In the last years, Hong Kong lost a bit of its old shine and the dynamic of incorporations in Hong Kong slowed down. Still, Hong Kong remains an attractive location, and this is proved by increasing number of incorporations. The latest incorporation report can be found on the website of the Hong Kong’s governmental Census and Statistics Department (C&SD):
Most of the regional headquarters in Hong Kong are, however, created and hold by companies from Mainland China followed by Japan and USA as you can see on the chart from C&SD on the next page. This is well explicable: operating from Hong Kong, Chinese companies have more freedom of action, Hong Kong Dollar is easier to use on the international markets than the Chinese Yuan.
But also for foreign companies or entrepreneurs, having a company in Hong Kong can be a benefit, especially if you have business relations with companies from Mainland China, for example, ordering and shipping products from China to your own country.
Chart from C&SD Hong Kong
Important to keep in mind that the company law in Hong Kong mainly follows the corporation law of Commonwealth countries. It means that you need at least a registered office and a corporate secretary in place. Hong Kong limited companies have to do their proper bookkeeping and file their local tax declarations, even if there is no revenue generated in Hong Kong itself.
Hong Kong applies territorial taxation. It means that earnings coming from outside of Hong Kong are not taxable. However, since 2023 under the refined FSIE regime (foreign-sourced income exemption) four types of offshore income, namely 1) interests; 2) dividends; 3) disposal gains from the sale of equity interests and 4) income from intellectual property, are deemed to be sourced from Hong Kong and subject to a profit tax if the company fails to meet a relevant exception from the deeming provision. Surely, also the DTAs can influence the taxation topic.
In any case, the standard corporate tax rate in Hong Kong is at 16,5% only, while the first 2 million HKD earnings are taxed at a half-rate of 8,25%.
It is not mandatory to have a local nominee director for Hong Kong Limited companies. Compared to Singapore, where this requirement is imposed by the local law, many entrepreneurs believe that the maintenance costs for a company in Hong Kong are cheaper by the amount they could save for the nominee director if incorporating in Hong Kong instead of Singapore.
What many incorporation service providers do not mention to you: annual audit of your company is mandatory for all limited companies in Hong Kong. And an audit can cost much more than savings you could achieve by not having a local nominee director.
In any case, it is advisable to check different countries and options before you decide whether Hong Kong is a right location for your next incorporation.
Singabiz will be glad to consult you on this topic and to check different benefits or advantages for your plans. Just book one of our consultation options or write us an e-mail and one of Singabiz representatives will be glad to assist you.
