledging the customer’s concern. You can go a long way when you make someone feel heard.
• Be apologetic about the inconvenience and assure the customer that you will fix it promptly
• Launch an investigation and aim for a speedy resolution
• Ask if the solution is satisfactory or if you can do anything else

Understanding the Role of the Consumer Council

The Consumer Council of Hong Kong is an independent body. A customer who is not satisfied with the resolution offered by a business can approach the council.

It cannot take any legal action against businesses, but it can publicize the names of offending businesses.

It also has powers to order mediation and conciliation for dispute resolution.

Avoiding legal disputes and potential penalties

The best way to insulate your business from potential legal action by customers? Stick to honest marketing practices.

Whether you are selling a product or service, don’t compromise on the quality.

Resist the urge to make any misleading claims to boost your sales. If your customer has a genuine complaint, acknowledge it and resolve it proactively.

The Role of Consumer Education in Protecting Consumers

Customer who is unaware of their legal rights as consumers face a heightened risk of being harmed by unfair trade practices.

Importance of consumer awareness

Awareness of consumer protection regulations helps buyers to make an informed choice and protect themselves from deceptive traders/trade practices.

Customers are aware of their rights and hold businesses accountable when they default in legal compliance. This creates a level playing field and promotes healthy competition in the market.

Educating customers about their rights and responsibilities

Several organizations, such as Consumer Council and Consumer Rights Awareness Network, work toward making customers aware of their rights and responsibilities.

Customers should also know what remedies are available when a trader fails to act as per consumer protection laws.

Promoting ethical consumption

There is a close link between consumer protection and ethical consumption.

Ethical businesses tend to be more accountable to their customers and maintain complete transparency about their trade practices. Customers who purchase from such businesses are less likely to be victims of deceptive practices.

Importance of Ethical Business Practices and Corporate Social Responsibility

Implementing ethical practices such as CSR can help you to gain customers’ trust and increase your market reputation.

The link between ethical business practices and Consumer trust

Ethical business practices are honest and transparent ways of conducting business. It includes:

• treating employees and customers fairly without following any discriminatory practices
• taking accountability for actions
• giving back to the society

Businesses that operate ethically develop a strong bond with their customers and earn their trust. Customers that trust your business stay loyal, refer your business to family and friends and increase the chances of your success.

Ethical business practices also boost brand awareness, increasing conversions and making you more attractive to investors.

Implementing corporate social responsibility initiatives

Businesses that take CSR seriously will likely offer quality products and maintain transparency about their practices. They are also less likely to use deceptive practices or cheat their customers.

Even though CSR initiatives are not mandatory in Hong Kong, implementing them can help you gain more customers.

Balancing Profitability and consumer protection

Of course, the ultimate goal of any business is profit generation.

But that shouldn’t be at the cost of acting against consumer laws. You get happy customers when you conduct business in compliance with consumer protection regulations. And satisfied customers stay loyal and provide referrals, helping you to boost your bottom line.

Conclusion

Even though Hong Kong is a favorable jurisdiction to start your business, you cannot cheat your customers.

Make sure to understand how consumer laws apply to your business and take steps for legal compliance. Business owners who prioritize consumer rights and use fair trade practices have a better chance of surviving in a competitive economy.

Keen to set up a business in Hong Kong but afraid of how to ensure legal compliance with consumer laws? Need someone who can hit the ground running and help you understand consumer protection regulations?

Contact Air Corporate today.

FAQs

1. Are e-commerce transactions protected by Hong Kong consumer protection regulations?

Currently, there are no specific regulations in Hong Kong that safeguard customers of e-commerce transactions. Trade Descriptions Ordinance and Sale of Goods Ordinance provide generic protection against unfair trade practices.

However, the Legislative Council of Hong Kong has emphasized the need for specific legislation for protecting e-consumers.

2. Do the Hong Kong consumer laws provide a right to a refund?

The current legislation doesn’t provide such a right.

3. What happens if a business owner violates Hong Kong consumer protection regulations?

Depending on the nature and severity of the violation, a business owner may face fines or imprisonment.

