Chinese new year 2025 year of the snake

Free Incorporation when subscribing to Accounting & Audit Services Save HK$3,999 Hurry, offer ends 28th Feb!

Resources

A Comprehensive Guide to Setting up a Business in Hong Kong

As a global financial hub, Hong Kong holds a pivotal role in the international economy, boasting a well-established legal framework, a robust infrastructure, and a business-savvy atmosphere that’s second to none. But what makes Hong Kong truly exceptional is its unique blend of Eastern heritage and Western influence, making it a melting pot of ideas, culture, and opportunities.

The purpose of this blog is to be your trusted companion on the journey of establishing your business in this extraordinary city. We understand that embarking on such an endeavour can be a daunting task, but our mission is clear: to provide you with a step-by-step guide that demystifies the intricacies of starting and managing a business in Hong Kong. 

Whether you’re a seasoned entrepreneur or a novice taking your first steps, this comprehensive guide will equip you with the knowledge, insights, and practical advice you need to succeed in this dynamic business ecosystem. So, let’s dive in and unlock the potential that Hong Kong has to offer as we embark on this thrilling adventure together.

Overview: 

Why Hong Kong is the Best Country to Start a Business as a Foreigner

unlock business potential -1

Strategic Location:

Hong Kong’s geographical location makes it an ideal gateway to both the booming Asian markets and the rest of the world. Its proximity to China, one of the world’s largest economies, provides businesses with unrivalled access to this dynamic marketplace.

Low Taxes:

Hong Kong boasts one of the most tax-friendly environments for businesses globally. With its simple and competitive tax system, featuring low corporate and personal income tax rates, companies can retain a larger portion of their earnings. This not only encourages investment but also allows businesses to thrive and expand.

The corporate tax rate stands at a favourable 16.5%, and businesses benefit from a 100% exemption of the 2022/23 profits tax subject to a ceiling of HKD 6,000 per case only. Additionally, regarding social charges, companies are required to pay a maximum of HKD 1,500 per employee on a monthly basis. No capital gains tax, no VAT.

Well-Developed Infrastructure:

Hong Kong’s world-class infrastructure is a significant asset for businesses. The city offers efficient transportation networks, a modern and reliable telecommunications system, and a highly developed financial sector. These elements provide the essential support that businesses need to operate efficiently and stay globally connected.

Strong Legal System:

Hong Kong’s legal framework is renowned for its transparency and reliability. The city upholds the rule of law, ensuring that contracts and business transactions are protected. The independent judiciary and the enforcement of intellectual property rights make it an attractive destination for businesses seeking legal protection and a fair business environment.

Access to Global Markets:

Hong Kong serves as a gateway to international markets. Its free-trade policies, open economy, and extensive network of bilateral trade agreements make it a springboard for businesses looking to tap into global markets. The absence of trade barriers and tariffs enhances the ease of conducting cross-border commerce.

Trying to start your business? Reach out to our experts today!

Types of Companies/Business Registration Offices to Choose from:

selecting your business structure in hong kong

Our team will help you select the right business structure for you depending on:

  1. Size of the business
  2. Capital investment
  3. Number of employees
  4. Business requirement.

Some common business structures in Hong Kong offered by the Companies Ordinance are:

Limited Company

Small and medium-sized enterprises usually establish a company limited entity. You need to hire at least one director and 1 shareholder to set up a limited company. There is no capital amount requirement for starting this entity.

Branch Office

The Branch Office is set up by the parent company. The headquarters decides all the activities of the branch office. The debts and liabilities of the branch office are liable to the parent company.

Subsidiary Office

The subsidiary office works similarly to a branch office except that it is responsible for its debt and liability.

Representative Office

A representative office is an excellent way to explore the market of Hong Kong before expanding your wings here. An RO cannot perform any income generating activities here.

Sole Proprietorship

This business entity has a single owner and is best suitable for small firms. The owner of the firm is responsible and liable for all the debts and can enjoy the profits after paying income tax.

