Advantages & Considerations of Registering a Company in Hong Kong
Hong Kong attracts a large quantity and variety of foreign companies, from sizeable multinational corporations to small and medium companies seeking to develop marketing and sales opportunities, not to mention financial investors of all kinds. This success in attracting investment, talent, and entrepreneurship is, to a large degree, due to Hong Kong’s excellent institutions, whereby it maintains a very business friendly environment and a high level of political and regulatory stability. The World Bank ranked Hong Kong the world’s 5th easiest place to do business in 2016.
Hong Kong is an important location for businesses seeking to expand into nearby markets such as Mainland China and the emerging and frontier markets of Southeast Asia. In the past several decades, Hong Kong played an important role in financing regional economic growth and fostering the growth of global value chains. Hong Kong enjoys a very developed financial industry, as well as full capital account convertibility. Businesses are able to find financial services providers that are able to process nearly every kind of financial transaction.
Leveraging Hong Kong’s Advantages
Business Environment and Rules
Hong Kong’s remarkably laissez-faire regulatory regime leaves most business matters to be decided by individuals and ultimately settled in the market place. The Economist Intelligence Unit ranks Hong Kong as the third best business environment in the world. The Institute for Management Development ranks Hong Kong the most competitive economy in the world. In financial development, the World Economic Forum ranks Hong Kong number one.
Contract Enforcement In terms of the time needed to settle commercial disputes, Hong Kong is about 33% faster that the OECD high income country average. However, regarding the cost of enforcing contracts (as a percentage of the claim value), Hong Kong is slightly more expensive than the OECD high-income economy average.
Starting a Business It is quick, inexpensive, and simple to form most types of companies in Hong Kong. It takes roughly one week to form a private limited liability company. Foreign companies and entrepreneurs may also form a limited or general partnership, sole-proprietorship, subsidiary, branch office, or representative office, all of which are simple and inexpensive to form and meet the requirements for on an ongoing basis.
Protection for Minority Investors Hong Kong maintains an excellent system for the protection of minority investors. Shareholder governance is extensive and the system regulating conflict of interest is among the very best in the OECD.
Registering Property Registering Real Estate in Hong Kong takes slightly more time and is somewhat more expensive than the OECD high-income country average. In the overall quality of land administration, Hong Kong performs noticeably lower than the OECD high-income country average.
Hong Kong maintains very low taxation and does not levee taxes on a number of categories common in other advanced economies, making it an attractive target for mobile capital from abroad. With no taxation on profits earned oversees, Hong Kong attracts a great deal of foreign capital from investors seeking to park their capital offshore and reduce their tax burden. Hong Kong levees no consumption tax, capital gains tax, withholding tax on dividends and interest, no tax on the collection of social security benefits, and no value-added tax.
- Corporate Tax The corporate rate is steady at 16.5%, well below the worldwide average of 22.96%.
Income Tax Salary tax, as it is known in Hong Kong, is between 2% and 17%. Hong Kong has no value-added tax, capital gains tax, sales tax, and no withholding tax on dividends and interest.
- Property Tax The property tax rate is 5%
Employer Social Security Contributions The tax rate on Mandatory Provident Fund contributions paid by both the employer and employee is 5%. The Mandatory Provident Fund is the compulsory pension fund for the retirement of Hong Kong residents.
The Hong Kong Monetary Authority has demonstrated its intention to promote the internationalization of the RMB. Hong Kong’s Renminbi liquidity pool, which exceeded RMB 580 billion as of 2016 is the largest outside of the Mainland. According to the Bank of International Settlements, RMB transactions (including derivatives trades) totaled $77 billion daily as of April 2016, dwarfing the quantity of RMB transactions in the next two largest offshore RMB financial centers, Singapore and London. Use of the RMB provides companies with an opportunity to reach the large Chinese customer and supplier base that prefers to settle transactions in the Chinese Renminbi.
RMB Related Services in Hong Kong
- RMB Money Markets
- RMB Capital Markets
- RMB Retail and Corporate Banking
- RMB Money and Foreign Exchange Markets
- RMB Insurance and Reinsurance
Hong Kong as a Launching Base for Chinese Market Entry
Hong Kong played an important role during the early stages of reforms and the opening up of the Chinese economy. Much of the foreign investment into the Mainland Chinese market passed through Hong Kong. Nowadays, Mainland China is relatively open to foreign capital, diminishing the incentive to go through Hong Kong. The advantage of starting in Hong Kong will be further reduced given the recent introduction of 11 Free Trade Zones throughout the Mainland.
Nevertheless, Hong Kong is simultaneously one of the freest and most competitive markets in the world while being located at the mouth of the Pearl River Delta, one of the most economically vibrant, diverse, and powerful regions in China. Additionally, as the world’s only global offshore Renminbi business hub, Hong Kong is likely to maintain a strong role as the provider of a financial highway between the vast Chinese market and the rest of the world.
Hong Kong as a Launching Base for Regional Investment
Hong Kong is an important investment and financial hub when it comes to linking global capital with much of East Asia and financing regional growth. Hong Kong is short plane ride to all of East and Southeast Asia. The region enjoys a variety of investment opportunities, from real estate investments with rental income to high-technology startups.