What are the Foreign Company Set Up Options in Hong Kong?
Hong Kong consistently ranks among the top global hubs for open and free-market economies, having claimed the title of the world’s freest economy in 25 of the last 26 years. Its business-friendly appeal is further enhanced by low corporate tax rates and the absence of capital gains tax, sales tax, or withholding tax on dividends and interest, making it an attractive destination for global investors.
For foreign investors looking to establish a presence in Hong Kong, there are three primary company setup options: a representative office, a subsidiary company, or a branch office. The ideal structure depends on the nature and scale of your business objectives. Small to mid-sized businesses often opt for representative offices or subsidiaries due to their flexibility and ease of management, while larger corporations tend to prefer branch offices to support broader operations and integration with their global entities.
Prerequisites for Company Registration in Hong Kong
Starting a company in Hong Kong as a foreigner involves fulfilling a few key requirements to ensure compliance with local regulations. Below are the essential prerequisites:
1. Choose a Unique Company Name
Entrepreneurs must select a company name that is unique and not identical to or too similar to any existing registered entity in Hong Kong. It’s important to check the Guidelines on Registration of Company Names for Hong Kong Companies to ensure the proposed name complies with the naming conventions.
2. Minimum Share Capital
There is no statutory minimum share capital requirement in Hong Kong. However, every company must have at least one shareholder holding at least one ordinary share. The share capital can be denominated in any major currency and is not limited to the Hong Kong Dollar (HKD).
3. Appoint Directors
A Hong Kong company must have at least one director who is a natural person and at least 18 years old. Directors can be of any nationality and do not need to reside in Hong Kong. The same individual can act as both director and shareholder. One director is sufficient for private companies, while public companies must appoint a minimum of two directors, all of whom must be natural persons.
4. Appoint a Company Secretary
Every Hong Kong company must appoint a company secretary. If the company secretary is an individual, they must ordinarily reside in Hong Kong. If it is a corporate body, its registered office or principal business place must be in Hong Kong. The company secretary is crucial in ensuring the company complies with legal and regulatory obligations. A Hong Kong resident must be appointed to act as a local representative for foreign-owned companies.
5. Registered Office Address
A local registered office address in Hong Kong is required for company incorporation. This must be a physical address (not a P.O. Box) and will be used for receiving official communications and legal correspondence. The address must be clearly stated in the company registration application.
Subsidiary vs Branch vs Representative Office:
Branch Office Registration in Hong Kong
One option to register a foreign company in Hong Kong is via the branch office business structure. You will be legally registered, but the business will be considered as a foreign entity as it is an extension of the foreign parent company. A branch office is not considered a separate legal entity, meaning that your foreign parent company will be responsible and accountable for any liabilities and debts incurred. Your business must be registered with the Hong Kong Companies Registry.
Branch offices will generally be subjected to the same tax and legal consequences as other Hong Kong companies, and you will have to adhere to Hong Kong’s ongoing compliance requirements. To incorporate a branch office in Hong Kong, you will need to meet the following requirements:
- Have your company name approved
- Must have a local resident as an authorised representative
- Must have an established place to do business in the country
Prerequisites for Company Registration in Hong Kong
Starting a company in Hong Kong as a foreigner involves fulfilling a few key requirements to ensure compliance with local regulations. Below are the essential prerequisites:
1. Choose a Unique Company Name
Entrepreneurs must select a company name that is unique and not identical to or too similar to any existing registered entity in Hong Kong. It’s important to check the Guidelines on Registration of Company Names for Hong Kong Companies to ensure the proposed name complies with the naming conventions.
2. Minimum Share Capital
There is no statutory minimum share capital requirement in Hong Kong. However, every company must have at least one shareholder holding at least one ordinary share. The share capital can be denominated in any major currency and is not limited to the Hong Kong Dollar (HKD).
3. Appoint Directors
A Hong Kong company must have at least one director who is a natural person and at least 18 years old. Directors can be of any nationality and do not need to reside in Hong Kong. The same individual can act as both director and shareholder. One director is sufficient for private companies, while public companies must appoint a minimum of two directors, all of whom must be natural persons.
4. Appoint a Company Secretary
Every Hong Kong company must appoint a company secretary. If the company secretary is an individual, they must ordinarily reside in Hong Kong. If it is a corporate body, its registered office or principal business place must be in Hong Kong. The company secretary is crucial in ensuring the company complies with legal and regulatory obligations. A Hong Kong resident must be appointed to act as a local representative for foreign-owned companies.
5. Registered Office Address
A local registered office address in Hong Kong is required for company incorporation. This must be a physical address (not a P.O. Box) and will be used for receiving official communications and legal correspondence. The address must be clearly stated in the company registration application
Subsidiary vs Branch vs Representative Office:
will be legally registered, but the business will be considered a foreign entity, as it is an extension of the foreign parent company. A branch office is not considered a separate legal entity, meaning that your foreign parent company will be responsible and accountable for any liabilities and debts incurred. Your business must be registered with the Hong Kong Companies Registry.
Branch offices will generally be subjected to the same tax and legal consequences as other Hong Kong companies, and you must adhere to Hong Kong’s ongoing compliance requirements. To incorporate a branch office in Hong Kong, you will need to meet the following criteria:
- Have your company name approved.