Partnership

When two people come together under an agreement to do business, a partnership firm is established. There are two types of partnership firms:

  • A General Partnership is where the investor is entirely liable for the company including the partner’s action.
  • A limited partnership is best to invest where you are responsible for your contribution, but you cannot control any activities of the business entity. It is established between the principal partner and the limited partner.

How to Set Up a Hong Kong Company

Setting up a company in Hong Kong is a straightforward process, involving several key steps:

  1. Select a Business Structure: Determine the most suitable business structure, such as a sole proprietorship or partnership, branch office, or representative office, based on your specific needs and goals.
  2. Company Name Registration: Choose a unique company name and check its availability for registration with the Hong Kong Companies Registry.
  3. Appoint a Company Secretary: Every Hong Kong company is required to have a company secretary who ensures compliance with statutory obligations.
  4. Share Capital and Shareholders: Define the share capital and the number of shareholders for your company.
  5. Registered Office Address: Provide a registered office address within Hong Kong where official documents can be delivered.
  6. File Incorporation Documents: Submit the necessary incorporation documents to the Companies Registry, which can be done online, by mail, or in person.
  7. Obtain a Business Registration Certificate: Upon approval, you will receive a business registration certificate and a certificate of incorporation.
  8. Comply with Tax Regulations: Ensure your company complies with Hong Kong’s tax regulations, including profits tax and any other relevant taxes.

Not sure about the company registration procedure in Hong Kong? Click that link to check out our article on that topic. 

Doing Business in Hong Kong

Doing business in Hong Kong offers unique opportunities and challenges:

  1. Market Entry: Entry into the Hong Kong market is relatively straightforward due to the city’s open and liberal economy.
  2. Business Culture: Understanding and respecting local business customs, such as gift-giving and the significance of relationships, is essential for successful business interactions.
  3. Language: While English is widely used for business, having proficiency in Cantonese or Mandarin can be an advantage, especially for specific sectors or target markets.
  4. Regulatory Compliance: Staying compliant with local regulations and keeping up with changing legal requirements is vital for a smooth business operation.
  5. Networking: Building a strong network is highly beneficial in Hong Kong. Attending business events and joining industry-specific associations can open doors to new opportunities.
  6. Tax Efficiency: Utilise the city’s favourable tax system and exemptions to enhance your company’s financial performance.

With the right knowledge and guidance at Sleek, entrepreneurs can capitalise on Hong Kong’s unique advantages and thrive in this dynamic business environment.

Legal Considerations for Starting a Business Venture in Hong Kong

A. Business Registration Certificate and Licensing Requirements

You have three options for submitting your incorporation documents to get your business registration documents:

  • online through the 24/7 Companies e-Registry,
  • via mail to the Companies Registry address, or
  • in person at the business registration office.

Companies Registry is responsible for the registration of Hong Kong and non Hong Kong companies under the Companies Ordinance, open-ended fund companies under the Securities and Futures Ordinance and limited partnership funds under the Limited Partnerships Funds Ordinance.

Upon submission, the Companies Registry will promptly issue two essential documents: the certificate of incorporation and the business registration certificate. Both documents can be collected either in person or electronically. It’s worth noting that the Certificate of Incorporation by the Companies Registry is issued only once by the Hong Kong Companies Registry, providing validity throughout your company’s lifetime. In contrast, the business registration certificate is valid for one year and must be renewed annually within one month following your company’s establishment anniversary to avoid fines.

Hong Kong, known for its liberal economy, typically does not require permits or licenses for businesses to operate. The city welcomes a wide range of businesses without undue restrictions. Exceptions arise in cases where licenses or permits are essential to safeguard public interests, such as safety, hygiene, public health, or people’s savings. For instance, opening a restaurant necessitates obtaining a General Restaurant Licence, a Provisional General Restaurant Licence, and a Liquor Licence from the Food and Environmental Hygiene Department.

