Hong Kong attracts global businesses with its strategic location, business-friendly environment, strong legal system, and financial infrastructure. This blog explores the factors that make Hong Kong a preferred destination, showcasing its unique advantages and opportunities for international companies to expand and succeed.
Introduction
Business in Hong Kong aggressively positions itself as Asia’s business hub, luring businesses of all sizes. Its role as a super-connector to China and the Greater Bay Area enhances its competitive edge. Beyond business, Hong Kong offers diverse communities, low-income tax rates, and a strategic location for travel. Starting a business here, though initially challenging, is facilitated by a supportive environment. Many expats transition from corporate roles to entrepreneurship, and a thriving community of trailing spouses contributes to the city’s vibrant business landscape. Explore the numerous advantages of establishing a business in Hong Kong, a global hotspot for innovation and opportunity.
Establishing and Running a Business In Hong Kong
Hong Kong stands out as one of the world’s most business-friendly cities, drawing entrepreneurs and companies globally. Its favourable tax structures, strategic Asian location, and highly skilled workforce make it an attractive destination for business establishment. This article guides those unfamiliar with local laws through the necessary steps, requirements, and tips for setting up a business in Hong Kong.
Setting up a company in Hong Kong is remarkably straightforward and cost-effective. Registration takes just 48 hours, and the city boasts the world’s freest economy, with no minimum registered capital, no requirement for a local director, and no restrictions on foreign investment. Hong Kong ranks as the 3rd most competitive economy globally, making it a strategic springboard for entrepreneurs to expand regionally. With a vibrant business environment, the city is home to 340,000 SMEs and serves as a hub for regional startups. The Hong Kong Government’s substantial investment of HKD 100 billion in innovation and technology further highlights its commitment to fostering business growth. Additionally, the business-friendly tax environment, with a corporate tax rate of 16.5% and exemptions for initial profits, along with no VAT or capital gains tax, further enhances its appeal for business ventures.
Simple and Low Tax Regime in Singapore
Singapore primarily taxes income earned within its borders. Foreign income is taxed upon remittance to Singapore unless already taxed in a jurisdiction with a 15% or higher headline tax rate. The country maintains a competitive 17% corporate tax rate to attract foreign investment.
Singapore’s single-tier corporate tax system ensures tax-free dividends for shareholders.
Corporate Tax Rates
| Income | Tax Rate |
| Tax rate on corporate profits for up to 300,000 SGD | Effective tax rate at 8.5% |
| Tax rate on corporate profits above 300,000 SGD | 17% |
| Tax rate on capital gains accrued by the company | 0% |
| Tax rate on dividend distribution to shareholders | 0% |
| Tax rate on foreign-sourced income not brought into Singapore | 0% |
| Tax rate on foreign-sourced income brought into Singapore | 0 – 17% subject to conditions |
Personal Tax Rates
| Income | Tax Rate |
| Tax rate on first 20,000 | 0% |
| Tax rate on next 10,000 | 2% |
| Tax rate on next 10,000 | 3.5% |
| Tax rate on next 40,000 | 7% |
| Tax rate on next 40,000 | 11.5% |
| Tax rate on next 40,000 | 15% |
| Tax rate on next 40,000 | 18% |
| Tax rate on next 40,000 | 19% |
| Tax rate on next 40,000 | 19.5% |
| Tax rate on next 40,000 | 20% |
| Tax rate on above 320,000 | 22% |
| Tax rate on capital gains | 0% |
| Tax rate on dividends received from Singapore company | 0% |
Free Port in Overseas Trading Business
The second advantage of company registration in Hong Kong is its status as a ‘free port’ with simple customs clearance. Only a few products, such as tobacco, require businesses to pay duty.
In addition, the import of wine and beer is now duty-free. Hong Kong may benefit from these benefits by promoting an attractive wine import, export, and storage sector that caters to retail and private buyers.
Excellent Location in Asia
For those eyeing business growth in Mainland China or across Asia, Hong Kong stands out. Its strategic location amid Asia’s thriving economies provides a host of benefits. Notably, key business hubs like Shanghai, Singapore, Kuala Lumpur, Taipei, Beijing, Manila, and Perth share the same time zone as Hong Kong, simplifying coordination and communication.
One Country, Two Systems
Hong Kong, once under British rule, was handed back to China in 1997. Despite being part of China, Hong Kong maintains its distinct legal system, ensuring the continuation of key strengths like the free flow of information, an independent judiciary, the rule of law, and financial autonomy. This arrangement enables Hong Kong business owners to enhance the city’s efficiency as a business hub and enhance its appeal as a gateway to opportunities in mainland China.
Advantages of Starting a Business in Hong Kong
Hong Kong’s strategic location, stable political climate, business-friendly tax policies, top-notch infrastructure, and robust legal system make it a premier global business hub. If you’re considering launching a business, Hong Kong offers several compelling reasons:
Ease and Affordability: Establishing a business in Hong Kong is straightforward and cost-effective. Foreigners can own 100% of a company, acting as the sole director and shareholder, without local residency restrictions.
Global Recognition: Hong Kong provides stability and international acclaim compared to neighbouring regions, operating under English common law distinct from mainland China.
Gateway to China: Renowned as the ideal entry point for Western countries to conduct business in China, Hong Kong’s geopolitical position is advantageous.
Flexibility: A physical address is not mandatory for Hong Kong businesses, allowing for operational flexibility with just a temporary address.
Multi-Currency Banking: Hong Kong companies can open multi-currency bank accounts, enhancing financial versatility.
Tax Advantages: With a territorial source concept, Hong Kong’s taxation system exempts income earned outside the region. Local earnings above 120,000 HKD are taxed at approximately 17%.
Global Economic Leader: As the world’s most liberal economy for 17 consecutive years, Hong Kong remains a global banking and industry powerhouse.
Low Corruption: Ranking higher than the United States, Germany, Japan, and the United Kingdom, Hong Kong is among the least corrupt countries globally.
World-Class Business Infrastructure: Hong Kong boasts world-class business infrastructure, contributing to its status as a top-notch commercial centre.
English Proficiency: English is widely spoken, easing communication and fostering a welcoming environment for international businesses.
Conclusion
To sum up, starting a business in Hong Kong offers numerous benefits, making it a global hub for entrepreneurs. With its strategic location, friendly business policies, worldwide recognition, and excellent infrastructure, Hong Kong is an ideal place for startups and established businesses alike. The setup process is straightforward and affordable, offering tax advantages, geopolitical benefits, and minimal corruption. As a leading player in the global economy, Hong Kong ensures a journey of growth and success for businesses looking for a dynamic and profitable market. In the ever-changing world of international trade, Hong Kong stands out, inviting entrepreneurs to pursue success in one of the most influential business destinations globally.