- Must have a resident as an authorised representative.
- Must have an established place to do business in the country.
Subsidiary Company Registration a in Hong Kong
Another option for registering a foreign company in Hong Kong is via the subsidiary company business structure. A subsidiary company in Hong Kong is for investors who want 100% foreign ownership of their company, making this structure one of the most common and preferred options. Your business must be registered with the Hong Kong Companies Registry.
Incorporating a subsidiary company in Hong Kong provides numerous advantages to investors, especially regarding tax incentives. It is considered a separate legal entity from the foreign parent company; hence, the subsidiary company will be treated as a resident company in Hong Kong. You will be eligible for tax exemptions and incentives from all local Hong Kong companies.
To incorporate a subsidiary company in Hong Kong, you will need to fulfil the following requirements:
- Have your company name approved.
- Have a local registered address.
- Must have at least one director or shareholder.
- A Company secretary must be a resident.
- Must have an auditor.
- Must have share capital (no minimum requirement).
Representative Office Registration in Hong Kong
Foreigners considering setting up a company in Hong Kong can first set up a representative office to gain insight into the local market, gain exposure, and develop an in-depth understanding of Hong Kong’s business environment. This move is to help them decide if they want to go ahead with a full-fledged office in Hong Kong, and they can get the feel of what it’s like to run a business here through the representative office business structure.
Representative offices in Hong Kong are not allowed to engage in activities to make a profit. It is also not regarded as a legal entity, which means that you cannot enter into any contracts or agreements, engage in trading activities, sign deals on the company’s behalf or raise invoices and letters. Your business activities will be limited to promotion and liaison activities, coordinating and organising activities on behalf of the parent company and undertaking market research.
Given that representative offices have no legal standing, any liabilities will be the parent company’s responsibility. There are no registration, capital or compliance requirements with this entity either. The primary requirement is to register your business with the Inland Revenue Department of Hong Kong and obtain a Business Registration Certificate.
|
Types of Foreign Companies’ Structure |
Subsidiary |
Branch Office |
Representative Office |
| Entity Name | Need not be the same as the parent company | Must be the same as the parent company | Must be the same as the parent company |
| Activities Allowed | Can conduct all business activities | Must be the same as the parent company | Can only conduct promotion, liaison, marketing, research and other non-profit bearing activities |
| Suitable For | For local or Foreign Companies that wish to expand their operations in Hong Kong | For Foreign Companies that want to expand their operations in Hong Kong | For Foreign Companies that wish to set up a temporary vehicle in Hong Kong to conduct research and act as a liaison office |
| Disadvantages | Continuing Compliance Obligations, eg Financial Reports, Audit, AGMS, etc | Continuing Compliance Obligations, eg Financial Reports, Audit etc | It is a temporary vehicle and cannot generate revenue |
| Ownership | Can be 100% foreign or locally owned | Owned 100% by the head office | No Ownership |
| Separate Legal Entity | Yes | No | No |
| Cap on Number of Members | Yes, max 50 | Not Applicable | Not Applicable |
| Minimum Setting Up Requirement | One shareholder, that can be an Individual or corporate (100% local or foreign shareholding allowed). | Must have a Hong Kong Resident Authorised Representative | Must appoint a Manager or Chief Representative who will relocate from the headquarters |
| Limited Liability | Yes | No, Liabilities extend to the parent company | No, Liabilities extend to the parent company |
| Need for Audited Accounts | Yes | No (Subject to conditions) | No |
| Annual Filing with Companies Registry | Yes | Yes | Not Applicable |
| Tax Treatment | Taxed as a Hong Kong locally incorporated entity | Taxed as a Hong Kong locally incorporated entity | Not Applicable |
| Cessation of Business upon Death of a Member/Partner | No. Equity shares go on in perpetuity | No | Not Applicable |
| Normal Registration Time | 1 to 2 days | 10 days | 1 – 2 days |
| Bank Account | Can open a bank account in Hong Kong | Can open a bank account in Hong Kong | Can open a bank account in Hong Kong |
| Staff Hiring | No restrictions on hiring local or foreign staff | No restrictions on hiring local or foreign staff | The chief representative must be a staff member from the parent company. |
| Local Person Requirement | Must appoint at least one resident company secretary to set up the Company | Must have a Hong Kong Resident Authorised Representative to set up the Branch | Must appoint a Manager or Chief Representative who will relocate from the headquarters |
Which Foreign Company Business Structure Should You Choose?
Choosing between a subsidiary, a branch office, or a representative office in Hong Kong depends mainly on your business objectives.
If you aim to engage in profit-generating activities, establishing a subsidiary company or a branch office would be the appropriate route. However, if you are looking to explore the Hong Kong market before fully committing, setting up a representative office is a suitable, low-risk option, as it allows you to study the business environment without conducting direct business operations.
Among these options, most foreign investors prefer to establish a subsidiary company. Foreign individuals can own and operate a subsidiary without requiring local resident personnel. It also tends to be a more straightforward option for opening a corporate bank account in Hong Kong, making it a popular and practical choice for foreign entrepreneurs.
