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Introduction
Prospective entrepreneurs face a number of challenges when setting out on their journey, from how to compete in the marketplace to the ideal place to startup. The first step, coming up with your first invention or new business idea, is perhaps the easiest. The hard part is setting yourself up for success. In other words: so, you’ve got your business mojo going – now what?
Compass Offices’ Starting Up In Hong Kong’ is designed to help you understand how easy it is to set up your business in the world’s freest economy – Hong Kong.
As a busy entrepreneur, fitting in reading time is tough. When you have an always-on job and a schedule that won’t quit, it’s easy to say I just don’t have time to read. But picture it as a light jog for your brain! To speed things up we’ve summarised each section below.
Entrepreneurship Starts with You
A great time to start and why Hong Kong should be on your radar.
More Bang For Your Buck
Why is Hong Kong a business haven for FinTech Firms and StartUps.
Making Hong Kong Your Business
Find out what it takes to work and play in Asia’s world city.
Open For Business
Explore Hong Kong’s vibrant StartUp ecosystem and get the word out
Conclusion
About Compass Offices
Sources
Entrepreneurship Starts With You
There has never been a more exciting time to start your own business. People are spotting gaps in the market and realising there are customers for the skills, knowledge or assets they have developed through employment or personal passions and as a result, new businesses are springing up every day.
Whether these new ventures are inspired by young people starting their careers with their own businesses, previously employed middle managers, or just regular folks looking to increase their monthly income, many are finding themselves caught in the entrepreneurial spirit.
As companies are focused on becoming leaner and meaner, career-minded individuals are learning that the only place to find true job security is by starting up on their own. Changes in government programs and tax benefits for these entrepreneurs have created a market situation for which it has never been easier to start and operate a new business.
“Do something you love and you’ll never have to work a day in your life” – John Lasseter, chief creative officer, Pixar.
How does starting up in the world’s freest economy sound?
More Bang For Your Buck – Why Start Up In Hong Kong?
Hong Kong ranks at the top of nearly every “best countries to do business list,” thanks to its unbeatable advantages to companies looking to locate or expand in the region. The city, home to more than 7million people, has a lot going for it. It is one of the world’s biggest financial centers and the Hong Kong dollar is the 13th most traded currency in the world. In addition, Hong Kong’s economy has successfully doubled in size, with GDP growth at an average annual rate of 5% in real terms. Hong Kong’s total trade is approximately split halfway between imports and exports, and its dominant markets are China and the U.S. Interestingly, Hong Kong handles more than 20% of China’s foreign trade.
Hong Kong has the 5th fastest growing StartUp ecosystem and is the world’s Freest Economy. – World Bank
The reasons that Hong Kong is recognized as such a successful business center include location, a political environment and economy that are trustworthy, a tax and business approach that are business friendly, a world-class infrastructure and a productive legal system.
Why would you want to choose Hong Kong to set up a business? The following are some vital answers to that question:
- Opening a business in Hong Kong is easy and inexpensive.
- A foreigner is permitted to own 100% of a Hong Kong company, and is able to be the sole director and shareholder in a Hong Kong company. There are no requirements to be a local resident or a specific nationality.
- In comparison to the surrounding countries, Hong Kong provides stability and worldwide recognition.
- English common law is prevalent and the legal system is separate from that of Mainland China.
- A physical address is not necessary for Hong Kong. A holding address is adequate.
- Companies in Hong Kong are permitted to open multi-currency bank accounts.
- Hong Kong uses the territorial source principle of taxation, in which profits made outside of Hong Kong are tax-free. Revenue created inside Hong Kong and income tax over 120,000HKD is around 17%.
- Hong Kong is viewed as a global leader in banking and business.
- Hong Kong has held the record for 17 years in a row as the world’s freest economy.
- Hong Kong holds the distinction of being one of the least corrupt nations in the world, ranking ahead of the USA, Germany, Japan and the UK.