To determine specific licensing requirements for your business, you can visit the government website, which provides comprehensive information about the licenses, permits, certificates, and approvals needed for various types of businesses or receive help from a company secretary practising in Hong Kong.

B. Intellectual property rights protection

Safeguarding intellectual property is crucial for businesses in Hong Kong. Copyrights, patents, trademarks, and designs must be registered to protect your innovations. The Hong Kong Intellectual Property Department offers resources and services for IP protection.

C. Contracts and agreements

Contracts and agreements form the foundation of business relationships. In Hong Kong, ensuring that your contracts are well-drafted and legally binding is vital. The Department of Justice provides resources on contract law and templates for various business agreements.

Not sure what are the benefits of registering a business? Check out our article to learn more!

Discover our incorporation services or reach out to our team for personalised guidance today.

Finances and Funding for Running a Business in Hong Kong

A. Initial Capital Requirements

Setting up a business in Hong Kong demands an understanding of the initial capital requirements, which can vary widely based on the nature and scale of your enterprise. According to data from the Hong Kong Census and Statistics Department, the average capital investment for small and medium-sized businesses in Hong Kong ranged from HKD 50,000 to HKD 300,000. It’s crucial to conduct a comprehensive financial assessment to determine the specific capital needs of your venture.

B. Banking and Financial Services in Hong Kong

Hong Kong is renowned for its world-class banking and financial services sector. In fact, it is home to numerous global and regional banks, making it a hub for international financial activities. The jurisdiction is known for its stable banking system, robust regulatory framework, and accessibility to a wide range of financial products and services, including business loans, credit facilities, and foreign exchange services.

As of the most recent data from the Hong Kong Monetary Authority, the city boasts over 150 authorised institutions, highlighting the diversity and depth of the financial services sector. This diversity provides businesses with access to a wide array of financial tools and resources to support their business operations.

C. Sources of Funding

  1. Personal Savings:

A significant portion of entrepreneurs in Hong Kong utilise personal savings to kickstart their businesses. According to the Hong Kong General Household Survey, personal savings remain a prominent source of funding for startups, with more than 60% of new businesses relying on personal funds. This highlights the entrepreneurial spirit and financial stability of many Hong Kong residents.

  1. Angel Investors and Venture Capital:

Hong Kong has a burgeoning ecosystem of angel investors and venture capital firms. Data from the Hong Kong Venture Capital and Private Equity Association (HKVCA) indicates a steady increase in venture capital investment over recent years. Venture capital investment reached approximately HKD 5.4 billion, showcasing the growing support for innovative and high-potential startups.

  1. Government Grants and Incentives:

The Hong Kong government actively encourages business development through grants and incentives. One such initiative is the Enterprise Support Scheme, which provides financial support for startups in various sectors. According to the Hong Kong Trade and Industry Department, this scheme has awarded grants ranging from HKD 50,000 to HKD 5 million to eligible businesses, promoting innovation and economic growth.

Taxation for Businesses in Hong Kong

unlock tax benefits in hong kong

A. Hong Kong’s tax system

Hong Kong boasts one of the most business-friendly tax systems globally, underpinned by its simple and transparent approach. The city continues to uphold this reputation, with a direct tax system characterised by

Low Corporate Tax Rate: Businesses enjoy a competitive corporate tax rate of 16.5%, contributing to a favourable environment for enterprise.

No Value Added Tax (VAT): Unlike many other jurisdictions, Hong Kong does not impose a Value Added Tax or Goods and Services Tax (GST) on the sale of goods and services, further reducing the tax burden on businesses.

B. Profits tax and exemptions

Hong Kong’s profits tax system is designed to be both straightforward and tax-efficient. Businesses operating in the city benefit from:

Tax Exemptions: The first HKD 2 million of assessable profits is subject to a 50% tax rate, while the remaining profits are taxed at the standard 16.5% rate. This exemption significantly eases the financial obligations of small and medium-sized enterprises (SMEs).

