Business Registration in Hong Kong: A Comprehensive Guide

Hong Kong is an attractive market for investors and entrepreneurs from all over the world, with China and the Asia-Pacific region right on its doorstep.

The city consistently ranks as the world's freest economy as an international economic center with excellent technology infrastructure.

The administration's pro-business attitude, tax incentives for startups, a productive legal system, and world-class tech infrastructure have all contributed to this.

The first step in using Hong Kong's potential is to establish a company there. Continue reading to learn everything you need to know about business registration in Hong Kong.

Understanding Hong Kong Business Registration

The Companies Ordinance of Hong Kong can help anyone who wants to register a business in Hong Kong. This is an official document that outlines the legal parameters within which businesses can operate in Hong Kong.

The business registration office, managed by the Inland Revenue Department (IRD), is responsible for processing new business registrations.

Here are some other facts concerning Hong Kong company registration that individuals and corporations should be aware of:

Directors

There must be at least one individual director, with no limitations or restrictions on the director's location or country. The maximum number of directors is also uncapped.

Shareholders

In Hong Kong, a limited liability company must have at least one shareholder and a maximum of 50. Shareholders are not subject to any residence requirements.

In Hong Kong, there is no minimum share capital requirement for registration. Therefore, the most frequent approach is to establish a company with HKD 10,000 share capital. Because one share in Hong Kong has a minimum paid-up capital of HKD 1.00, this capital is represented by 10,000 ordinary shares of HKD 1.00.

Tax

Hong Kong levies taxes on a territorial basis. That is, registered companies only pay corporate tax on Hong Kong-based transactions. Furthermore, there is no withholding tax on earnings and interest, nor is there any collection of tax on social security benefits, nor is there any VAT sales tax.

In Hong Kong, there are two alternatives for profit tax rates. The first is the Single-Tier Corporate Tax System, which levies a 16.5 percent tax on assessable profits on corporations and a 15% tax on unincorporated businesses. The second alternative is the Two-Tier Profits Tax Regime, which lowers the tax rate to 8.5 percent for the first $2 million in assessable profits for both companies and unincorporated businesses.

For companies that do not actually engage in business in Hong Kong, the tax rate is 0%, also known as the offshore tax system.

Company Secretary

Any limited liability company requires a company secretary who lives in Hong Kong. The company secretary serves as the company's representative in Hong Kong, ensuring that the firm's operations are conducted in accordance with local regulations. The company secretary is also responsible for keeping the firm's statutory books and records.

Compliance

After a company has been officially registered in Hong Kong, the owners, directors, and company secretary are responsible for ensuring that accounts are properly prepared and maintained.

In Hong Kong, accounts must be audited by a certified public accountant every year. Audited accounts must then be submitted to Hong Kong's Inland Revenue Department.

Opening a Corporate Bank Account 

Companies that want to use reliable payment gateway providers like Stripe and PayPal should normally use banks in the same territory. The following documents are necessary to open an account in Hong Kong:

• Account application forms
• Corporate registration documents
• Copies of passports of major members
• Personal resume
• A bank reference letter of each major member
• A bank statement of each major member or any related corporate
• Proof of business such as agreements, invoices, and contracts of the current company or any related one

Benefits of Business Registration In Hong Kong

Before we go into the requirements of business registration in Hong Kong, it's crucial to understand the advantages of forming a company in the territory. These advantages are listed below:

• The procedure of forming a business in Hong Kong is quick, easy, and inexpensive. After an application is approved, the Certificates of Incorporation and Business Registration (“the Certificates”) are usually accessible within four working days.
• Hong Kong, along with Singapore, has earned a reputation as the world's most open jurisdiction.
• Hong Kong ranked 7th in the latest Global Competitiveness Booklet 2023.
• In Baker McKenzie & Oxford Economics' Global Transactions Forecast 2020, Hong Kong is ranked 2nd in Asia-Pacific for IPO and M&A activity.
• Foreign investors can manage their Hong Kong-based company from anywhere in the world. They only require a local holding address rather than a physical address.
• Profits earned outside of Hong Kong are tax-free, but money earned in Hong Kong is subject to a 17% income tax rate on earnings exceeding 200,000 HKD.
• Hong Kong is strategically placed in Asia alongside many of the region's most advanced business markets, such as China, Singapore, and South Korea.
• The city's legal system is separate from that of Mainland China and is based on English common law. Hong Kong's two main languages are English and Cantonese.

