Choosing the business nature description is one of the first steps when setting up a company in Hong Kong. It is not an exact science, but there are a few factors to consider when determining the business nature you will declare. In this article, you will find all the information you need to do so correctly.
Definition of "Business Nature": Business nature is a general description of the activity of a Hong Kong limited company. It is stated on the company's business registration certificate.
What does the law say when setting up a company in Hong Kong?
You must declare your business nature to the Inland Revenue Department (IRD). For example, if you are engaged in the clothing trade, your business nature could be "Clothing Trading". If you operate a restaurant, your business nature could be "Food and Beverage". This declaration must be made when setting up a company and whenever the company substantially changes the nature of its business activities. Your company's business description (or business nature) will be stated on the business registration certificate and in the shareholder's file. The length of the business nature (including punctuation, symbols, and spaces) cannot exceed 30 characters for a description and business nature in Chinese, and 60 characters for a description and business nature in English. Your business nature can be concise but should not be too vague, especially when clarifying tax implications. The IRD expects your business nature to be sufficiently descriptive so that it is clear what you do. For example, "Trading" or "Consulting" would be too general, whereas "Clothing Trading" or "IT Consulting" would be acceptable. That said, there is no need to spend too much time on your business nature because, legally, companies are allowed to engage in any lawful activity, regardless of their business description (provided it is not regulated).How to write your business nature?
Some people spend a great deal of time and effort creating a long and detailed description of their business nature, when in fact, a simple description would be sufficient. As mentioned previously, the business nature can be short and concise while still being descriptive. Note that what you choose as your business nature is not only important for the IRD's reporting requirements, but will also be a key factor in how banks assess your business account application. A good way to determine your business nature is to ask two simple questions, which we address below.Answer two questions:
Formulate a descriptive but simple business nature that should be sufficient for reporting purposes based on the following two main points:- What does the company do? Trading, holding, investment, manufacturing, consulting, etc.
- What sector does the company operate in? Clothing, food, IT, transportation, etc., with a focus on the benefits generated and VAT management.
Examples of Business Nature:
Thus, based on the questions above, the business nature could be: Trading fitness products with a focus on benefits and taxation.- Trading fitness products
- Manufacturing smartphone peripherals and software
- IT consulting
- Advisory and consulting for startups
- Executive coaching
- Investment in works of art
- Retail clothing
- Interior design
- Food and beverage catering
- E-commerce operations
- Event management etc.
In the meantime, remember to note the following points:
- Length of the business nature (including punctuation, symbols, and spaces):
- In English: Cannot exceed 60 characters, and if it exceeds 30 characters in total, it may be divided equally into two lines of 30 characters each.
- In Chinese: Cannot exceed 30 characters.
- For regulated businesses: Make sure to check with the relevant authority whether there are any specific requirements / wording to follow.
