Why Hong Kong is the best choice for self-employed professionals
10 minute read
Deciding to become a self-employed individual is a significant step towards financial autonomy. If you’re considering starting your own business, Hong Kong offers a plethora of advantages. As one of the world’s freest economies, the city welcomes both locals and foreigners with relatively straightforward processes for business registration and setup.
In this blog post, we will explore why and how Hong Kong makes it easier to become a self-employed professional, the processes involved, and the benefits of using an online partner to simplify the journey.
Overview:
- Who qualifies as a self-employed individual in Hong Kong?
- Why is Hong Kong coveted for self-employment?
- Responsibilities that come with being self-employed
- Wrapping up
- FAQs
Who qualifies as a self-employed individual in Hong Kong?
Unlike a limited liability company, a self-employed does not have a separate legal entity.
As a self-employed professional, you are personally liable for the obligations and debts of your business. This status offers advantages in terms of control and decision-making but comes with the responsibility of managing day-to-day operations and compliance requirements.
We’ll discuss all that in this piece. But first, let’s understand why Hong Kong is the go-to place to work for self-employed individuals.
Why is Hong Kong coveted for self-employment?
Hong Kong is the top place for self-employed professionals because of the following reasons:
1. Quick incorporation and set-up
Hong Kong offers a remarkably efficient process for incorporating a business as a self-employed individual. The government provides user-friendly online platforms and services that enable entrepreneurs to register their businesses swiftly.
This efficient incorporation process allows you to establish your business promptly, minimising bureaucratic hurdles and enabling you to focus on your core activities.
2. Straightforward processes
Hong Kong is known for its business-friendly regulations and transparent processes. The government provides clear guidelines and requirements for self-employment, making it easier for individuals to navigate the process without unnecessary complications.
Here is how you can start as a self-employed professional in Hong Kong:
- Apply for a business licence with an ID card
- Open a business bank or neo bank account
- File a change of business address, change of business name, change in nature of business or cessation of business
- File tax returns
- Renew the business registration certificate
The simplicity of these procedures ensures that you can understand and complete your firm’s legal and administrative obligations without having to worry too much.
3. Minimal restrictions for foreigners
Unlike many other countries, Hong Kong imposes minimal restrictions on foreigners starting a business. Foreign entrepreneurs are welcomed and encouraged to establish their ventures in the city. There are no requirements for local partnerships or shareholding, and foreigners can own 100% of their companies.
This openness creates a level playing field and allows individuals from all over the world to explore entrepreneurial opportunities in Hong Kong.
4. Nominal registration fees
The cost of registering as a self-employed professional in Hong Kong is relatively low compared to other jurisdictions. The nominal registration fee makes it financially accessible for individuals with varying budgets to start their own businesses.
The fee for one year is HK$2,000, and the levy costs HK$250. This affordability factor is particularly advantageous for aspiring entrepreneurs who may have limited initial capital but possess the drive and ambition to succeed.
5. Easy tax filing
Hong Kong’s tax system is renowned for its simplicity and low tax rates. As a self-employed professional, you can enjoy a favourable tax regime. In a ranking by accounting firm PwC and the World Bank in 2020, Hong Kong was recognised for having a very friendly tax system, second only to Bahrain.
Hong Kong has a certain level of autonomy within the People’s Republic of China, allowing for even greater financial secrecy than during its time as a British colony.
As per the city’s inland revenue department, the current tax rate for a self-employed individual is 8.5% for the first HK$2m of profit and 16.5% for profits exceeding that amount.
Individuals with work visas in Hong Kong pay income tax ranging from 2% to 17%, depending on their income level. These rates are significantly lower compared to income taxes in Western countries. Moreover, tax for businesses in Hong Kong is also subject to a relatively low of either 8.25% or 16.5%, depending on their profit levels.
6. Easy access to credit
The Hong Kong Monetary Authority (HKMA) has launched a platform to help banks make quick lending decisions for small and medium-sized enterprises (SMEs). The platform is called Commercial Data Interchange (CDI).
