In order to have an administrative office in Hong Kong, non-Hong Kong incorporated companies frequently register a representative office in Hong Kong.
A representative office is considered to be a useful tool for any foreign investor looking to test the local business climate while also assessing their potential for success before expanding. Representative offices are typically limited to carrying out only certain activities, including in Hong Kong and many other locations.
FEATURES OF A HONG KONG REPRESENTATIVE OFFICE
Scope of activities
A representative office is actually a liaison office, and it is forbidden for it to engage in any profitable activity in Hong Kong. The following are some examples of profitable activities:
- conducting business
- generating invoices for business transactions
- signing any agreements
- providing consulting services for a fee
- executing the transshipment of commodities
- negotiating or making arrangements on the company’s behalf
Ideally, a representative office in Hong Kong would only be allowed to work on behalf of the overseas parent firm in connection with promotions, liaison, or market research.
Any representative office that wishes to participate in any transactions must be turned into other business structures, such as a branch office or a subsidiary in Hong Kong, that provide legal status for conducting business. Notably, the most typical business entity for overseas entrepreneurs in Hong Kong is a subsidiary as a private limited company.
Refer to Hong Kong company incorporation for more information.
Similar to a branch office, the Hong Kong representative office is required to maintain the name of its foreign parent company.
A representative office in Hong Kong lacks its own separate legal status. Most of the time, foreign businesses are thought of as temporary setups. For this reason, if a foreign parent company’s representative office in Hong Kong incurs any expenses or debts, that parent company will be solely responsible for all acts, including any debts and liabilities incurred by the representative office.
Compared to branch offices or subsidiaries, representative offices are much easier to operate in Hong Kong. Registration of the Hong Kong regional office with the Companies Registry is usually not necessary. Additionally, there is no requirement for the minimum capital.
One manager is usually required to relocate from the parent company to the representative office in Hong Kong. The representative office may also select local Hong Kong residents to serve as support staff.
As Hong Kong representative offices are not allowed to engage in transactions involving profits, they are not required to maintain filing records, i.e., file tax returns with Inland Revenue Department, as a Hong Kong subsidiary (private limited company) is.
But keep in mind that the representative office might need to submit a “NIL” filing on their yearly tax return and apply for a Business Registration Certificate with IRD.
KEY CONSIDERATIONS FOR THE REGISTRATION OF A REPRESENTATIVE OFFICE IN HONG KONG
|1.||Name||As with a branch office, the Hong Kong representative office must keep the same name as its international parent business.|
|2.||Nomination of officers||Typically, Hong Kong requires the presence of one management who relocates from the parent firm to the representative office. Furthermore, the representative office may designate support personnel who are Hong Kong citizens.|
|3.||Procedure for registration||Representative offices in Hong Kong are significantly easier to set up than branch offices or subsidiaries. In general, there is no necessity for the Hong Kong representative office to be registered with the Companies Registry. Furthermore, there are no requirements for minimum capital.|
|4.||Requirements for compliance||Because Hong Kong representative offices are not permitted to perform profit-related operations, they will not be accountable for keeping filing records – i.e., submitting tax returns with IRD – as a Hong Kong subsidiary (private limited company) is.|
DOCUMENTS REQUIRED FOR THE REGISTRATION OF A REPRESENTATIVE OFFICE IN HK
|1.||The domestic name||The non-Hong Kong company's business name(s) in its place of incorporation.|
|2.||Establishment date||The establishment date of a business location in Hong Kong. The registration must be completed within one month of the start date of the business.|
|3.||An address in Hong Kong||This Representative Office's major business location in Hong Kong.|
|4.||Registered address||The registered address of the non-Hong Kong company.|
|5.||Details about the directors, managers, or company secretaries of a non-Hong Kong firm.||Signature and full name|
|6.||Certified copy of the Certificate of Incorporation of the applicant's non-Hong Kong company||Produced by the authority in charge of the company's incorporation.|
PROCESS OF REGISTERING A REPRESENTATIVE OFFICE IN HONG KONG
In order to operate a representative office in Hong Kong, there is no need to register with the Companies Registry. But within a month of its commencement date, it must apply for a Business Registration Certificate with the Inland Tax Department. The following paperwork is necessary for registration:
- Proof of identification for the representative offices’ chief officer in Hong Kong,
- completion of a prescribed application form
- The non-Hong Kong company’s name and registered location (translation to applicable languages – English or Chinese, or both – may be required)
- An address for a place of business in Hong Kong
The Business Registration Certificate will be given the following working day after the application has been received successfully and must be collected in person. The Business Registration Certificate must always be prominently visible on the business property.
