Entrepreneurs from all over the world prefer Hong Kong as their preferred destination to establish a businesses. Many investors and business owners are deciding to start their businesses abroad, outside their home country, particularly in places like Hong Kong. They do this to easily access international markets and take advantage of tax-friendly environments.
Hong Kong is often seen as a great place to start and manage a business because it’s easy and fast to set up a business, 100% foreign ownership is allowed, offers low taxes, and ranks high in all aspects important to businesses. If you are wondering why you should choose Hong Kong to set up a business, this article details why Hong Kong is a good place to start a business.
Hong Kong business setup competitiveness ranking
Hong Kong continues to hold top rankings globally in economic freedom and competitiveness. The territory maintains its status as a vital financial hub and business center. Hong Kong reported 2022 GDP (Gross Domestic Product) was $368.63 billion, which translates to $49,661 per capita, and has an 1.7% inflation rate (1.7%).
To understand Hong Kong’s current economic position, let’s take a look at its latest statistics across key indicators:
Parameter | Hong Kong rank |
Economic Freedom Index | 1st globally (2023) The Heritage Foundation: Index of Economic Freedom |
World’s best financial system | 1st globally (2019) World Economic Forum: The Global Competitiveness Report |
Best location for IPOs in Asia-Pacific | 1st (2019) Baker McKenzie & Oxford Economics: Global Transactions Forecast |
Global Competitiveness ranking | 3rd globally (2019) World Economic Forum: Global Competitiveness Report |
Best Global Financial Center | 3rd (1st in Asia) 2023 The Global Financial Centres Index |
Corporate Governance ranking | 2nd (in Asia-Pacific) CG Watch 2020 compiled by Asian Corporate Governance Association and CLSA Limited |
Ease of Doing Business | 3rd globally (2020) The World Bank Group: Doing Business Report 2020 |
World’s leading investment hub for FDI (Foreign Direct Investment) inflows in Asia | 3rd globally (2020) World Investment Report by United Nations Trade and Development (UNCTAD) |
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Ease of Doing Business
Hong Kong is famous for being a simple place to start a business. Hong Kong is ranked as the third easiest place to do business globally, according to The World Bank Group’s Doing Business Report 2020. This high ranking underscores the city’s efficient regulatory environment, which supports business operations and facilitates starting and running a business with relative ease.
You can set up your company here in about two weeks. The city has good infrastructure and it’s easy to find business spaces. Hong Kong takes intellectual property protection seriously, with strict rules in place. Further, Hong Kong’s tax system is straightforward and friendly to businesses, which attracts foreign investors. Foreigners who want to start a business in Hong Kong can easily move there by applying for a work visa.
Here are some international rankings to demonstrates how easy it is to do business in Hong Kong:
- 3rd in ease of doing business according to The World Bank’s Doing Business 2020 Report
- 4th in the world’s business environment rankings in The Global Financial Centres Index 25, 2019
- 3rd in best countries for business, as per Forbes lists
- 5th in world’s fastest place to start a business according to the World Economic Forum: The Global Competitiveness Report 2019
- 3rd in global competitiveness according to the World Economic Forum: The Global Competitiveness Report 2019
Ultimate guide: How to register a business in Hong Kong
Straightforward Tax System
Hong Kong’s corporate tax regime is celebrated for its simplicity, transparency, and favorable rates, making it one of the most business-friendly environments in the world:
- Territorial Taxation: Companies in Hong Kong are generally only taxed on profits sourced within the territory. This means income generated outside of Hong Kong is often tax-free, significantly reducing your tax burden.
- Low Tax Rates: Hong Kong boasts incredibly competitive corporate tax rates. It has a two-tier profits tax system:
- The first HK$2 million of profits are taxed at 8.25%
- Any profits above that are taxed at a flat rate of 16.5%
- No Sales Tax, VAT, or Capital Gains Tax: Hong Kong doesn’t levy sales tax, Value-Added Tax (VAT), or capital gains tax. This simplifies your tax obligations and keeps more of your hard-earned revenue in your pocket.
- Few Deductions: While deductions in Hong Kong’s tax system are limited compared to some countries, this significantly reduces the complexity of tax calculations and minimizes the opportunity for disputes.
- Efficient Filing: Tax filing in Hong Kong is relatively straightforward, often made further accessible through the option for online filing.
Note: Tax obligations can vary depending on business structure and activities. Always consult a qualified tax advisor in Hong Kong for professional guidance and to ensure complete compliance.
Different business entities in Hong Kong
World's freest economies
According to the Fraser Institute, Hong Kong has maintained its position as the world’s freest economy for over two decades. This consistent ranking highlights the city’s commitment to free market principles, including minimal government intervention in business, a low tax regime, and an open trade environment.