In some cases, the court may also order the business to shut down.

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Imagine you build a device to simplify cancer diagnosis and start scouting for investors in Hong Kong to market your product. You would be left high and dry if Hong Kong Intellectual Property rights did not exist to stop your competitors from stealing your design!

Simply put, intellectual property protection is essential for a business’s growth in an innovation-fuelled economy.

As a leading international trading centre, Hong Kong is home to several industries that need protection for their intellectual property. Hong Kong IP laws protect the IP assets of Hong Kong businesses from other market players acting in bad faith and trying to cash in on someone’s work.

Unsure how to navigate the landscape of Hong Kong IP laws? This guide is the perfect place to begin. Learn about IP registration, IP licensing, and the best practices for IP management.

Understanding Intellectual Property Rights in Hong Kong

Intellectual property includes everything that is a product of intellect and creativity.

The silhouette of a half-bitten apple on your iPhone, the novels Shakespeare wrote, or even this blog post you are reading are all examples of intellectual property. Whatever your business creates, such as websites, logos, inventions, and designs for particular processes or marketing collaterals, also qualify as intellectual property.

Legal protection for intellectual property stops others from stealing and profiting from your work. The right or protection is automatic for certain types of intellectual property. But for others, you have to apply for protection.

Here are various types of intellectual property rights that Hong Kong IP laws recognize:

Types of intellectual property rights

The most common types of intellectual property rights include:

1. Copyright

It is the right that the owner of any original work holds. The work doesn’t have to be of a certain aesthetic or creative value to receive copyright protection.

You get a copyright when you create any literary or artistic work. Examples include books, musical compositions, drawings, paintings, films, sound recordings, and software. In general, creative industries benefit the most from copyright protection.

2. Patents

Patents exist to protect inventions. A patent holder has the right to prevent others from using their invention for a limited time.

3. Trademarks

A trademark is any sign distinguishing your product or services from others.

Name, logo, design, shape of your product, sound, or smell can all be registered trademarks.

4. Industrial Designs

Industrial design is a shape or pattern that’s important for an industrial process.

The design for creating watches, jewellery, phones etc., are examples of industrial design.

5. Trade Secrets

A trade secret is any information that holds economic value for a business and provides a competitive edge.

Significance of IP rights for businesses and creators

Intellectual property rights are critical because:

• they act as an incentive to promote innovation
• prevent your competitors from benefiting from your hard work
• boost the valuation of your business and brand

What are the Hong Kong IP Laws?

You can protect your intellectual property under the relevant Hong Kong IP laws:

Copyright Ordinance

The ordinance governs copyrights in Hong Kong and grants the following protections to the copyright holders:

• circulate, rent, or lend copies of their work
• communicate their work via an electronic mode
• adapt their work

Term of protection: 50 years after the creator dies.

Patents Ordinance

This ordinance governs the registration and protection of patents. It grants patents to inventions that are:

• new
• demonstrate an inventive step; and
• have industrial application

It also covers inventions which not eligible for patent protection, such as:

• those meant for experimental purposes; or
• public non-commercial use.

Term of protection: 20 years or 8 years, depending on the patent you hold.

Trademarks Ordinance

This ordinance governs the registration and protection of trademarks. To register a trademark in Hong Kong, the sign must:

• distinguish your product from others in the market, and
• be capable of graphical representation.

A registered trademark owner gets the exclusive right to use the trademark. Even though registration is not mandatory, not registering limits your legal protections and makes it harder to prove that you are the legal owner.

There are a few exceptions listed under the ordinance, such as:

• fair use
• using the trademark in a country where it is not registered

Registered Designs Ordinance

The ordinance covers the registration and protection of registered designs.

Only new and original designs receive registration. Registering the design gives you an exclusive right to it during the term of protection.

IP Registration in Hong Kong

Here’s an overview of the IP registration regime in Hong Kong:

Intellectual Property Department (IPD) is a statutory body responsible for registering and protecting trademarks, patents, and industrial designs. The Copyright Licensing Bodies Registry is also part of the IPD.

Here’s how to register different types of intellectual property in Hong Kong:

Copyright registration

Copyright does not need any registration in Hong Kong.