The CDI connects different data companies, SMEs, and lenders, allowing banks to access relevant information to assess the creditworthiness of SMEs. This is particularly beneficial for small companies that struggle to secure loans due to a lack of collateral.
By accessing the operational data of SMEs through reliable feeds, banks can make informed and fast lending decisions.
In addition, Eddie Yue Wai-man, the CEO of HKMA, has been a strong advocate for financial technology (fintech) and has already made advancements in this area, such as granting virtual bank licences and exploring a digital currency called e-HKD. This bodes well for the future of businesses in Hong Kong.
7. Business privacy
In Hong Kong, a company director doesn’t have to be a real person as even foreign companies can be directors of Hong Kong companies. This means that international businesses and entrepreneurs can manage their Hong Kong companies without their details being publicly revealed. They can appoint a nominee director to act on behalf of the foreign company and keep personal information private.
While information about individuals with significant control over Hong Kong companies needs to be provided to regulatory authorities, it is not accessible to the public.
8. Free trade
In simple terms, Hong Kong is a free port, which means it doesn’t impose import or export duties on goods. This makes it easier and more cost-effective for businesses to trade internationally.
Hong Kong has special trade arrangements with mainland China and other developed economies. There is a free trade area between Hong Kong and Mainland China called the Closer Economic Partnership Arrangement (CEPA).
Additionally, Hong Kong has free trade agreements with countries like Australia, New Zealand, the member states of the Association of Southeast Asian Nations (ASEAN), and the member states of the European Free Trade Association. These agreements promote trade and remove barriers, benefiting businesses and boosting economic activities.
9. No separate legal entity
In Hong Kong, businesses owned and operated by a single individual without a separate legal identity. The owner and the business are considered one entity. Similarly, Hong Kong limited partnerships lack a separate legal entity status and the partnership is viewed as an extension of its partners. So, it’s better to work as a self-employed individual in the city.
Talk to our friendly experts today about how Sleek can simplify your business
Responsibilities that come with being self-employed
While self-employment offers numerous advantages, it also comes with certain day-to-day responsibilities. As a self-employed individual in Hong Kong, you will be responsible for handling various tasks, including registration, obtaining licences, filing tax returns, and managing accounting matters. These requirements can be overwhelming, particularly when you are trying to establish your business.
To alleviate the burden and ensure compliance, it is highly recommended to rely on experts who can provide guidance and end-to-end support, allowing you to focus on what truly matters – growing your business. That’s where Sleek can help. From bookkeeping to financial audits, and managing taxes and payroll, let our experts bring you peace of mind while you focus on more pressing matters like growing profits!
Wrapping up
Hong Kong is highly regarded as the best choice for self-employed professionals due to its numerous advantages. The city offers a quick and efficient incorporation process, transparent and straightforward procedures, minimal restrictions for foreigners, low registration fees, and a favorable tax system.
Access to credit is facilitated through initiatives like the Commercial Data Interchange platform. Business privacy is protected, and the city’s free trade agreements promote international trade.
Overall, Hong Kong provides an optimal environment for self-employed individuals to thrive and achieve financial autonomy. Given these factors, the city will likely maintain its status as one of Asia’s leading international business hubs.
On a more individual note, while self-employment comes with responsibilities, seeking guidance from experts can help navigate the process. Choose Sleek as your online accounting expert and financial coach for seamless self-employment in Hong Kong.
FAQs
Registration with the Business Registration Office of the Inland Revenue Department is mandatory for all self-employed individuals in Hong Kong. If you operate multiple companies, you must obtain a separate business registration certificate for each of them. Each firm is eligible to have a distinct business name.
Starting from the 2018/19 period and onwards, corporations are subject to the following tax rates in Hong Kong:
- An 8.25% tax rate applies to assessable profits up to HK$2m.
- For any portion of assessable profits exceeding HK$2m, a tax rate of 16.5% is imposed.
In Hong Kong, people seem like they’re always on the go! You’ll see lots of individuals focused on being efficient and getting things done to be successful. But hey, they’re not all about work and no play; apart from being one of the best cities to start a company in, Hong Kong also offers delicious cuisines, a vibrant culture and a friendly community.
