Hong Kong is always described as a “super-connetor” to connect the Mainland China and the Asia countries to help the Mainland China companies to expand into Asia, and vice versa help the Asia companies to expand into Mainland China. What are the advantages of incorporating a Hong Kong company for business purpose?
- No substantial capital requirement: There is no substantial capital requirement to incorporate a Hong Kong company. A Hong Kong company can issue one share for one dollar as share capital. Therefore, the foreign investors do not need to inject a huge amount of share capital to incorporate a company in Hong Kong. In case the company needs further funding, the shareholders can provide the funding by way of shareholder’s loan which is payable on demand.
- No geographical requirement of shareholder and director: There is no requirement that the directors and shareholders of a Hong Kong company must reside in Hong Kong, hold Hong Kong Identity Card/ Passport with Chinese nationality. Any persons or corporation around the world can be the directors and shareholders of a Hong Kong company. Also, Hong Kong private companies can operate by single shareholder and single director which is a simple corporate structure.
- Limited Liability: Hong Kong still follows the Common Law system. Under the Common Law system, a Hong Kong company is a separate legal entity. All the liabilities of a company belong the company itself. Thus, the shareholders’ personal assets are protected and shield against the creditors because their liability is capped and limited to the share capital that he/ she/ it has agreed to subscribe only (unless the shareholders sign a personal guarantee).
- Quick incorporation process: It usually takes one to two weeks to incorporate a Hong Kong company. The only approval authority is the Companies Registry. Also, it is a one-stop application, once you get the Certificate of Incorporation, you can get the Business Registration Certificate at the same time. No more licensing is required unless you carry on business for a particular industry which requires licensing.
- Straight forward annual compliance: A Hong Kong company is required to file the annual return with the Companies Registry (reporting the current registered office address, company secretary, share capital, shareholders, and directors). A Hong Kong company is also required to file audited account to the Inland Revenue Department (i.e. the tax authority). However, the audited account is not public record if you are a private company.
- Protection of Personal Data: The full identity number and the residential address of the director and company secretary of a Hong Kong company is protected, and not for public inspection. It is also not necessary for natural person shareholders to disclose his/ her identity number, and residential address in public record. Thus, it safeguards the privacy of the directors/ company secretaries/ shareholders and prevents the occurrence of doxxing and intrusion of personal data.
- Low and simple tax: Hong Kong companies will be subject to profits tax only, and the tax system in Hong Kong is low and simple. We adopt the source concept, meaning only the profits arising in or derived from Hong Kong will be subject to profits tax, and we do not charge profits worldwide. The current profits tax rate is 8.25% on assessable profits up to HK$2,000,000; and 16.5% on any part of assessable profits over HK$2,000,000. From the shareholders’ perspective, we do not charge dividends tax, and withholding tax when the company distributes dividends to the shareholders. Hong Kong also does not impose capital gain tax or value-added tax.
- Free flow of money: Hong Kong does not have foreign exchange control. The investors’ money is freely flowing into and out of Hong Kong without restrictions which will protect the interest of foreign investors when repatriating profits back to their home country.
Franky Fung
Sun Lawyers LLP
(852) 5238 9028
frankyfung@hksunlawyers.com