Tax Deductions: The tax system allows for various deductions, including bad debts, and interest expenses, enhancing the tax efficiency of businesses.

C. Goods and Services Tax (GST)

Hong Kong maintains its status as a tax haven by not imposing a GST or VAT on goods and services. This absence of a consumption tax is a significant advantage, as it keeps prices competitive and simplifies financial operations for businesses.

D. Double taxation agreements

Hong Kong has a network of double taxation agreements (DTAs) with over 40 countries, ensuring that businesses are not subjected to double taxation on their income. These DTAs promote international trade and investment by providing clear guidelines for taxing rights on various types of income.

E. Tax planning and compliance

Effective tax planning and compliance are essential for businesses operating in Hong Kong. Staying compliant with tax regulations ensures a smooth and legally sound operation. Hong Kong Inland Revenue Department data indicates that around 90% of profits tax returns are filed online, reflecting the city’s commitment to efficient tax compliance processes.

Hiring and Employment

A. Labour market in Hong Kong

Hong Kong’s labour market is characterised by a skilled and diverse workforce. As of 2022, the city’s unemployment rate stood at around 5.06%, which is relatively low compared to the global average. The city’s labour force participation rate is approximately 60%, with a strong emphasis on the services sector, including finance, tourism, and trade. With a robust pool of talent and a favourable regulatory environment, Hong Kong presents an attractive proposition for businesses looking to expand their workforce.

B. Work permits and visas

To hire foreign talent in Hong Kong, businesses must navigate the work permit and visa requirements. As of 2022, the city offered various visa schemes, including the General Employment Policy (GEP), which allows skilled professionals to work in Hong Kong. Additionally, the Admission Scheme for Mainland Talents and Professionals (ASMTP) caters to mainland Chinese professionals. These visa options facilitate the inflow of international talent, enhancing the diversity and expertise of the workforce.

C. Hiring local and expatriate employees

Hong Kong businesses often strike a balance between local and expatriate talent. Hiring local employees is straightforward, with no restrictions on the number of local employees a business can hire. Furthermore, the Employee Retraining Board (ERB) provides training programs to enhance the skills of local workers, ensuring a competent workforce.

Expatriate hires, on the other hand, are essential for multinational companies and those requiring specialised expertise. Last year, Hong Kong was home to over 300,000 foreign domestic helpers, reflecting the cosmopolitan nature of the city and the need for expatriate workers in various sectors.

D. Employment contracts and benefits

Hong Kong’s labour laws govern employment relationships, ensuring clarity and fairness. According to the Employment Ordinance, employers are required to provide written employment contracts to employees within the first 30 days of their employment. These contracts outline terms and conditions, including wages, working hours, and termination procedures.

Employee benefits are a vital component of Hong Kong’s employment landscape. The city boasts a Mandatory Provident Fund (MPF) system, requiring employers and employees to make contributions to retirement savings accounts. Additionally, statutory benefits such as paid annual leave, sickness allowance, and maternity leave ensure employee well-being and safeguard their rights.

Not sure about the importance of business registration? Check out our article by clicking that link!

Compliance and Regulations for a Hong Kong Company

A. Import and export regulations

Hong Kong is a global trading hub with a commitment to open markets and free trade. The city maintains a simple and efficient import and export regime, facilitating international commerce. Hong Kong’s strategic location has made it a gateway to China and the world. According to the Census and Statistics Department of Hong Kong, the total value of Hong Kong’s re-exports of goods in 2022 exceeded HKD 4.5 trillion, emphasising the city’s pivotal role in global trade.

B. Environmental and safety regulations

Environmental and safety regulations in Hong Kong are designed to ensure sustainability and public well-being. The Environmental Protection Department (EPD) enforces stringent standards. The city remains committed to reducing greenhouse gas emissions, with the target of achieving carbon neutrality by 2050. Hong Kong’s focus on environmental sustainability is evident through its comprehensive waste management programs, renewable energy initiatives, and air quality monitoring systems.

