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If you want to do business in Asia or with Asia, Hong Kong is simply the best place.
Fast and inexpensive
Setting up a company in Hong Kong is easy and inexpensive.
There is very limited bureaucracy, no foreign exchange control system.
It takes a few hours only to set up a new company.
Business owners enjoy maximum freedom (no minimum share capital, no mandatory local director, no restrictions for foreigners, no need to visit Hong Kong).
Attractive tax system
Hong Kong has a very competitive tax regime, with no VAT or consumption tax.
There is a 0% profit tax for offshore companies registered in Hong Kong, and a maximum of 16.5% profit tax for local companies.
Competitive business environment
Almost 1,400,000 companies have set up in Hong Kong at the end of 2019 (which is almost three times more than Singapore).
Hong Kong is also home to 340,000 local startups and SMEs.
The government is also doing a lot to support entrepreneurs and startups.
It will invest HKD 100 billion in innovation and technology in 2020.
It is, therefore, no surprise that Hong Kong is the 3rd most competitive economy according to the World Economic Forum’s Competitiveness Index 2019 and 5th according to IMD World Competitiveness Center.
In this guide, we take you through the main steps of setting up a company in Hong Kong.
Step 1: Your main contacts
When you set up your company, and after it is set up, your main contacts will be:
- Your company secretary: this will be your main contact for all issues regarding setting up a Hong Kong company, its maintenance, and its closure. Your company secretary is the point of contact and your representative to deal with the Hong Kong authorities.
- The Hong Kong Companies Registry: the Companies Registry (CR) is the government department in charge of the setting up of your company and annual filings in Hong Kong.
- The Hong Kong Inland Revenue Department: the Inland Revenue Department (IRD) is the government department in charge of taxes and duties in Hong Kong. To put it simply, every year you must file your company tax return with IRD, in order to determine with and how much tax your company needs to pay.
Step 2: Choosing a Company Secretary
What is a Company Secretary?
It is mandatory for any company in Hong Kong to appoint a Company Secretary.
The main roles of your Company Secretary are:
- Acting as the contact point between your company and the Hong Kong authorities
- Taking care of administrative formalities to ensure that your company remains in good standing with the Hong Kong authorities (preparing and submitting your company annual return in time)
- Maintaining your company statutory records (register of members, register of directors, register of significant controllers, preparing and issuing share certificates)
- Organizing and documenting the meetings of the board of directors and the general meeting
- Preparing your tax filings
- Monitoring and reporting about regulatory changes that may affect your company
Who can be appointed as your Company Secretary?
If your Company Secretary is an individual, they must reside in Hong Kong.
This means that you can appoint a friend in Hong Kong as your Company Secretary.
But you should make sure this friend is familiar with the regulatory obligations of Company Secretaries.
In order to save time and avoid problems, we recommend that you select a professional services firm as your Company Secretary.
Step 3: Choose A Legal Form for Your Business
The next step is to decide the legal structure for your business.
The main types of entities available in Hong Kong are:
- Branch Office
- Sole proprietorship
- Company limited by guarantee
- Company limited by shares
To keep things simple, we recommend that you set up a company limited by shares, also known as a “limited liability company“.
Step 4: Pick your Company Name
You enjoy maximum freedom for your company name when setting up a company in Hong Kong.
You can select a name in Chinese (simplified characters), in English, or both.
Here are a few practical tips regarding the name of your company:
- There is no obligation to include a reference to Hong Kong in your company name
- Your company name must simply include “Limited” at the end if you set up a limited liability company
- You cannot select a name that is already used by another company. You can check by yourself if a proposed company name is available or already used. Just visit the website of the Companies Registry for an online, free and easy company name search
- If you use your company name as a brand, we strongly recommend that you register it as a trademark in Hong Kong and possibly also as a trademark in China
If you have difficulties finding a name for your business, our friends at Shopify have created this easy-to-use name generator. Give it a try!
For more information on company names, you may also check our guide to selecting a company name in Hong Kong.
Step 5: Select your registered address
You do not need to rent an actual office in order to set up your company.
Instead, you may just use a registered address provided by your Company Secretary.
If you prefer to have your own office, please note that you may not be able to use your apartment as a registered address for your company.
You can only set up a company at an office building, a commercial building, or a mixed building (both residential and office).
All correspondence from the Hong Kong government authorities will be sent to your registered address.
It is therefore important to make sure that someone (usually your Company Secretary) will receive an email you any correspondence.
Please check our post on the registered address for more information.
Step 6: Organize your company
There is no minimum amount of share capital required.
You are free to decide the currency and amount for your share capital of your company.
