Hong Kong company incorporation has a major advantage
One Country, Two Systems
The city is a business gateway to the emerging Chinese economy which is now the world’s second-largest after the US. Moreover, it has a majorly English-speaking population and operates under the English common law. This means that while its political structure is part of China, the legal system functions separately, giving companies freedom from governmental controls and restrictive policies.
Thus, some benefits of One Country, Two Systems are:
- free movement of talent, capital, goods, and information – under city’s free trade policy (it has a free port status and follows easy customs procedures)
- sovereign (independent from China) participation in international forums
- no foreign ownership restrictions
Thus, the dynamic city of Hong Kong while serving as the perfect launch platform for companies looking to trade in Mainland China is also the ideal place to target other Asian countries as well, with a multitude of advantages.
Simple and low corporate taxation
Businesses in Hong Kong enjoy one of the most tax-friendly jurisdictions in the world, as the city has no sales tax, no withholding tax, no capital gains tax, no taxes on dividends, and no estate tax. The Hong Kong Government imposes only three direct taxes with very low rates, which itself comes out to be even lower with generous allowances and deductions.
- Profits tax of 8.25% for the first HK$2 million of profits of companies. Profits above this are taxed at 16.5%. For unincorporated business (i.e. partnerships and sole proprietorships), the corresponding two-tiered tax rates are 7.5% and 15%.
- Salaries tax of 15%.
- Property tax of 15%.
Other benefits of Setting up a Business in Hong Kong
Opening of multi-currency corporate bank accounts: Companies can open multi-currency bank accounts with e-banking features to carry out business activities offshore and from overseas. Hong Kong is home to all major international banks including HSBC and Hang Seng Bank.
No mandatory requirement of residency: For Hong Kong company incorporation, it is not mandatory to be a resident of the city. Non-residents can work with a local company secretary (along with securing a local office space) to set-up a company in Hong Kong.
Low capital requirement: For Hong Kong company incorporation, the fee to be paid is low as compared to other jurisdictions. The required paid-up capital is also comparatively lower.
Apart from the above, if you are based in Hong Kong, you will benefit from the below.
Excellent business infrastructure and great connectivity
Hong Kong International Airport, which has won numerous awards over the years, is the world’s busiest cargo gateway and one of its busiest passenger airports. Over 100 airlines connect about 190 locations across the world. Notably, all the major Asian markets are just four hours away, which is why over 8,000 firms have based their regional head-quarter in the city.
The city is also one of the world’s leading sea and air cargo hubs. Opened last year, the Guangzhou-Shenzhen-Hong Kong Express Rail Link has enhanced the city’s connectivity to Mainland China. The recently completed Hong Kong-Zhuhai-Macao Bridge has connected key cities in the Pearl River Delta. The city itself has low-cost and reliable public transport system.
All the more, Hong Kong is poised to capitalise on the opportunities arising from the national Belt and Road Initiative, as well as from the potential and ongoing development of the Guangdong-Hong Kong-Macao Bay Area. For this, the Hong Kong Government has set-up economic and trade offices in Mainland China as well as in foreign jurisdictions.
Hong Kong has strong IP protection laws, along with being recognized as one of the world’s most competitive economy by the International Institute for Management Development. (out of 63 economies)
Other accolades include:
- the best location for IPO and M&A activity in the Asia-Pacific – by Baker Mckenzie & Oxford Economics: Global Transactions Forecast 2019
- 2nd in the world as leading investment hub for FDI inflows in Asia – by United Nations Trade and Development (UNCTAD): World Investment Report 2018
- 2nd in the world as the world’s best financial system – by World Economic Forum: The Global Competitiveness Report 2018
- 4th in the world’s easiest place to do business – by the World Bank’s Doing Business 2019 Report
- 1st in the world’s lowest tax jurisdictions – by the World Bank’s Doing Business 2019 Report
- 4th in the world’s business environment rankings – by the Global Financial Centres Index 25 2019
- 2nd in world’s fastest place to start a business – by the Global Competitiveness Report 2018
- 1st in the world’s freest economy – by the Index of Economic Freedom, 2019
Hong Kong is also the region’s leading financial hub. It offers a transparent and robust regulatory regime for financial services industries including those in insurance, reinsurance, banking, securities, and futures. The city is also the world’s largest offshore hub in Renminbi settlement and is aiming to become a leading regional FinTech hub very soon.
In 1985, the city established the International Arbitration Centre and is now the key center for arbitration in Asia. In general, arbitration is a popular method of dispute resolution in the city.
Moreover, the city follows a liberal immigration policy, with citizens of about 170 countries and territories allowed visa-free visits for periods ranging from 7 to 180 days.
In Hong Kong, the Government believes in playing the role of a facilitator and promoter. Some recently announced decisions indicating this are:
- $20 billion for the Research Endowment Fund of the Research Grants Council
- 3 billion Research Matching Grant Scheme
- Introducing fellowship schemes for outstanding academics to strengthen the pool of talent in research and innovation and technology in Hong Kong
- $2 billion re-industrialisation funding scheme to subsidize manufacturers to set up smart production lines in Hong Kong
- $2 billion for building manufacturing facilities required by the advanced manufacturing sector in industrial estates
- Formulating tax concessions to encourage ship leasing business
- Providing tax concessions for the marine insurance sector
- Providing dispute resolution services to the global maritime industry
- $200 million for the Maritime and Aviation Training Fund
- Launching the Technology Talent Admission Scheme to encourage talent in the innovation and technology sector
- Signing more bilateral and multilateral agreements and make Hong Kong an international commerce and trading center; the city already has signed seven free trade agreements, and 20 investment promotion and protection agreements
- $5.5 billion for the development of Cyberport 5 to support more technology start-ups
- $800 million to support R&D by universities, laboratories, and engineering research centers
- $353 million for the continued implementation of the development blueprint of tourism in Hong Kong
Highly-skilled, multi-lingual workforce and good quality of living
Most foreign entrepreneurs who set up a business in Hong Kong re-locate with their family due to its high quality of life including the social environment, which is a unique blend of cultures with a cosmopolitan lifestyle. Moreover, the city offers world-class health and education services. Hong Kong has over 50 international schools offering different international curricula, as well as 20 local degree-awarding post-secondary education institutions. Of these four universities regularly feature in the Quacquarelli Symonds (QS) World University Rankings top 100 lists, a testiment to high quality higher education system in the city.
Hong Kong is also acknowledged as one of the safest countries in the world, with a relatively crime-free society where fear for personal safety is not present.
Also, integration of expatriates is very easy as most locals are either bilingual or trilingual, speaking English and Cantonese (Hong Kong’s most widely spoken language), Mandarin (Mainland China’s official language).
The variety of food on offer is par excellence, with thousands of options from street-side food stalls to Michelin star restaurants. The city is home to beautiful beaches, hiking trails, with over 3/4th of its land area being countryside.
Corruption – a major problem in the emerging economies in Asia – is very low in the city. In fact, Hong Kong is often cited as one of the most corruption-free economies in the world. It has an anti-corruption watch-dog – Independent Commission Against Corruption (ICAC) – which is mandated to investigate cases of corruption in both the public and private sector.