Hong Kong consistently tops global rankings as one of the world’s freest economies. This open economic model brings undeniable advantages to businesses:
- No Barriers to Foreign Ownership: Hong Kong embraces businesses from all over the world. No foreign ownership or investment restrictions create a truly international business environment.
- Free Flow of Capital: Capital can move in and out of Hong Kong without restriction or excessive regulation. This is incredibly attractive to investors and those seeking financial flexibility.
- Level Playing Field: Hong Kong’s free market ensures competition. Businesses compete on quality and customer service, not artificial government intervention.
- Simple Import/Export Procedures: Hong Kong’s trade processes are famously streamlined with minimal bureaucracy. Import and export declarations are straightforward, allowing for quick and efficient handling of shipments.
- Zero Tariffs and Unrestricted Trade: As a free port, most goods entering or leaving Hong Kong do not face import or export tariffs. This means less red tape, reduced costs, and faster movement of goods, making your business more competitive.
Factors such as a strong banking system, minimal public debt, a reliable legal system, ample foreign currency reserves, and strict anti-corruption measures make Hong Kong a favorable place for businesses.
Additionally, businesses established in Hong Kong can take advantage of the Closer Economic Partnership Arrangement (CEPA), which allows preferential access to China’s mainland market. Goods made in Hong Kong can be exported to China without tariffs, and service providers from Hong Kong can receive special treatment in certain areas when offering services in China.
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International Financial Center
Hong Kong is a globally recognized powerhouse in the financial sector, offering businesses a wealth of advantages:
- Deep Capital Markets: Hong Kong has one of the largest stock exchanges in Asia. It’s an attractive venue for IPOs and raising capital due to its highly liquid markets and access to international investors.
- Global Banking Hub: World-leading banks and financial institutions thrive in Hong Kong. This creates a dynamic financial ecosystem with diverse services and readily available funding.
- Offshore Renminbi (RMB) Center: Hong Kong is the premier offshore hub for RMB (China’s currency) transactions. Businesses can use this strategically for trade with Mainland China and capitalize on the growing internationalization of the RMB.
- Advanced Financial Infrastructure: Hong Kong boasts top-of-the-line financial infrastructure with robust regulatory frameworks, reliable clearing and settlement systems, and cutting-edge technologies.
- Fintech Hotspot: Hong Kong is actively driving innovation in financial technology (Fintech). Its supportive environment fosters growth in areas like digital payments, blockchain, and wealth management technology.
Being at the epicenter of global finance in Hong Kong allows businesses to tap into an extraordinary talent pool, access diverse financial resources, and build lucrative partnerships with players across the world.
Strategic location and world-class infrastructure
Hong Kong’s position on the southern coast of China places it at the heart of Asia’s bustling trade and economic activity. Key benefits of this strategic location include:
Known as Asia’s Heartbeat, Hong Kong is located at the center of East and Southeast Asia, within a few hours’ flights of major business centers like Tokyo, Seoul, Singapore, and many Chinese megacities. This accessibility simplifies face-to-face engagement and strengthens regional business ties.
As a gateway to China, Hong Kong is the premier hub for entering and developing business with the massive mainland Chinese market.
Even Hong Kong International Airport is consistently ranked among the world’s best, hailed by Skytrax as a top global airport for many years. It offers a vast network of destinations, making business travel convenient and air cargo logistics exceptionally efficient.
Victoria Harbour has also proven to be a seaport powerhouse. It has one of the busiest container ports globally, with highly modernized cargo-handling facilities that ensure the movement of products worldwide.
The IMD World Digital Competitiveness Ranking 2020 places Hong Kong as the second most digitally competitive economy in the Asia-Pacific region and the fifth worldwide. This ranking reflects Hong Kong's strong performance in technological infrastructure, digital skills, and future-readiness, making it an attractive location for tech-driven businesses and incorporation processes.
Stable Legal System Based on English Common Law
Hong Kong’s legal system, rooted in English common law, provides businesses with a high degree of transparency, predictability, and protection for their rights
The common law foundation in Hong Kong resonates with many international businesses accustomed to similar legal frameworks in countries like the US, UK, Canada, and Australia. This enhances understanding and minimizes legal surprises. The legal system in Hong Kong operates independently from Mainland China and follows English common law principles. The International Arbitration Centre, established in 1985, has made Hong Kong a prominent hub for arbitration in Asia, offering an effective method for resolving disputes.
Also, contracts form the bedrock of business, and Hong Kong’s legal system enforces them rigorously. This ensures agreements are honored and reduces the risk of unexpected breaches.
The Intellectual Property Department oversees the enforcement of these regulations, boasting extensive experience in managing IP issues.
Intellectual Property Rights (IPR) are rigorously protected in Hong Kong, with strict regulations governing patents, copyrights, trademarks, and designs.
