Hong Kong Company Formation

Everyone in the area of business knows that Hong Kong is the ideal location for setting up and forming a company. It is specifically geared to enable free enterprise to flourish with a minimum of restriction. The country itself is pro-business, so it would be a good place for all who wish to make themselves successful enterprises. Success does not come automatically; we must know all about Hong Kong company formation.

It has a simple low-rate tax regime with free-market principles. There are no curtailments on outbound or inbound stake. Further, nationality does not matter. Anyone can invest in almost any business and own up to 100% of the equity.

Image Source: UnSplash

Territorial tax system and stable nation

The Hong Kong tax system is territorial. Profits are subject to a tax (currently at a rate of 16.5%), but foreign-source income is not taxable. There are no other taxes like capital gains, sales, dividends, interest, or inheritance.

In addition to being a major financial and commercial center, it is also a regional headquarters and business hub for the Asia Pacific region.  It is used as a link by companies looking to do business in Mainland China and mainland enterprises seeking access to global markets.

The country’s appeal is built on its political stability, the rule of law, the free flow of information. The use of English as the language of business is also a plus. It has well-qualified talent, while business-friendly immigration policies make it simple to recruit professionals from overseas.

What is required is minimal. All one needs is a registered office and a resident company secretary or a resident agent. Agents provide the necessary expertise. This takes care of administering and managing companies, including company secretarial services, company law, board procedures, director responsibilities and shareholder relations, and financial and corporate compliance requirements. This is the key that enables the company’s owners to focus on their primary business.

Business entities

The most frequently used form of business entity is the private limited company, either as a standalone business or as a subsidiary of a foreign company. Companies from abroad can also set-up in Hong Kong as a branch office or a representative office. It is vital to have full knowledge of your options prior to deciding how to proceed. The choice is necessary as the wrong choice could severely restrict the expansion of one’s business. To be successful, a new company must obtain a certificate of incorporation from the Companies Registry here. All businesses must also obtain a Business Registration Certificate from the Inland Revenue Department (IRD) within a month of commencing business.

The new ordinance here, which came into effect on 3 March 2014 stated the eight different types of companies that could be formed under the old Hong Kong Companies Ordinance into five types:

• Private companies limited by shares
• Public companies limited by shares
• Companies limited by guarantee with no shares.
• Private unlimited companies with a share capital
• Public unlimited companies with a share capital

The most commonly used is private company limited by shares for small to medium-sized businesses or trading companies in HK. This protects the personal assets of shareholders from business liabilities.

This company would be able to take advantage of incorporated business in Hong Kong, including the Closer Economic Partnership Arrangement (CEPA), a free trade agreement with Mainland China.

The law requires that one must not allow people to transfer their shares, ensure the shareholders are only 50 without including employees and former employees. One must also prohibit an invitation to the public to subscribe for both dividends and debentures, for that would not make it a private limited company. The shareholders can, of course, be individuals or corporations of any nationality, domicile, or residence.

Win-win situation

As we can see, this county is successful as it has made it easy for all to do business. We surely feel this is a nation worth investing in as its ideas are clear and on the right path. We know that the principle itself is one of win-win, so it would help if we understand this clearly.  Hongkong, after all, did not become successful without clarity. It is a business hub, as it was meant to be one. We can make use of this prosperous nation when we understand their strategy.

Links:

https://www.cr.gov.hk/en/home/index.htm
https://home.hktdc.com/en/success-stories