Types of Business Entities In Hong Kong

It's critical to choose the right company type when starting a business in Hong Kong. The following are the main business types:

Limited Company

• Limited businesses are one of the most common options for companies forming in Hong Kong, as they are unrestricted in their activities.  
• Tax exemptions on income derived from overseas operations are available to a company incorporated in Hong Kong. Hong Kong is, therefore, an ideal place for establishing a holding company or a corporate headquarters.
• In Hong Kong, there are only a few prerequisites for forming a company, including only one director and one shareholder (who can be of any nationality). A resident company secretary is also required.
• Limited companies are legal entities that can conduct business independently of their owners.
• Although corporate shareholders are popular, Hong Kong company law prohibits corporate directors.
• At their annual general meetings, limited companies must present audited accounts and tax returns.
• Minimum share capital is not limited, and limited company incorporation does not require government approval in Hong Kong.
• A company's share capital can be in any currency, including the USD, EUR, GBP, and HKD.

Branch Office

• Because branch offices are considered extensions of their parent corporation, they lack their own legal identity.
• A branch office is suitable for organizations that need to start doing business right away or for businesses that only sell in Hong Kong.
• The parent business bears both positive and negative financial consequences for a branch company.
• Hong Kong branch offices are allowed to conduct business within the parent company's guidelines. They can only do business in Hong Kong if they have the necessary licenses.
• A Hong Kong branch office can open for business up to one month before registering with the Hong Kong Companies Registry.
• Within a month of opening a branch office in Hong Kong, overseas enterprises must register as a “Registered Non-Hong Kong Company.”
• In Hong Kong, branch offices are allowed to sign local sales contracts, invoice local consumers, and collect revenue from local customers.
• A Hong Kong branch office is not required to provide audited financial statements with its yearly returns and tax filings.

Representative Office

• In Hong Kong, a representative office is exempt from making direct sales.
• Representative offices in Hong Kong are only allowed to conduct market research and promote the parent company's products.
• Companies with simply a representative office in Hong Kong must hire a local distributor or agent to offer their products and services to local customers.
• Due to the limitations in business activity, a representative office is excellent for enterprises intending to enter Hong Kong to conduct market research and investigate potential opportunities.

Documents Needed for Business Registration In Hong Kong

All the documents must be prepared when going through the business registration process in Hong Kong. These are outlined below:

Articles of Association

These are a set of rules that govern how a board of directors can run a business.  It's often viewed as a contract between employees and members of the company and the company.

A company registration form must also be completed with the following information:

• The company name
• The registered business address
• An accurate description of the company's main activities 
• Details relating to the company's shareholders, directors, and company secretary 
• For firms with non-Hong Kong shareholders and directors, copies of passports and proof of residence in their respective countries are required
• If a company has local shareholders and directors, copies of their identity documents should be submitted
• A copy of the parent company's company registration documents is required in the event of corporate shareholders
• Company directors' responsibilities
• Total share capital 

If any documents are provided in a language other than English, an English-translated document must be provided as well.

A Quick Look at Business Registration Certificate HK

A Business Registration Certificate (BRC) in Hong Kong is a crucial document that confirms your business is officially registered with the local authorities. It serves as proof of your business's legal existence and allows you to operate lawfully in Hong Kong.

What's on a Business Registration Certificate?

• Your business name (both Chinese and English, if applicable)
• Your Business Registration Number (BR Number)
• Your company type (sole proprietorship, partnership, limited company, etc.)
• Your registered office address
• The date of your business registration

What's the Business Registration Certificate used for?

• Opening a business bank account
• Entering into contracts
• Applying for licenses and permits
• Demonstrating your business legitimacy to potential clients or partners

Summary

For any company trying to join the Asia-Pacific market, Hong Kong is one of the most important investment destinations in the world. The region's advantageous tax system, world-class financial and technological infrastructure, and ease of company formation all contribute to this.

It is possible to form a company in Hong Kong in a few of days. There are simple rules to follow, including the presence of at least one director, shareholder, and resident company secretary. A corporate bank account is also essential for businesses.

Check out this business registration certificate guide to understand why it is critical for anyone who wants to do business in Hong Kong.

Let Air Corporate walk you through the company registration process. Reach out to us today.