- Hong Kong has a world-class business infrastructure.
- English is spoken as one of the two main languages of Hong Kong (Cantonese being the other).
- Hong Kong’s proximity to Shenzhen adds to the potential by providing easy access to inexpensive and rapid prototyping.
- The long tradition of international trade and the presence of expats and western-educated locals translate into a demonstrated ability to penetrate foreign markets.
Key Takeaway
Hong Kong can be a great choice for starting your company and the ideal place to build and grow an enterprise. With a favourable climate for trade, investment and the movement of goods, Hong Kong’s where it’s at! |
Starting up in FinTech
Hong Kong has an efficient market driven economy capable of delivering benefits to investors including business stability, extensive free trade agreements and active government support for FinTechs.
StartUps can take advantage of a business environment consistently rated on many measures as one of the best in the world – an environment where it is easy to commence business and where capital flows freely across borders.
4 key factors driving FinTech in Hong Kong
Hong Kong’s long history as a banking and finance hub, its affluent and increasingly well-educated population and tradition of entrepreneurship provide a secure foundation for FinTech development.
Investment by both the government and the private sector in business start-up, incubation and accelerator facilities is encouraging new firms to establish themselves and test new ideas.
Wealth management, data analytics and crypto-currencies, particularly for remittances, are other FinTech sectors with potential for fast growth in Hong Kong. Hong Kong’s positioning as a gateway to China also offers advantages for the wider Chinese market.
China offers pools of developer talent, back-office services and, especially in the financial centres of Shanghai and Shenzhen, markets for Hong Kong FinTech businesses to sell into.
Around 600 million digital banking customers live within five hours flight of the city; by 2030, that figure is expected to have risen to 2.4 billion. – KPMG
Hong Kong’s FinTech Ecosystem
Hong Kong’s StartUp ecosystem is also starting to generate organisations dedicated to promoting FinTech. The Hong Kong Internet Finance Council (HKIFC) is a non-profit organisation with a mission of fostering the growth and development of the internet finance industry in Hong Kong.
Its activities include promoting a greater awareness and understanding of the internet finance industry among the general public, businesses, and government; providing a forum for businesses to discuss best practices and industry standards; and acting as a representative trade body for Hong Kong in the global internet finance landscape.
An overview of Incubators in Hong Kong
DBS
Accenture InnovationLab
FinTech Supercharger
Key Takeaway
The establishment of alternative financial services such as peer-to-peer lending, equity crowd-funding and innovative ways of making loans and investment available to small businesses are already creating a viable FinTech eco-system across the city. |
Making Hong Kong Your Business
Good rules create an environment where new entrants with drive and good ideas can get started in business and where good firms can invest, expand and create new jobs. Setting up a business in Hong Kong is straightforward. Procedures are transparent and simple. The principal forms through which a business can be conducted in Hong Kong are as follows:
- Limited Company (either private or public via listing on the Stock Exchange of Hong Kong).
- Branch of a foreign company.
- Representative or liaison office of a foreign company.
- Joint venture (can be set up either as a company or partnership).
- Sole proprietorship.
The most common types of business vehicles for foreign companies wishing to carry on business in Hong Kong are: A Limited Company incorporated in Hong Kong and a Branch Office of that foreign company.
Limited Company
A limited company is the most common business type in Hong Kong. Since it’s officially incorporated in HK, you’ll enjoy all the same tax benefits as resident entrepreneurs do, including the free trade agreement with China. Limited Companies are further distinguished into – Private (limited by shares) and Public (limited by guarantee).
Over 99% of new businesses opt for private limited companies. In Hong Kong, there are over 500,000 private companies but less than 2,000 public companies. – InvestHK
Branch Office
If your company is already registered somewhere else, you can open a branch office in Hong Kong. This type of office is not independent from its parent company, and comes with a distinct set of limitations. The Branch Office operates under the full control of and full liability to the branch’s owners. In short, a Branch Office gives advantages of accounting and operation to owners for expanding its business by establishing new brand names or outlets.
