Hong Kong is renowned for being a vibrant and appealing business center. It attracts a ton of business trailblazers each year due to its robust economy and diversity. It makes sense that they want to establish a business here in Hong Kong, given the welcoming tax policies, advantageous location in Asia, and highly qualified workforce.
If you wish to know more about the company incorporation process, refer to our guide on Hong Kong offshore company formation.
THINGS TO CONSIDER BEFORE SETTING UP YOUR COMPANY IN HONG KONG
Funding
In Hong Kong, there are numerous funding sources. Since the region is so developed in terms of trade, there are plenty of businesses that provide funding packages.
Additionally, the Hong Kong government frequently offers assistance to new enterprises that have potential.
The following are the relevant government financing programs to consider:
- Innovation and Technology Fund: Projects involving innovation and technology that will make living more comfortable and secure are granted funding by this scheme.
- CreateSmart Initiative (CSI): This scheme provides financial assistance to programs that encourage and foster the creative industries.
- Funding Programs for the Department of Trade and Industry: This scheme is intended to help Hong Kong’s small and medium-sized businesses (SMEs).
Business plan
If the applicant wants to form a business in Hong Kong, they must have a solid business plan.
Without an effective business plan, a person cannot obtain a visa. Their top priority should be a two-year company plan because it will also be included in their application for an entrepreneur visa.
The plan needs to be flawless in order to be accepted. The objective is to prove to the authorities that the business has something to give them. The applicant must therefore include all relevant information and data.
The business plan should demonstrate how the company benefits Hong Kong’s economy. The authorities will thoroughly examine the business plan.
The following information should be included in the business plan:
- Both key and secondary business objectives
- Type of business
- Marketing strategy
- Budgetary plans
- Strong evidence that the company will succeed in Hong Kong
- Information about the staff members
A business plan shouldn’t be an in-depth description of the company. Instead, it should be a simple plan that enables authorities to understand how the owner intends to launch a firm. The plan can, of course, be changed later based on how the business is doing in terms of growth.
Preparing a shareholder agreement
It is highly recommended for businesses with numerous shareholders to enter into a written shareholder agreement so they fully understand what they are agreeing to and can protect themselves in the event of a dispute between the parties to the agreement.
Shareholder agreements are necessary for several crucial reasons, including the transfer of information rights, the right to serve as a director, and ensuring that all shareholders maintain the confidentiality of information about HK companies, among others.
Taxation
Hong Kong has a very appealing tax system because of its low rates of corporate and personal income tax. In Hong Kong, a company’s annual assessable profits are subject to a 16.5% corporation tax rate. Owners should still be aware of the many tiers and classifications of tax rates.
In Hong Kong, businesses are required to pay the profit tax, which is calculated as 16.5% of assessable profits. When compared to other countries such as Japan or South Korea (31% and 22%), this rate is significantly lower.
Companies are also exempt from paying sales taxes, value-added taxes, and capital gains taxes. Additionally, there is no social security benefit collection or withholding tax on dividends or interest payments.
These do not apply to local company dividends that are taxable. It should be noted, though, that Hong Kong does not tax offshore dividends from foreign corporations.
Name search from Company Registry
Before submitting their applications, applicants are advised to check the Company Search Mobile Service at www.mobile-cr.gov.hk or the CyberSearch Centre at www.icris.cr.gov.hk of the Companies Registry to see if the intended name is the same as one that has already been registered in Hong Kong.
It is advised to enter the full and exact company name that is supposed to be used, including all spaces, punctuation marks, and closing terms like “Company Limited,” “Limited,” “Company, etc., when searching for a Hong Kong company name using the “Exact Name Search” search mode. Please be aware that entering names in other languages or simplified Chinese characters may not result in anything. The names should only be in English or traditional Chinese characters.
Annual filing requirements
The applicant should have a basic knowledge of the annual filing requirements for Hong Kong companies. That includes:
- Businesses in Hong Kong, both domestic and foreign, are required to submit yearly reports to the Inland Revenue Department (IRD) and Companies Registry.
- The Hong Kong Companies Ordinance also mandates that businesses with Hong Kong incorporation keep accurate books of accounts and adhere to statutory audit procedures once a year.
- The Hong Kong Institute of Certified Public Accountants (HKICPA) is the organization in charge of overseeing the accountancy profession in Hong Kong.
Reach out to us at Relin Consultants for further assistance with our company incorporation services in Hong Kong.
