Registering a Company in China from Hong Kong

Can a Hong Kong Company Register a Business in China?

A Hong Kong company cannot directly operate in mainland China. Under Chinese law, it is treated as a foreign investor and lacks the legal status required to conduct business activities in mainland China.

This means a Hong Kong entity cannot:

• Hire employees under PRC labor contracts
• Lease commercial premises in its own name
• Issue official VAT invoices (fapiao)
• Open RMB corporate bank accounts
• Collect payments locally

To legally operate in China, a separate mainland legal entity must be established and registered with the Administration for Market Regulation (AMR).

What Are the Available Structures?

For most Hong Kong companies, there are three primary structures available:

1. Wholly Foreign-Owned Enterprise (WFOE): A WFOE is a limited liability company fully owned by a foreign investor, including a Hong Kong holding company. It allows full operational control, direct staff hiring, profit repatriation, and invoice issuance in China. This is the most common structure for service, trading, and manufacturing businesses.

2. Joint Venture (JV): A Joint Venture is formed with a mainland Chinese partner. Although foreign ownership restrictions have been relaxed in many industries, JVs are still required in certain sectors listed in China’s Foreign Investment Negative List, including specific areas of telecommunications, education, and resource exploitation.

3. Representative Office (RO): A Representative Office is permitted only for non-profit activities such as liaison, marketing support, and market research. It cannot issue invoices, generate revenue, or directly hire staff without using a labor dispatch agency.

Why Use a Hong Kong Entity to Register a Company in China?

Using a Hong Kong holding company for company registration in China is one of the most practical ways to set up a company in China. Instead of investing directly, the Hong Kong company becomes the shareholder of the mainland entity, usually a wholly foreign-owned enterprise.

This structure is widely used for company registration because it improves approval efficiency, tax planning, banking flexibility, and future restructuring options in China.

1. Smoother Company Registration in China

Chinese regulators are familiar with Hong Kong corporate documents. Compared to offshore jurisdictions, a Hong Kong company typically faces fewer complications during company registration in China.

When forming a wholly foreign-owned enterprise in China, authorities review shareholder documents, business scope, registered capital, and identity records. After approval, a company in China receives a business license and a unified social credit code. This social credit code is required to open bank accounts, register for tax, hire employees, and operate legally in China.

The same applies whether you form a wholly foreign-owned enterprise, a joint venture, or a representative office in China, although each structure follows different regulatory requirements.

2. Tax Efficiency Between Hong Kong and China

Corporate income tax in China is 25 percent, while Hong Kong profits tax is 16.5 percent. Using a Hong Kong holding company allows structured profit allocation between the wholly foreign-owned enterprise in China and the parent company.

For example, a company in China may handle manufacturing or service delivery, while the Hong Kong company manages overseas contracts. This structure is commonly used for cross-border operations in China.

Dividend payments from a company in China to a Hong Kong shareholder may be subject to reduced withholding tax under the tax treaty, provided the compliance conditions are met.

This approach is used for both a wholly foreign-owned enterprise and a joint venture in China, depending on industry restrictions.

3. Banking and Payment Flexibility

A company in China must open local RMB and foreign currency bank accounts to operate. A Hong Kong company can maintain international bank accounts and handle global payments more easily.

In trading structures in China, the wholly foreign-owned enterprise manages sourcing or production, while the Hong Kong company invoices overseas customers. This separation simplifies foreign exchange control and payment flow in China.

A representative office cannot generate revenue in China, which limits its usefulness for commercial activity.

4. Structural Protection and Confidentiality

Using a Hong Kong holding company separates international clients from the operational company in China. Customers contract with the Hong Kong company, while production or services remain inside China.

This structure is commonly used in China to protect supplier relationships and maintain commercial confidentiality.

5. Easier Ownership Changes and Exit Planning

Changing ownership of a company in China requires regulatory approval and updated filings. In a joint venture, the process can be more complex due to the involvement of a local partner.

However, if the wholly foreign-owned enterprise in China is owned by a Hong Kong company, ownership can often be transferred at the Hong Kong level. This avoids directly restructuring the company in China.

For investors planning mergers, acquisitions, or future exit from China, this structure provides greater flexibility and efficiency.

Step-by-Step Process to Register a Company in China from Hong Kong

After determining the right structure, whether it's a WFOE, JV, or RO, here’s what comes next:

Step 1: Choose a Chinese Entity Name

Submit a proposed company name for approval with the local SAMR (State Administration for Market Regulation).

• Name must follow the Chinese format: [City] + [Name] + [Industry] + “Co., Ltd.”
• It should not duplicate existing entities
• You’ll receive a Name Approval Notice once accepted

Step 2: Prepare Corporate Documents in Hong Kong

Your HK company must provide core legal documents to prove its existence and authorize the China setup.