As soon as you create any work, the copyright arises automatically.

Patent registration

Apply to the Patents Registry of the Hong Kong IP Department.

You can register for either:

• standard patent (owner protected for 20 years); or
• short-term patent (owner protected for 8 years).

You can submit the application online or in person, along with a description of the invention, scope, and drawings. Hong Kong also allows the re-registration of Chinese, EU, or UK patents.

Trademark registration

You can apply to the Trade Marks Registry of the IP Department to register a trademark in Hong Kong. Applications can be online or in person.

The application should include a description of the trademark and the goods/services it covers.

The term of protection is 10 years.

Industrial design registration

You can protect your industrial designs by registering them with the Designs Registry of the Intellectual Property Department.

The application should include a description of the design and drawings.

The maximum protection term is 20 years.

Costs and duration of IP registration

Predicting the exact timeline for IP registration in Hong Kong is difficult as it depends on a case-t0-case basis.

Here’s an indicative timeline and costs:

Patents

Cost:

• Standard patent – HKD 345 for an online application and HKD 480 for a paper application.
• Short-term patent – HKD 545 for an online application and HKD 755 for a paper application
• An additional HKD 68 is payable as advertisement fees for standard and short-term patents.

Information as of date. For more details, check the IPD website.

Timeline:

6 to 9 months if there are no objections or deficiencies in the application

Trademarks

Cost:

• HKD 2000 for the application fee and application form.
• HKD 1000 for each additional trademark class in the application.

Information as of date. For more details, check the IPD website.

Timeline:

It can take up to six months for registered trademarks if there are no deficiencies or oppositions.

Otherwise, it can take up to 12 months.

Industrial designs

Cost:

The application fee to register a single design is HKD 785 plus HKD 155 as an advertisement fee.

Fees go up if you wish to register more than one design.

Information as of date. For more details, check the IPD website.

Timeline:

Between 2 to 6 months

IP Licensing and Commercialization in Hong Kong

Commercialization and licensing IP is critical for a knowledge-based economy like Hong Kong. Here’s how you can do it:

IP licensing agreements

You can execute a licensing agreement to allow another person to use your IP in exchange for royalties.

IP licensing agreements in Hong Kong are widely used for technology transfer. Here’s what you can license under an agreement:

• Patents
• Copyright
• Trademarks
• Product designs

You can grant:

• an exclusive license, which means only the licensee can use the IP; or
• a non-exclusive license so that you can continue to use your IP and license other users.

Franchising and technology transfer

Franchising refers to a specific licensing arrangement, typically used for trademarks and trade secrets. It is also a vehicle for technology transfer.

Using a franchising agreement, you allow other businesses to distribute your products or use your trade name to run their business in lieu of franchise/marketing fees.

For example, Burger King US executes franchising agreements that allow its franchisors to set up Burger King outlets in Hong Kong.

Revenue generation

You can monetize your IP assets to generate revenue for the business. Here are some of the common methods:

• Receive royalty as compensation for licensing your intellectual property such as patents, trademarks and copyrights. This practice is particularly common in the pharma and biotech sectors.
• Use IP rights as collateral to borrow loans
• Tie up with another business and pool relevant patents for a common investor

Protecting Intellectual Property Rights in Hong Kong

Here’s an overview of the enforcement options available in Hong Kong to stop IP infringement:

IP enforcement mechanisms

Hong Kong IP laws allow civil and criminal enforcement.

Civil enforcement

The first step of civil enforcement involves writing to the infringer and ordering them to stop the activity.

If the infringer doesn’t stop, you can approach the trial court or high court to enforce your rights. You can approach the Court of Appeal to appeal against the high court’s judgment.

Typically, an enforcement action takes 15 to 30 months.

Criminal enforcement

The Hong Kong Customs and Excise Department (C&E) initiates criminal action against copyright and trademark infringements in the region.

IP owners must prove they own the relevant intellectual property and provide evidence of its registration and infringement in Hong Kong.