Key Takeaway
To get the most out of your business in Hong Kong, selecting the right type of company, incorporating and registering, is crucial early on and will help maximise your chances of financial and operational success. |
Registration Requirements / How to register / Procedures & Timelines
Every business in Hong Kong is required by the Business Registration Ordinance to obtain a Business Registration Certificate within one month of commencing business for its principal office address and also for any other business address in Hong Kong. If a company carries on a business using one or more business or trade names, a Business Registration Certificate is required for each such name.
An ounce of action is worth a ton of theory – Ralph Waldo Emerson
1.1 Private Limited Company Incorporation
Basic Requirements
Name – The company name must be approved before you can proceed with the incorporation of a Hong Kong company. You may conduct a company name search free of charge through the Companies Registry’s Cyber Search Centre or the Company Search Mobile Service.
Registered Address – The registered address of the company must be a physical address (local Hong Kong address) and cannot be a PO Box. For affordable prime locations within Hong Kong, you may want to consider these vibrant alternatives instead of the traditional office space.
Directors – A minimum of one individual director and an unlimited maximum number of directors are allowed. The director must be a natural person, at least 18 years of age, of any nationality, must not be bankrupt or convicted for any malpractices, and need not be resident in Hong Kong. There is no requirement for the directors to also be shareholders. Nominee corporate directors can also be appointed in addition to the individual director. Directors Board meetings can be held anywhere in the world.
Company Secretary – Appointing a company secretary is mandatory. The secretary, if an individual, must ordinarily reside in Hong Kong; or if a body corporate, must have its registered office or a place of business in Hong Kong. In the case of a sole director/shareholder, the same person cannot act as the company secretary. The company secretary is responsible for maintaining the statutory books and records of the company and must also ensure the company’s compliance with all statutory requirements. A nominee secretary can be appointed.
Shareholders – A Hong Kong private limited company can have a minimum of 1 and maximum of 50 shareholders. There is no residency requirement for shareholders. A director and shareholder can be the same or different person. The shareholder must be at least 18 years of age and can belong to any nationality. The shareholder can be a person or a company. 100% local or foreign shareholding is allowed. Appointment of nominee shareholders is permitted. Shareholders meetings can be held anywhere in the world.
Share Capital – Although there is no minimum share capital requirement, the general norm for companies incorporated in Hong Kong is to have at least one shareholder with one ordinary share issued on their formation. Share capital can be expressed in any major currency and is not restricted to the Hong Kong Dollar alone and can be freely transferred, subject to a stamp duty fee. Bearer shares are not allowed.
Public Information – Information about company officers viz. directors, shareholders and company secretary is public information as per Hong Kong Company Laws. It is mandatory to file details of the company officers with the Hong Kong Registrar of Companies.
Auditors & Accounts – A company must keep proper books of accounts and the financial statements must give a true and fair view of the financial position and financial performance of the company unless the company is entitled to reporting exemption. Its accounts must be audited every year and submitted to the Hong Kong Inland Revenue Department. The accounts of a private company are not published or filed on any public record in Hong Kong. The accounts of a public company must, however, be filed at the Companies Registry.
Taxation – Hong Kong follows a territorial basis of taxation i.e. only profits which arise in or derived from Hong Kong are subject to tax in Hong Kong. There is no capital gains tax, withholding tax on dividends, or GST/VAT in Hong Kong. Corporate tax, (or profits tax as it is called), is set at 16.5% of assessable profits for companies setup in Hong Kong.
Documents Required for Registration
- A copy of the Articles of Association for the company. A standard document is normally provided by the professional services firm assisting with the incorporation of the company.
