FAQs

Today, many investors and entrepreneurs are choosing to set up their businesses overseas – especially in jurisdictions like Hong Kong. The rationale behind this trend is to primarily facilitate entry into an international market and to benefit from tax friendly jurisdictions. Hong Kong is considered one of the best cities to establish and run a business, as it scores high on factors that matter to business.

Hong Kong is strategically located at the heart of the Asian continent. A five to eight hours’ flight will connect you to most markets in the Asia-Pacific region. If you need to tap into the Chinese market you will find that Hong Kong is perfectly situated on the southeast coast of China, flanking the mouth of the Pearl River Delta. This facilitates travel to and from Hong Kong to Beijing, Shanghai and other major Chinese cities within a single day.

Hong Kong is renowned for being an easy place to set up a business. You can establish your company within one to two weeks’ time in Hong Kong. It has no foreign ownership restrictions and no restriction on business scope for the companies established in Hong Kong. It is noted for its excellent infrastructure facilities and business premises are easily available. Intellectual property protection is taken seriously, with strict regulations in place. There are various dispute resolution channels that businesses can avail of. The simple and business friendly tax system draws foreign investors to the city. Foreigners who wish to set up business in Hong Kong can easily relocate by applying for an appropriate work visa.

Taxes are the main concern for any entrepreneur who intends to set up a business in a given jurisdiction. In this regard, Hong Kong boasts of being one of the lowest tax jurisdictions in the world. Taxes on corporate income Profits tax - Profits tax is payable on profits arising in or derived from Hong Kong at the company rate of 16.50% of assessable profits for corporations and 15% for unincorporated businesses. On 21 March 2018, the Inland Revenue (Amendment) (No.7) Bill 2017 – The Two-tier profits tax system passed its third reading in the Legislative Council. Commencing from the year of assessment 2018/19, tax relief will be provided to small and medium-sized enterprises by the two-tier profits tax system. Each group of connected entities can nominate one enterprise to enjoy such tax relief. We summarize the relief for corporations below: Profits: HK$2,000,000 or below 2018/19 tax rate: 8.25% Prevailing tax rate: 16.5% Maximum tax saving under new legislation: HK$165,000 Profits: (Remainder) 2018/19 tax rate: 16.5% Prevailing tax rate: 16.5% Maximum tax saving under new legislation: N/A Under the situation of corporations, “connected entities” means – a) one of the entity has direct or indirect control over another; b) the entities are under common control directly or indirectly. “Control” means – i) owns or controls more than 50% in aggregate of the issued share capital; OR ii) is entitled to exercise or control the exercise of more than 50% in aggregate of the voting rights at general meeting; OR iii) is entitled to more than 50% in aggregate of the profits. With the introduction of more tax relief, investments in Hong Kong as small and medium enterprises will bring more benefits and returns to investors. Corporate residence Corporate residence is determined by reference to the place of central management and control. Income determination Capital gains – gains from realization of capital assets are not taxed. Intercompany dividends – dividends from sources either inside or outside Hong Kong are not taxable in Hong Kong. Foreign income – resident corporations are not taxed on their worldwide income. Foreign-source income, whether or not remitted to Hong Kong, is not taxed. Deductions Net operating losses – losses incurred in an accounting year are carried forward indefinitely until set off against future profits of the business, but a corporation carrying on more than one business may have losses in one trade set off against profits of the other with any balance being carried forward. These are anti-avoidance provisions to prevent the utilization of losses in a corporation purchased for that purpose. Group taxation There are no group provisions in Hong Kong. Withholding taxes There is no withholding tax on dividends, interest or royalties. Sales taxes There is no sales taxes or VAT in Hong Kong. Taxes on individual Personal income tax, or salary tax, starts at 2% and goes up to 17% for income above HK$132,000.

Hong Kong is one of the world’s most dynamic economies driven by the principles of free enterprise, free trade and free markets open to all. There are no restrictions on inward and outward investments, no foreign exchange controls and no foreign ownership restrictions. Factors such as a sound banking system, almost no public debt, a strong legal system, sizable foreign exchange reserves and a strict anti-corruption regimen serve to strengthen Hong Kong’s position as a business friendly region. Furthermore, businesses that are set up in Hong Kong (i.e. any Hong Kong company regardless of nationality) can now benefit by gaining preferential access to the China market from the Closer Economic Partnership Arrangement (CEPA) – a free trade agreement between the Central People’s Government and the Government of the Hong Kong Special Administrative Region. All goods qualified as Hong Kong origin may be exported to China tariff free. Moreover, Hong Kong service suppliers in 40 areas are eligible to receive preferential treatment in providing services in China.

Noted for its transparency, law and order is central to Hong Kong’s success. All are considered equal before the law. Hong Kong’s legal system is separate from China’s, and English common law prevails. With the establishment of the International Arbitration Centre in 1985, Hong Kong has become a key center for arbitration in Asia and arbitration is now a popular method of dispute resolution in Hong Kong. The law is committed to the protection of Intellectual Property Rights (IPR) and enforces stringent regulations for patents, copyrights, trademarks and registered designs. The specially set up Intellectual Property Department monitors the IP regime in Hong Kong and is reputed to have extensive experience in handling IP matters. There are distinct rules and regulations concerning trade and commerce, employment, taxation and other business-related areas, making it an attractive place to set up and operate a business. Hong Kong’s legal system encourages many overseas companies and others to, where possible, sign their contracts in Hong Kong because of the certainty that entails. With many overseas companies and brands establishing themselves in Hong Kong for acquisitions, mergers, franchise and distribution arrangements, Hong Kong has become the “revolving door” for “kick start” into Asia.