Preventing and addressing infringement

IP infringement impacts your business in several ways:

• dilutes your reputation
• minimizes innovation
• results in revenue loss

Taking proactive steps to prevent infringement protects your work and reduces the cost of pursuing legal action.

Legal remedies and dispute resolution

Preferred forums for initiating civil action against IP infringement include district and high courts.

Usually, courts order one of the following remedies:

• direct the offender to pay monetary compensation
• pass an injunction that directs the infringer to stop
• direct the infringer to pay you the profits earned by infringing your IP

You can also resolve IP disputes through arbitration and mediation.

Here’s a break up of penalties for various IP infringements:

• copyright piracy/infringement: jail term of up to four years and a maximum fine of HKD 50,000 for every act of infringement.
• trademark infringement: a fine of up to HKD 500,000 and imprisonment of up to five years.
• infringing registered design: imprisonment of up to five years and payment of damages.
• patent infringement: imprisonment up to three years and payment of damages.

Trade Secrets and Confidential Information

Any information that gives your business a competitive edge is valuable and requires protection. The umbrella term ‘trade secret’ covers all such information.

Definition of trade secrets

Any confidential information of a business known to a limited number of people and holding commercial value counts as a trade secret.

The recipes for KFC chicken and Krispy Kreme doughnuts are some of the world’s most popular trade secrets.

Other examples of trade secrets include:

• marketing and pricing plans
• list of customers
• manufacturing and design processes

Protection strategies for trade secrets

The common law of confidence protects trade secrets Under Hong Kong IP laws.

You can impose an obligation on another person to keep the information confidential. The owner of the trade secret has the following remedies for any breach of confidence:

• injunction
• damages
• delivery of the document/material containing the trade secret

Non-disclosure agreements and confidentiality clauses

Executing a non-disclosure agreement is a strong preventive measure to protect the misappropriation of your trade secrets.

You can execute an NDA with business partners and employees to prevent them from sharing any confidential information about your company.

IP Management Best Practices

A solid plan for managing and protecting your IP assets can go a long way to boost the potential of your business.

Here are some best practices to consider:

Developing an IP strategy

IP strategies are unnecessary for small companies with few employees on the roll.

But if you are running a large organization, create a well-drafted intellectual property strategy that focuses on:

• creating intellectual property assets and identifying specific protection needed;
• identifying any third parties who may be involved with the creation of IP assets;
• reducing unnecessary costs; and
• commercializing IP assets

Monitoring and maintaining IP rights

Maintaining and monitoring intellectual property rights helps you to align the IP strategy with the business’s overall goals.

In particular, you should aim toward:

• establishing dedicated IP management teams responsible for registering and maintaining IP rights;
• increasing awareness about intellectual property rights and company policy; and
• negotiating and administering IP agreements with relevant third parties

Valuation and IP audits

Conduct regular IP audits to unlock the true value of your IP assets.

Audits can also help you uncover loopholes in licensing agreements, assignment agreements, tech transfer agreements, etc., to prevent your rights from getting compromised.

IP portfolio management

Like your investment portfolio, you must manage your intellectual property assets smartly.

There are different aspects of IP portfolio management, such as:

• auditing your existing IP assets,
• identifying new assets that need IP protection, and
• minimizing the risk of IP infringement, including any secondary infringement

You can also make sure that your IP policies cover all products and services you offer to provide a competitive advantage in the market.

Conclusion

Other than copyright, you need to approach relevant registries of IPD to register your intellectual property right and receive legal protection. Hong Kong IP laws also have a strong enforcement mechanism to address infringement issues.

Protecting your IP rights can help you get an edge over your competitors, skyrocket the value of your business, and open floodgates of investment. And being well-versed in Hong Kong’s IP landscape means you know which authority to approach if you need IP registration or wish to initiate enforcement action for infringement.

Are you having difficulty trusting someone to establish your business in Hong Kong while you are on the other end of the world? Need someone with a wealth of experience setting up and running a business in Hong Kong, including compliance with Hong Kong IP laws?

Get in touch with Air Corporate today.

FAQs

1. Can you register a copyright in Hong Kong?

There is no provision to register a copyright in Hong Kong. But you can get proof of copyright in Hong Kong by applying for an affidavit or declaration under the Copyright Ordinance.