Robust & effective corporate governance
The CG Watch 2020 report, compiled by the Asian Corporate Governance Association and CLSA Limited, ranks Hong Kong as the second-best in the Asia-Pacific region for corporate governance. This signifies the city’s strong legal framework, enforcement mechanisms, and practices that protect shareholders and ensure companies’ transparent operations.
Hong Kong operates under a unique system known as “One China, Two Systems,” granting it a high level of autonomy in domestic affairs while deferring foreign and defense matters to the People’s Republic of China.
Guided by the Sino-British Joint Declaration and the Basic Law, Hong Kong maintains its distinct political, economic, and judicial frameworks, ensuring stability and continuity.
Renowned for its business-friendly environment, Hong Kong upholds free market principles and boasts minimal corruption. The Independent Commission Against Corruption (ICAC) oversees anti-corruption efforts, contributing to Hong Kong’s reputation as one of the least corrupt economies globally.
Extensive support for business
Both the Hong Kong government and private sector offer various programs to assist your company in growing and improving. Numerous support programs and financial incentives specifically aimed at helping small and medium-sized enterprises (SMEs) flourish have been put in place.
Organizations like the Hong Kong Trade Development Council assist international companies in doing business in Asia, including the Mainland, and help local Hong Kong companies explore new markets.
- The Hong Kong Productivity Council focuses on boosting productivity and promoting more efficient practices across various business sectors.
- For SMEs seeking guidance and information, the Support and Consultation Centre provides comprehensive advisory services.
- Financial aid is also accessible through several Government Funding Schemes.
Skilled Workforce
Another significant advantage of running a business in Hong Kong is access to a highly skilled and educated workforce. Hong Kong’s strategic position in Asia, combined with its robust education system and cosmopolitan culture, has cultivated a labor pool that is proficient in technical and professional domains and adaptable and internationally minded.
Employees are recognized for their hard work, competitiveness, and continuous self-improvement efforts.
While English serves as the primary language for business communication, many workers are also proficient in Cantonese and Mandarin due to Hong Kong's close ties with China.
Easy immigration policy
Hong Kong has a welcoming immigration policy. People from around 170 countries and territories can visit Hong Kong without a visa for periods ranging from 7 to 180 days. Short-term visitors are allowed to engage in business activities such as negotiations and contract signings with a visitor visa or entry permit.
To accommodate entrepreneurs and businesses, the government has established work visa provisions. These provisions are meant for those relocating to run businesses in Hong Kong or hiring foreign professionals.
Further, various policies and schemes exist for employing foreign professionals, Mainland talents, and individuals seeking investment opportunities. Dependent visas are also available, permitting holders to engage in almost any lawful employment in Hong Kong.
Relocating to Hong Kong
Many foreign professionals and entrepreneurs choose to move to Hong Kong with their families when starting a business there. Quality of life concerns, such as the social environment, cost of living, housing, and education, are common among individuals considering the move.
- Hong Kong has a diverse social scene, offering a cosmopolitan lifestyle with a mix of cultures and people. While the city is modern and Westernized, it faces challenges like high air pollution and traffic congestion.
- Living costs, especially residential rentals, are comparable to major international cities like London and New York. Hong Kong is renowned as the food capital of China, offering a wide range of Chinese regional cuisines alongside international options.
- The city boasts a well-connected, clean, safe, and affordable public transportation system, including buses, trains, ferries, and taxis. It also features world-class international schools and healthcare services.
- Residents enjoy various recreational activities and a vibrant nightlife, earning Hong Kong the reputation of being the ‘city that never sleeps.’ Additionally, it’s considered one of the safest places to live, with low crime rates.
Here are some international rankings that will help you assess the ease of living in Hong Kong:
- Ranks 19th in the Ease of Settlement survey (2019)
- Ranks 1st in the most Expensive City for Expats by Mercer’s Cost of Living Ranking 2019
- Ranks 1st in Most Expensive City for Rental Accommodation by Deutsche Bank Research on Mapping the World’s Prices 2019
- Ranks 4th in the Best Place for Security and Safety 4 (1 in Asia-Pacific) Legatum Institute’s Legatum Prosperity Index 2019
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Frequently asked questions
What makes Hong Kong an attractive location for business?
How can setting up a business in Hong Kong benefit me?
Establishing a business in Hong Kong provides access to global markets, a skilled workforce, political stability, and robust legal protections.
What support does Hong Kong offer for new businesses?
Hong Kong provides various support programs, financial incentives, and resources to assist new businesses in their growth and development.
What steps are involved in setting up a business in Hong Kong?
The process typically includes company registration, obtaining necessary licenses and permits, and complying with tax and regulatory requirements.
Which industries thrive in Hong Kong?
Industries such as finance, trade, logistics, tourism, and technology flourish in Hong Kong due to its strategic location and vibrant business ecosystem.
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