- A duly completed incorporation form that includes the following:
- Company name
- Registered address
- Brief description of business activities
- Particulars of shareholders, directors and company secretary
- Liability of members
- Share capital registered on incorporation
- Number of shares taken up by subscribers
- For non-resident shareholders and directors:
- Copy of the passport, overseas residential address proof
- For resident shareholders and directors:
- Copy of Hong Kong identity card
- Copy of residential address proof
- For corporate shareholders and directors:
- Copy of parent company registration documents such as Certificate of Incorporation and Articles of Association
Considerations for Foreigners
Foreigners who wish to register an offshore limited liability company in Hong Kong, must take into consideration the following points:
- Foreigners are free to be the sole directors and shareholders of a Hong Kong company. There are no local resident requirements.
- Although there is no requirement to be physically present at the time of company registration, physical presence may be required for the purpose of opening a bank account, depending on the bank chosen.
- Foreigners who do not plan to relocate to Hong Kong are free to operate their Hong Kong offshore company from overseas.
|
Registration Procedure & Timeline – PRIVATE LIMITED COMPANY
The incorporation procedure entails two steps:
- Approval of the company name
- Registration of the company
The prevailing registration fee and the capital fee of HKD1 for every, or part of HKD 1,000 of the nominal share capital (this capital fee is subject to a maximum of HKD 30,000 per case), is payable to the Companies Registry.
A successful application is usually processed within 4-7 working days and the Companies Registry will issue a Certificate of Incorporation.
1.2 Branch Office Incorporation
Foreign corporations are permitted to establish branch offices in Hong Kong and are subject to the same legal and tax consequences as companies incorporated in Hong Kong. As per Hong Kong law, there is no distinction between the foreign corporation itself and its branch, and the branch is only an address at which the corporation itself carries on business.
Basic Requirements
Name – Generally, the name of the branch must match the name of the overseas parent company. However, the Companies Registry reserves the right of disallowing the branch from using its parent company’s name if the name is already in use in Hong Kong or is otherwise deemed as misleading or improper.
For limited companies incorporated in Hong Kong, the company name must not be the same as a name appearing in the index of company names kept by the Registrar of Companies. You may conduct a company name search free of charge through the Companies Registry’s Cyber Search Centre or the Company Search Mobile Service.
Officers – A Hong Kong branch office must appoint at least one person who is resident in Hong Kong and authorized to accept legal notices served on the company. The authorised representative can be an individual or body corporate (firm or corporate practice of solicitors or professional accountants only).
Constitution and Activities – The structure of company and its activities are directed by the parent company’s Memorandum and Articles of Association (MAA). There is no separate MAA for the branch office.
Place of business – A branch office must establish a place of business in Hong Kong. The place must be a physical location where among other things statutory documents are kept.
Minimum capital requirement – Not Applicable.
Documents Required for Registration
- A completed application form
- A valid Business Registration Certificate of your existing business
- A valid branch business name (a company name search for availability in advance is recommended)
- A valid address in Hong Kong (i.e. can be the same as your existing business registered address)
Note: Officially certified translated versions for any non-English documents must be provided.
Any person who applies for registration of a non-Hong Kong company under the Companies Ordinance is deemed to have made a
simultaneous application for business registration. The Notice to the Business Registration Office must be submitted together with
the registration documents.
Registration Procedure and Timeline – BRANCH OFFICE
Approval of Company Name
The name of the branch must be the same as that of the parent company. The name will generally be approved unless it;
- Is the same as or similar to a name appearing in the Companies Registry’s ‘Index of Company Names’
- Infringes on trademarks
- Is considered offensive or otherwise contrary to public interest
Company Registration with Companies Registry
Once the name has been approved, the registration documents must be submitted to the Companies Registry.
- The Company Registrar will approve the registration and issue a “Certificate of Registration of Non-Hong Kong Company”.
- The presentor of the registration documents will be notified by fax when the certificate is ready for collection.
- The certificate has to be collected in person at the Companies Registry.
A written authorisation will be required if the presentor sends a representative to collect the certificate.