2. Do Chinese patents cover Hong Kong inventions?

No. Chinese patents only offer protections in PRC. Inventors in Hong Kong must file Hong Kong Standard Patent Application to receive patent protection in Hong Kong.

3. How do I get a trademark in Hong Kong?

You can file an application online or in person with the Hong Kong government’s Trade Marks Registry, Intellectual Property Department.

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Hong Kong is not only a top-tier financial hub — it is also one of the most expensive places to stay. Anyone working in Hong Kong, especially those who have low-income jobs, needs a minimum wage to keep up with living expenses.

The Minimum Wage Ordinance and Minimum Wage Commission lay down the government-mandated wage that a person employed in Hong Kong should receive and protects them against unduly low pay.

Here is an ultimate guide exploring Hong Kong’s minimum wage landscape. Read through to learn how to calculate your employee’s earnings to ensure compliance with Hong Kong’s minimum wage law.

Understanding the concept of minimum wage

Let’s start with the basics before diving deep into minimum wages in HK.

Definition of minimum wage

The International Labour Organization defines minimum wage as the minimum remuneration a worker should receive for their work.

The minimum wage is usually decided through a minimum wage ordinance/statute, a wage board, industrial and labour courts, or tribunals. Collective agreements between trade unions and employers can also decide the minimum wage payable.

No agreement can reduce the statutory minimum wage payable. Employment contracts agreeing to any reduction are void under the law.

The rationale behind minimum wage policies

The chief objective is the protection of workers against excessively low pay.

Enforcing statutory minimum wages also ensures that workers receive fair wages to access the necessities of life and stay above the poverty line. From the standpoint of welfare economics, the statutory minimum wage is also considered a tool to minimize societal inequality.

Guaranteeing minimum pay incentivizes workers to be more productive and produce better-quality work.

Minimum wage systems around the world

A majority of countries across the globe follow minimum wages.

United Kingdom and New Zealand were some of the earliest countries to pass legislation to guarantee minimum wages.

Some countries follow a national minimum rate for all workers, while others apply different rates based on the sector, geographical region, population, and enterprise size.

Hong Kong’s statutory minimum wage rate

Here’s a brief overview of the statutory minimum wage system in Hong Kong.

Background and implementation

The Minimum Wage Ordinance enforces the Hong Kong minimum wage.

It applies to every employee and their employer, subject to the exceptions below.

Before the ordinance, a 1932 legislation and the Trade Board Ordinance of 1940 gave powers to the governor to establish minimum wages. But the governors did not propose any minimum wage under these legislations.

The Hong Kong government proposed a Minimum Wage Provisional Commission in February 2009 to reduce the widening wealth gap. The Minimum Wage Ordinance was finally passed in 2010 and bought into effect in May 2011.

Eligibility and exceptions

All employees, including those who are disabled, are eligible to receive Hong Kong minimum wage irrespective of their:

• employment contract (whether permanent, continuous, casual, full-time, or part-time)
• wage payment period (whether monthly, weekly, daily, hourly or per piece basis)

No statutory minimum wages are available for :

• live-in domestic workers (including domestic helpers, chauffeurs, gardeners, or other personal helpers) who receive free housing from their employer;
• student interns and work experience students; and
• anyone not covered by the Employment Ordinance. E.g. anyone serving their employment contract outside Hong Kong and apprentices registered under the Apprenticeship Ordinance

Current statutory minimum wage rate in 2023

From 1 May 2023, HK’s statutory minimum wage (SMW) is HKD 40 per hour. This means that regardless of the wage period, no employer should pay below the statutory minimum wage rate.

The monthly monetary cap for employers recording the total hours clocked in by an employee is fixed at HKD 16,300. So if the employer pays an employee less than HKD 16,300 as wages per month, they need to record the total number of hours worked by that employee during a wage period.

Calculation of hourly wage rate

The minimum wage ordinance only provides a wage floor and doesn’t mandate hourly wage payment.

