A Comprehensive Guide for Foreigners to Start a Business in Hong Kong
3E Accounting explains it all in a comprehensive guideline for foreigners to start a business in Hong Kong.
The Hong Kong (HK) Government is pulling out all stops to encourage investment in start-ups via private venture funds. Approximately HKD 7 billion has been earmarked and utilized in venture funds to support technology and innovation. If HK is your dream location, here’s a comprehensive guideline for foreigners to start a business in Hong Kong.
Start Up Your Start-up
HK hits all the right notes when it comes to starting a business. It’s an investor-friendly business hub, has the world’s freest economy, and low taxes and world-class infrastructure. Get your compliance and regulation right, and there’s no reason for foreign entrepreneurs to delay starting a business in HK.
Assuming due diligence and a first-rate business plan have been seen to, your journey begins with company incorporation. You will need to get your company incorporated with the HK company registry. Things to get in order include:
- A unique company name, i.e., one that isn’t already taken, which can be in English and/or Chinese.
- Pay the appropriate incorporation fee.
- Copies of the following:
- Any proof of address.
- Identification documents of directors and shareholders.
- Authorizing partners signature on incorporation form.
Next, choose a legal structure that aligns with your business needs. Each type has its strengths and weaknesses, so it’s advisable to do your research beforehand. Company structures include:
- Sole Proprietorship or Partnership
- Limited Company
- Company Limited by Shares or Guarantee
- Branch or Representative Office
Most foreign entrepreneurs prefer a Limited Company as its separate legal identity offers better protection and limited liability to its shareholders. It also exists in perpetuity and is easier to get funding from banks and investors.
However, if you are a foreign company that prefers to only have a presence in HK, then consider either a subsidiary, branch or representative office. Different compliance rules apply to each, and if you are unsure how to proceed, 3E Accounting is ready to assist.
Once your company is incorporated, you will need to set up a corporate bank account which requires the following, amongst others:
- Company’s documentation which includes:
- incorporation documents.
- registered address.
- contact information.
- details of business owners.
- Certification by a public accountant, lawyer, company secretary or banker.
- Proof of business such as financial statements, etc.
This is usually followed by getting a business activity license from the Trade and Industry Department. Note that most business activities in HK do not need a license to operate. However, specific industries, such as the shipping or food industry, have different regulations.
The most crucial step is to register for taxes on the HK Inland Revenue. HK practices a territorial tax regime, which means the business that occurs outside of HK do not incur profit tax. There is also no capital gains tax, while profit taxes are 8.25% for the first HKD 2 million, followed by 16.5% after.
Other requirements that need to be seen to include:
- MPF Scheme: employees must be enrolled in the Mandatory Provident Fund.
- Annual Returns: audited accounts and tax returns must be filed every year while annual reports depend on company legal structure.
- AGM: annual general meetings must be held every year.
- Get co-working space, rent serviced offices, get website design, liability insurance, etc.
- Access grants, funds and resources.
An Alliance for Success
A comprehensive guideline for foreigners to start a business in Hong Kong can only tell you so much. Real-life situations will have a hundred and one other matters that need to be addressed. Forming the right alliance can kickstart your business successfully. 3E Accounting offers customizable business solutions to assist all your entrepreneurial needs.
Contact 3E Accounting today for cutting-edge and novel business solutions.