The general practice is to have at least one shareholder with one ordinary share issued at the formation of the company.
A Hong Kong private limited company can have from one (1) to fifty (50) shareholders.
Shareholders do not need to reside in Hong Kong.
Shareholders can consist of natural persons or companies.
Local or foreign shareholding is allowed.
Appointment of nominee shareholders is permitted.
Shareholders meetings can be held anywhere in the world.
A minimum of one individual director is required.
The other directors can be persons or companies, local or foreigners.
There is no need for the directors to reside in Hong Kong.
Directors Board meetings can be held anywhere in the world.
Board meetings can be held anywhere in the world.
Step 7: Prepare your incorporation documents
If you set up a limited liability company, the documents that you need to prepare and present are as follows:
- Form NNC1 (see attached sample)
- Form IRBR1 (see attached sample)
- Articles of Association for your company (see attached sample). You are free to create tailor-made articles of association for your Hong Kong company. However, we recommend that you use the sample because (i) its provisions are very general and standard, (ii) the Companies Registry is familiar with it, meaning that it will speed up the incorporation process.
After the incorporation is complete, you will receive the following documents confirming that your company is ready for business:
Step 8: File the incorporation documents
Setting up a company in Hong Kong is straightforward.
The application must be filed with the Companies Registry.
It can be done:
- in person by submitting a hard copy of the application documents at the counter
- By courier sent to the Companies Registry office
- Online through Hong Kong’s 24-hour Companies E-registry.
Upon successful incorporation of your company, the Companies Registry will issue the following documents:
- Certificate of Incorporation (see attached specimen)
The Certificate of Incorporation is issued by the Companies Registry.
Its purpose is to confirm the name and date of incorporation of your company.
This document does not expire.
The Business Registration Certificate is issued by the Inland Revenue Department and confirms that your company is enrolled with the tax authorities in Hong Kong.
The unique number indicated in this document is also known as the Tax Identification Number of your company.
This document is normally valid for 12 months (unless you have opted for and paid for 3 years at the time of incorporation).
It must be renewed in time in order to allow your company to remain in good standing.
Step 9: Obtain licenses and permits
Hong Kong is a very open and free economy.
Most companies do not require a license or permit to conduct their business.
Certain companies still need to apply for a license or permit before they can start their business.
Such an application is done after your company is set up.
Examples of sectors where a license or permit is required include banking, insurance, medical services, dealing with securities, operating a food and beverage outlet.
Please refer to the HK government website or contact us in case you need guidance about the permits and licenses required to conduct your business.
Step 10: Open your company bank account
Your company will need a company bank account to start doing business.
But the process will be difficult if your company directors and shareholders live outside of Hong Kong.
If you are a young start-up, SME, or entrepreneur with no proof of existing business, the traditional banks will most likely reject your application.
If you want are looking for an alternative, Statrys is offering SMEs and entrepreneurs banking services without dealing with a bank.
- You can apply entirely online.
- You do not need to visit Hong Kong.
- The application process is smooth.
All you need to onboard is your company’s Business Registration and a copy of your passport, even if you are a foreigner and do not reside in Hong Kong.
Step 11: Get familiar with the onshore and offshore tax systems
Your company is automatically registered with Hong Kong’s Inland Revenue Department when it is incorporated.
Hong Kong offers a very attractive territorial tax regime.
Let’s keep it simple.
If your company does business outside Hong Kong (offshore limited liability company), it is not subject to profit tax in Hong Kong.
This is commonly known as the offshore tax system.
If your company conducts business in Hong Kong (onshore limited liability company), the profit tax rate is 8.25% on the first HK$2 million of profits, and 16.5% on everything thereafter.
In addition, your business can enjoy many tax deductions that will reduce your profit tax.
There is no VAT or capital gains tax in Hong Kong.
For more information on Hong Kong taxes, you may refer to our Complete Guide to Hong Kong Profits Tax for more information.
Step 12: Understand your annual filing obligations
You need to be aware that your company has some ongoing reporting and filing obligations during the course of its business life.
It essential that you comply with the obligations to ensure that your company remains in good standing.
Some of the annual filing obligations include:
- The filing of an annual return FORM NAR1 with the Companies Registry each year on your company’s anniversary date
- The filing of a profit tax return BIR51 with the Inland Revenue Department each year. The filing date depends on the financial year-end of your company.
You must also report to the Companies Registry certain changes regarding your company as soon as they occur.
This includes changes of directors, registered address, amount of share capital.
Register with Air Corporate today and we’ll handle all this greasy paperwork for you in less than 48 hours.
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