C. Compliance with labour laws

Hong Kong’s labour laws are designed to uphold workers’ rights and ensure fair and harmonious employment relations. In 2023, the city’s statutory minimum wage was set at HKD 40 per hour, benefiting numerous low-wage workers. The Employee Compensation Ordinance mandates employers to provide insurance coverage for employees against work-related injuries. Labour laws also cover working hours, overtime compensation, and paid leave, ensuring employee welfare.

D. Intellectual property rights protection

Hong Kong places a strong emphasis on protecting intellectual property rights. As of 2023, the city is a signatory to international conventions such as the Paris Convention and the Patent Cooperation Treaty, ensuring that intellectual property rights are safeguarded in accordance with international standards. The Hong Kong Intellectual Property Department is dedicated to providing resources, registration, and enforcement of intellectual property rights, with a particular focus on trademarks, patents, copyrights, and designs.

Challenges and Pitfalls

A. Common challenges faced by businesses in Hong Kong

Operating a business in Hong Kong offers numerous advantages, but it also presents unique challenges. Some of the common challenges faced by businesses in Hong Kong include:

  1. Intense Competition: Hong Kong’s dynamic business ecosystem is characterised by fierce competition. Staying ahead and differentiating your business is a constant challenge, especially in crowded market segments.
  2. High Operational Costs: The high cost of living and doing business in Hong Kong can impact your operational expenses, from rent and labour to utilities.
  3. Talent Acquisition: Attracting and retaining skilled professionals can be competitive, given the city’s demand for top talent.
  4. Regulatory Complexity: Navigating the regulatory framework, especially with regard to permits, licenses, and compliance, can be intricate and time-consuming.
  5. Market Volatility: Economic fluctuations, changing consumer preferences, and global events can introduce uncertainties that impact businesses.
Launch your business in under 3 hours with our expert guidance. Contact us today!

Overcome obstacles and adapt to changing circumstances with Sleek

Overcoming these challenges and adapting to evolving circumstances is crucial for business success. Sleek’s team of experienced business experts can provide valuable assistance to address these obstacles:

  • Market Research: Conduct in-depth market research to identify opportunities and gaps in your industry. Understanding your competition and target audience can help you formulate a robust strategy.
  • Cost Management: Efficient financial management is key. Sleek’s experts can offer advice on cost optimisation, budgeting, and financial planning to enhance profitability.
  • Talent Strategies: Leveraging our HR expertise, Sleek can help you create attractive employment packages and develop effective talent acquisition and retention strategies.
  • Regulatory Guidance: Stay compliant with local regulations by partnering with Sleek’s experts, who can assist with business registration, licenses, and permits.
  • Adaptability: Business environments change rapidly. Sleek’s team can help you adapt to evolving market conditions, identify emerging opportunities, and devise contingency plans.

Navigating the business landscape in Hong Kong is rewarding, but it requires vigilance and adaptability. Sleek’s business experts are well-equipped to provide the guidance and support needed to address challenges, seize opportunities, and steer your business towards sustained success.

Don’t miss out on our expertise – let’s embark on this journey together. Contact us today!

FAQs

The cost to set up a business in Hong Kong varies, but government fees for business registration are typically around HKD 2,150, while other costs depend on the business type and services required.

To start a small business in Hong Kong, you need to register your company, obtain the necessary permits or licenses, open a business bank account, and adhere to local regulations.

Foreigners can set up a company in Hong Kong by following the registration process, securing the required permits, and fulfilling regulatory obligations.

Opening a company in Hong Kong usually takes about 5-7 working days, provided all necessary documents are in order and approvals are obtained.

Ready to start your business?

Our expert team is here to help you. Explore our incorporation services or contact our team to get personalised advice today.

Need expert advice?

sleek logo
Let’s Connect
Leave our friendly team a message and we’ll be in touch in no time.

Need expert advice?