This includes:

• Certificate of Incorporation
• Articles of Association
• Board resolution approving the registration
• ID documents of directors and shareholders

All documents must be notarized in HK, then legalized by the Chinese consulate.

Step 3: Submit to Chinese Authorities

Submit the full application package to local authorities based on your chosen structure:

• WFOE or JV: Apply via SAMR + MOFCOM (if required)
• RO: File directly with SAMR and supporting departments

You’ll also need:

• A lease agreement for your registered China address
• Identification of your China legal rep and supervisor
• Detailed business scope (must match documents)

Step 4: Receive Business License

Once approved, SAMR will issue your Business License, the legal ID of your China entity.

Only after this can you:

• Sign contracts
• Hire staff
• Open local bank accounts

Step 5: Post-Registration Setup

After licensing, you must complete several setup tasks:

• Company seal registration (chop for stamping contracts)
• Tax registration with the local tax bureau
• Social insurance and housing fund accounts (if hiring)
• Bank account opening (explained in a separate section)

These steps are mandatory before operations begin.

Documents Required from Your Hong Kong Company

Here’s a checklist of what your Hong Kong entity needs to submit when registering in China:

Costs and Timeline for Registering a Chinese Company via Hong Kong

Setting up a company in China through a Hong Kong holding company offers long-term tax efficiency—but it also comes with upfront costs and a longer setup timeline. Here’s a breakdown of what to expect.

Typical Setup Costs

The cost of registering a company in China through a Hong Kong holding structure varies by entity type and scope of work. Below are realistic estimates:

• WFOE / Subsidiary LLC: USD 16,650 – 21,600
• Representative Office: USD 19,650
• Equity Joint Venture: USD 17,650+
• Free Zone Company: From USD 16,650
• Branch of Foreign Company: Around USD 19,350
• Fast Setup with Full Tax Reporting Package: Up to USD 46,970
• China Export LLC (Remote Setup): Around USD 35,540
• Hong Kong Legally Tax-Exempt Company: Around USD 10,105

These costs typically include government filing fees, notarization and legalization of documents, business license issuance, company chops, tax registration, and basic bank account setup.

Additional costs may apply for special industry licenses, a physical office address, higher registered capital commitments, or expedited processing services.

Timeline to Full Operation

The average timeline for setting up a WFOE via Hong Kong is around 5 to 6 months. Here's how the process breaks down:

Timelines can vary depending on the region, industry, and whether remote setup or in-person verification is required.

Tax Efficiency: Direct vs. HK Holding Company Structure

Here’s how the tax burden compares when investing directly into China versus going through a Hong Kong holding company:

Why lower via Hong Kong?

Under the China–Hong Kong Double Tax Agreement, dividends from the WFOE to the HK holding company are taxed at 5% (instead of the standard 10%), provided the HK company owns 25% or more of the China entity. To benefit from the reduced 5% withholding tax rate under the DTA, the Hong Kong company must be the beneficial owner of the dividends. Shell companies or entities with little or no business activities in Hong Kong may not qualify.

Hong Kong also has no withholding tax on outbound dividends.

China–Hong Kong Tax Implications and Cross-Border Compliance

When you operate a China WFOE through a Hong Kong holding company, tax compliance becomes cross-border and more efficient if structured properly.

Double Taxation Avoidance Agreement (DTA)

Thanks to the China–Hong Kong DTA, qualified Hong Kong companies benefit from reduced withholding tax on dividends from China. Instead of the standard 10%, the rate drops to 5%—as long as the HK entity holds at least 25% of the China company.

This treaty structure avoids double taxation of the same income and lowers your total tax burden.

How Dividends Are Treated

• In China: Dividends to foreign shareholders are subject to a 10% withholding tax (unless treaty-reduced).
• To HK Holding: With DTA relief, only 5% is withheld on dividends to the Hong Kong company.
• In Hong Kong: There is no withholding tax on outbound dividends from HK to the ultimate parent.

This structure makes it tax-efficient to move profits from China → Hong Kong → Global HQ.

Pro tip: To benefit from the DTA, make sure your HK company is considered the Beneficial Owner under Chinese tax rules. Shell companies without substance may be disqualified.

How Air Corporate Can Help You Expand from Hong Kong to China

At Air Corporate, we help foreign entrepreneurs set up and run their businesses in both Hong Kong and Mainland China. Whether you need a Hong Kong holding company or a China WFOE, our team handles the full process, from incorporation to tax and banking.

We make sure your China operations are fully legal, compliant, and tax-optimized.