The benefits of setting up your business in Hong Kong

Considered one of the freest, most competitive, and most stable economies in the world, Hong Kong is an extremely dynamic city and the ideal platform for serving mainland China and Asia. You will not find a better place to manage and grow your business in Asia. Business-friendly, Hong Kong offers many advantages to entrepreneurs wishing to establish their business in the region. This is complemented by outstanding administration, a proven legal system (common law), and public services (healthcare, housing, and education) that have continually improved over the past two decades.

ECONOMICALLY:

Establishing your company in Hong Kong is much simpler, faster, and less expensive than anywhere else in the world. Hong Kong’s geographical and strategic location attracts entrepreneurs from around the world. It enables companies to benefit from the many opportunities available in China and throughout the rest of Asia. With its strict laws and regulations, Hong Kong maintains excellent trade relations with the rest of the world. Hong Kong ranked 5^th out of 63 economies in the International Institute for Management Development’s (IMD) “World Competitiveness Yearbook 2020.” This ranking reflects Hong Kong’s consistent progress in establishing a business-friendly environment.

A hub in the heart of Asia.

Hong Kong is ideally located, just 4 hours from the major markets in Asia. This proximity explains why so many companies have chosen to establish themselves there. There are no fewer than 9,000 foreign companies in HK. From the island, no fewer than 100 airlines serve nearly 190 destinations. As Hong Kong is not recognized as a tax haven, companies established on the island are not perceived as offshore companies, giving them greater credibility when doing business with companies around the world.

TAXATION:

If you are looking for one of the best tax systems in the world, Hong Kong is the place to choose for establishing your business. There are only 3 direct taxes, and a deduction and relief system makes it possible to considerably reduce taxable amounts.

The three taxes are:

• Profits tax: 8.5% on the first two million dollars of profits and capped at 16.5% for profits exceeding 2 million dollars
  • Please note that all ordinary company expenses (entertainment expenses, benefits in kind granted to employees, consulting fees, etc.), as well as depreciation of fixed assets, are deducted from profits, considerably reducing the amount of profit subject to tax.
• Salaries tax at the standard rate of 15%
• Property tax at 15%

Hong Kong does not have the following taxes:

• No value-added tax/VAT
• No withholding tax
• No capital gains tax
• No dividend tax
• No inheritance tax

BANKING:

Hong Kong has long been considered the region’s leading financial center. Transparency and reliability prevail on the island, where market participants implement and comply with the best global practices and standards. Banks and financial institutions offer numerous Renminbi services, as Hong Kong is home to the world’s largest offshore financial center in the Chinese currency: the Renminbi. Hong Kong has also established various programs (Stock Connect and Bond Connect) that allow investors to access mainland China directly while preserving the city’s status as an international financial center. In addition, Hong Kong’s banking network is excellent, with major international banks such as HSBC operating there. They all offer internet banking solutions and multi-currency bank accounts for companies. It is also possible to open a bank account remotely without having to visit the banks in person.

LEGAL ASPECTS:

Regarding the establishment and operation of companies, Hong Kong offers considerable flexibility, as local law is based on the English legal system known as “common law.” Although establishing a company in Hong Kong is not complicated, we strongly recommend consulting a professional service provider. Our firm has specialized in company formation in Hong Kong since 1998. This legal simplicity is one of the many advantages of opening a company in Hong Kong, and it is not necessary to live in Hong Kong to develop your business. Another positive point is that in Hong Kong, a shareholder and director may be the same person, and they may be an individual or a legal entity. However, only a company secretary can register your company in Hong Kong. Merritt Asia can act as your company secretary on behalf of your company. With 1 to 50 shareholders, your company will be classified as a “private limited company,” or limited liability company. Beyond that, it will be considered a “public company,” allowing it to be listed on the stock exchange. If you still have doubts about establishing your business in Hong Kong, we invite you to contact our team of experts at support@merritt.group.