It doesn’t state that each hour’s wage should meet the statutory minimum. The employer’s only obligation is to ensure that the wages paid are not less than the statutory amount when averaged over the total hours clocked in during a wage period.

Here’s the formula to calculate the minimum wages payable by an employer:

Minimum wage = Total working hours in a wage period x Statutory Minimum Wage (currently, HKD 40 per hour)

The Labour Department’s Minimum Wage Reference Calculator is also a handy tool to work the minimum wage your employee is entitled to and whether you are paying above their entitlement based on their current salary.

Wage policy and government regulations

The recommendations of the Minimum Wage Commission influence the policy decisions on minimum wages in HK.

The role of the MWC is to strike a balance between promoting Hong Kong’s economic growth and protecting workers against excessively low wages.

Role of the Minimum Wage Commission

The Minimum Wage Commission (MWC) is an independent statutory body in Hong Kong. It has been established under the Minimum Wage Ordinance.

The job of MWC is to submit recommendations on minimum wages to the Chief Executive at least once every two years. The Legislative Council passes the law on minimum wages based on MWC and Chief Executive’s recommendations.

While reviewing the minimum wage rate, MWC conducts in-depth discussions with various organizations representing employers and employees and analyzes statistical information.

Wage adjustment mechanism

Setting the floor for wages is the most critical part of a minimum wage system.

Workers don’t receive effective protection against poverty when the base is too low. If the base is too high, the unemployment rate goes up.

MWC adopts evidence-based criteria for wage adjustment mechanisms. Apart from taking into account the views of the public and stakeholders, it conducts impact assessments.

Impact assessment includes various SMW test levels to evaluate the potential impact on employees, employers, inflation, and unemployment rate based on different economic assumptions.

Factors considered in determining minimum wage

Some key factors that MWC considers for calculating minimum wage include:

• Prevailing economic conditions
• Demand and supply in the market
• Productivity of labour
• Prevailing wage rates
• Bargaining power of trade unions

Enforcement and penalties for non-compliance

As per the Employment Ordinance, any employer that doesn’t pay minimum wages is liable to pay a fine of HKD 350,000 and face imprisonment for three years.

Economic Impact of Hong Kong’s minimum wage policy

Here’s how the minimum wage policy of Hong Kong may impact the following:

Income inequality

Increasing the minimum wage can reduce poverty and income inequality by minimizing the gap between wages.

Employment rates and labour market

Critics of minimum wages argue that enforcing a wage floor can lead to employers hiring fewer workers. But there is insufficient evidence to support the premise.

The employment rate may reduce in labour-intensive industries where labour costs make up a chunk of the total production cost.

Supporters of minimum wages suggest that the employment rate may increase if minimum wages increase domestic consumption and demand.

Cost of living and inflation

Increasing the minimum wage is unlikely to significantly increase inflation and the cost of living in Hong Kong.

In fact, labour groups in HK argue that the minimum wage revision of May 2023 is still less than the accumulated inflation rate over the last four years.

Businesses and industries

The statutory minimum wage is only the wage floor for employees. It doesn’t mean Hong Kong employers are only liable to pay the minimum wage. They still need to comply with relevant provisions of the Employment Ordinance and also honour other statutory and contractual entitlements such as leaves, meal breaks, and rest days.

Some business owners have also expressed concerns about a ‘knock-on effect‘ due to the periodic increase in minimum wages in HK. They argue that raising the wages of employees who earn well above the minimum is an added burden to preserve the wage hierarchy.

Comparing Hong Kong’s minimum wage to other regions

Learn how Hong Kong’s minimum wages fare compared to the rest of the world:

Minimum wage rates in other countries

Here’s a snapshot of the current minimum wages:

• Mainland China: Each province in China can decide its minimum wage. The highest monthly minimum wage is in Shanghai at RMB 2590. Hunan has the lowest monthly minimum wage at RMB 1220.
• Switzerland: No national minimum wage. Each Canton can determine its minimum wage. At present, Geneva pays the highest hourly minimum wage of CHF 23.
• Australia: Approximately 812.50 Australian dollars per week
• United Kingdom: Employee’s age determines the minimum wage they earn.. The hourly wage is £10.18 for workers aged 21 to 22, £7.49 for workers aged 18 to 20, and £10.42 for workers above 23.