The applicant must give written notice to the Hong Kong Inland Revenue Department within one month of any changes to the business’s registration information. Depending on whether the Certificate is good for one year or three years, they should renew the Business Registration Certificate annually or once every three years, whichever comes first.
Once the Representative Office has received the Business Registration Certificate from the Inland Revenue Department, a corporate bank account can be established with any of the major banks in Hong Kong.
Refer to the Corporate bank account opening in Hong Kong for more information.
ADVANTAGES & DISADVANTAGES OF A REPRESENTATIVE OFFICE IN HONG KONG
ADVANTAGES OF A REPRESENTATIVE OFFICE IN HONG KONG
A representative office can provide a company with an opportunity to conduct market research in Hong Kong before deciding to invest in the market.
A representative office is a cost-effective option for a company to establish a presence in Hong Kong without incurring the expenses associated with setting up a subsidiary or branch office.
A representative office is not allowed to engage in commercial activities, which means that the company’s liability is limited to the activities of the office.
A representative office in Hong Kong can enhance a company’s credibility and reputation in the market.
DISADVANTAGES OF A REPRESENTATIVE OFFICE IN HONG KONG
A representative office is not allowed to engage in any commercial activities such as sales, invoicing or signing contracts.
No legal entity:
A representative office is not a separate legal entity, which means that it cannot enter into contracts, hire employees or conduct business activities.
A representative office can only engage in limited functions such as market research, communication, and liaison.
A representative office in Hong Kong can only operate for up to three years, after which it must be either converted into a branch office or closed.
Reach out to us at Relin Consultants if you wish to establish a Representative Office in Hong Kong.
POST-REGISTRATION STEPS OF HONG KONG REPRESENTATIVE OFFICE
Once the Representative Office has secured the Business Registration Certificate from the Inland Revenue Department, a corporate bank account can be opened with any of Hong Kong’s major banks.
What is a representative office in Hong Kong?
A representative office is a type of business structure that allows a foreign company to establish a presence in Hong Kong for non-commercial purposes, such as conducting market research or liaising with local customers or suppliers.
What are the requirements for establishing a representative office in Hong Kong?
To establish a representative office in Hong Kong, a foreign company must provide a Certificate of Incorporation, a copy of the company’s articles of association, and a declaration stating that the representative office will not engage in any commercial activities. The company must also appoint a Hong Kong resident representative or has a Hong Kong employment visa.
What activities can a representative office in Hong Kong engage in?
A representative office in Hong Kong is limited to non-commercial activities, such as market research, communication, and liaison. It cannot engage in any sales, invoicing or signing contracts.
What are the benefits of establishing a representative office in Hong Kong?
Establishing a representative office in Hong Kong can provide a foreign company with an opportunity to conduct market research, enhance credibility and reputation, and establish a presence in the market without incurring the expenses associated with setting up a subsidiary or branch office.
What are the disadvantages of establishing a representative office in Hong Kong?
Some of the disadvantages of establishing a representative office in Hong Kong include limited activities, no legal entity, restricted functions, and a short lifespan. A representative office can only operate for up to three years, after which it must be converted into a branch office or closed.
Can a representative office hire employees in Hong Kong?
A representative office in Hong Kong cannot hire employees directly. However, the foreign company can hire second employees to work in the representative office, or the representative office can engage the services of a third-party agency to provide employees.
Can a representative office in Hong Kong open a bank account?
A representative office in Hong Kong can open a bank account for administrative purposes, such as paying rent and salaries, but it cannot engage in any commercial banking activities.
Can a representative office in Hong Kong apply for a work visa for its employees?
A representative office in Hong Kong cannot apply for work visas for its employees directly. However, the foreign company can apply for employment visas for its employees to work in the representative office.
What should companies do if the name of the representative office is already in use in Hong Kong?
In most cases, the name of the Representative Office must be the same as the name of the foreign parent firm. If the name is already in use in Hong Kong, the outside firm must choose a different name for the Hong Kong Representative Office.
Does the set up for a representative office in Hong Kong require registered capital?
A Representative Office does not require any registered capital to be established.
Can a representative office hire local employees as support staff?
Typically, a Representative Office will choose a staff member from its overseas parent company to relocate to Hong Kong and operate the office. However, local personnel or employees may also be hired as support staff by the Representative Office.
Are representative offices subject to the filing of tax returns?
What certificate will the organization receive after completing the registration?
If the registration is complete and successful, the organization or representative office will receive a Business Registration Certificate.