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Doing Business in Hong Kong for Foreign Enterprises
With low levels of restrictions and a startup-friendly business environment, Hong Kong remains a competitive economy in the Asia-Pacific region. Hong Kong also has a favorable free trade policy. Its free port status and relatively relaxed customs procedures make it easier for foreign companies to conduct business.
Company Incorporation in Hong Kong
Foreign investors seeking to set up a business in Hong Kong can choose among three types of business entities, namely:
- Subsidiary Company
- Non-Hong Kong Company
- Representative Office
A Subsidiary Company has a separate legal entity from its stockholders. As the most common entity for foreign companies in Hong Kong, it is eligible to receive all tax benefits granted to local businesses in the country. It can also partake in Hong Kong’s free trade agreement with Mainland China.
A Non-Hong Kong Company, or Branch Office, is an extension of a foreign corporation allowed to conduct business for profit in Hong Kong. Unlike limited liability companies, it does not have a separate legal entity from its parent company. Moreover, its parent company is liable for all the liabilities and debts it will incur in Hong Kong.
A Representative Office is ideal for foreign entrepreneurs seeking to test their potential for success in Hong Kong before deciding to make significant investments. Similar to a Non-Hong Kong Company, its parent company is also liable for all the liabilities and debts it will incur. But unlike a Non-Hong Kong Company, it is not allowed to generate profit or engage in any profit-generating activities.
Corporate Taxation in Hong Kong
Hong Kong has one of the lowest tax rates in the world. It only imposes three direct taxes and offers generous allowances and deductions to help companies reduce their taxable amount.
The three direct taxes in Hong Kong are as follows:
- Profits tax (or corporate tax) for the first HK$2 million of profits of corporations is 8.25%, while profits above that amount will be subject to the tax rate of 16.5%. For unincorporated business (i.e., partnerships and sole proprietorships), the two-tiered tax rates will correspondingly be set at 7.5% and 15%
- Salaries tax capped at 15%
- Property tax of 15%
Hong Kong does not impose the following taxes:
- No sales tax or VAT
- No withholding tax
- No capital gains tax
- No tax on dividends
- No estate tax
Work Visas and Immigration in Hong Kong
Those coming to Hong Kong for work, business, or investment-related purposes can choose among the following available visa schemes:
- Employment Visa
- Investment Visa
- Quality Migrant Admission Scheme (QMAS) Visa
Foreign individuals seeking for legal employment and relocation in Hong Kong can apply for an Employment Visa. The applicant must be sponsored by a Hong Kong-based company to be eligible. Those who want to start a business and relocate to Hong Kong to operate their business can apply for an Investment Visa. Under this visa, foreign entrepreneurs can stay in Hong Kong on employment status under their own company.
Moreover, those who want to enter Hong Kong to explore establishing a business or gainful employment can apply for a QMAS Visa. This visa scheme is quota-based and operates on a points-based system. Successful applicants must make arrangements to settle in Hong Kong to work or start a business during the visa validity period.