Factors affecting wage rate differences

A number of factors contribute to the variation in minimum wages across countries. These include:

• Regional economic conditions
• Cost of living
• Differences in labour market conditions
• Size of the enterprises
• Population
• Sector-specific economic factors

Lessons from other minimum wage models

Here’s what Hong Kong can consider incorporating:

• Implement an age-based minimum wage system similar to the UK.  A national minimum wage is paid to anyone between 16-22 whereas a national living wage is available for workers aged 23 and above. The national living wage is higher than the national minimum wage.
• Permit specific industries to formulate their minimum wages in HK, depending on their capacity to pay and the skills of the workers
• Annually review the minimum wage to take into account rising living costs and inflation

Navigating Hong Kong’s minimum wage landscape as an employer

Are you looking to register your business in Hong Kong and get employees on the roll? Here’s how to cruise through the statutory minimum wage requirements:

Ensuring compliance with minimum wage regulations

Consult with an employment law lawyer to stay updated about the latest changes to Employment and Minimum Wages ordinances.

Integrating minimum wage policies into payroll management

Outsource your payroll processing to a trusted service provider to keep your accounting system up to date with the latest minimum wage laws.

Strategies for managing labour costs

Investing in training to make employees more productive to counter increases in labour costs due to higher minimum wages.

Moreover, given that higher labour costs may also increase a firm’s tax burden, consult an accountant for efficient corporate tax planning and filing.

Employee engagement and satisfaction

Ensure that the average wages of employees are above the minimum wage limit to promote employee satisfaction and motivation.

Future of minimum wage in Hong Kong

The future of minimum wages in Hong Kong is uncertain as there are multiple actors are at play.

Here’s a look at some of the key aspects:

Potential Changes and Trends in wage policies

Hong Kong’s economy faces significant challenges due to the ongoing global economic crisis in the wake of the COVID-19 pandemic and geopolitical risks.

As MWC noted in its findings, increasing minimum wages in such an economy can force enterprises to reduce headcount, leading to unemployment.

As such, the government may freeze the statutory minimum wage rate until the economy bounces back. Between 2011 and 2018, when the Hong Kong economy was in a better position, the minimum wage rate increased from HKD 28 to HKD 37.5. However, from 2019 until 2023, it has only increased from HKD 37.5 to HKD 40.

Role of Government and Policymakers

Hong Kong’s government faces significant public pressure to reconsider the mechanism of deciding minimum wages in light of the protests and demonstrations.

The government has also pointed out the need to balance the interests of businesses and workers and avoid sharp increases that may potentially impact employment rates.

Advocacy and workers’ rights movements

Labour groups in Hong Kong have been consistently critical of the minimum wage revisions by the government.

They believe employers should pay a living wage, estimated to be HKD 60 currently, to meet the basic needs of employees in an expensive region such as Hong Kong. Worker rights movements have also urged the government to consider minimum wage reviews every year instead of reviewing them once every two years.

Conclusion

To recap, as an employer in HK, you cannot offer wages below the statutory minimum. Failure to pay minimum wages attracts civil and criminal liability.

While minimum wages protect the employees, they also directly impact a business’s bottom line. Given the economic situation of Hong Kong, there is a greater need for closely monitoring the minimum wage policies that create a win-win situation for all.

Running a business in Hong Kong can be challenging when you have to ensure compliance with labour and employment laws. Need help with starting up in Hong Kong and sailing through legal compliances?

Contact Air Corporate today so we can guide you in the right direction.

FAQ

How to calculate Hong Kong minimum wage for my employee?

You need to multiply the hours an employee works by the current statutory minimum wage to work out the monthly minimum wage.

What is the current minimum wage in HK?

From 1 May 2023, the minimum wage in HK is HKD 40 per hour.

Do employers need to pay minimum wage in HK for rest days?

Employers and employees can agree on the payment of minimum wages for rest days and the manner of calculation.

There is no obligation under law to pay minimum wages for rest days.

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