1.3 Post Registration Formalities
Apply for Certificate of Business Registration
It is mandatory for all branches to register their business with the Inland Revenue Department’s Business Registration Office and obtain a Business Registration Certificate. Business Registration with the Inland Revenue Department must be done within one month of the date of entity incorporation in Hong Kong. The business registration number that appears on the Business Registration Certificate is also the respective company’s tax filing number.
On successful receipt of the application, the Business Registration Certificate will be issued on the next working day and must be collected in person. The Business Registration Certificate must be displayed on the office premises at all times.
Open a Business Bank Account
Once you have registered the branch office with the Companies Registry and Inland Revenue Department, you can proceed to open a corporate bank account with any of the major banks in Hong Kong. There is a bank interview process subjected to the submission of the bank’s requested documents. The agency you have engaged to register your branch office should be able to assist you with choosing the bank that suits your needs.
Obtain Business License(s)
Most of the business activities don’t require a business licences in Hong Kong. However if a business license is required, you must obtain it before commencing operations.
| NOTE: Upon successful application, you will receive a Business Registration (BR) Certificate and the Certificate of Investment (CI). |
Useful Information
For a better understanding of Registration fees for a Limited Company as well as for Branch Office in Hong Kong, please refer to the link: http://www.ird.gov.hk/eng/tax/bre_abr.htm
Visas & Immigration
Foreign nationals normally need a visa before living or working in Hong Kong. But Hong Kong’s light-touch visa policies mean that short-term visitors are permitted to conduct business negotiations and sign contracts while on a visitor’s visa or entry permit.
Hong Kong visa types
Employment visa
To employ people from overseas, you need to demonstrate that a prospective employee has special skills, knowledge or experience not readily available in Hong Kong. The proposed employee must be sponsored by an employer in Hong Kong.
Investor visa
This requires you to be a shareholder of a Hong Kong registered company. You can do this by:
- Registering and setting up a company in which you are the major investor, or
- Investing in a Hong Kong-based company
You will also need to produce details of the viability of your proposed business – or your financial position if you are investing in an existing company.
4 hours to APAC’s key markets and 5 hours to half the world’s population.
Useful Information:
For a more comprehensive understanding of the Employment Visa and the Investor visa, please visit the Hong Kong Immigration Department webpage – http://www.immd.gov.hk/eng/services/ |
Opening a Company Bank Account
Hong Kong is one of the members of the Financial Action Task Force. Therefore, all Hong Kong banks must follow certain regulations in line with the international standards of risk management. Before accepting you as a customer, every bank has the obligation to collect certain documents in order to comply with anti-money laundering laws.
If you are a fresh businessman (that is, you have never had a business before), you will need to provide the following documents (in English) as business proof in order to open a business bank account in Hong Kong:
- Personal Bank Reference Letter.
- Previous/existing Employment contract.
- Previous/existing company business card.
- Working Attestation issued by previous company.
- Professional Certificate in related industry.
- Personal Resume.
On the other hand, if you already run a business, you’ll need to provide the following documents (in English) as business proof:
- Certificate of Incorporation.
- Business Registration Certificate.
- Business Card.
- Most recently filed annual tax return.
- Trading history, that’s to say, agreement copies (both buyers and sellers), purchase order copies, sales confirmation copies and so on.
Furthermore, you will need to write a business plan. The business plan doesn’t need to be too detailed, but you do need to provide a direction for your business (what services you intend to offer, in which countries you intend to operate and so on).
In order to open the business bank account, you will have to go to the bank’s branch in Hong Kong. There is no other way around this. However, your agency can apply for your bank account on your behalf and an employee of the agency will accompany you to the bank and help you open the account.
| USEFUL TIP: Most of the world’s major banks have a presence in Hong Kong. Prior to finalising a bank for opening your corporate account it is important to take into account factors such as bank reputation; services and facilities offered; availability of future support services such as loans or trade financing; minimum deposit requirements, availability of Internet banking facility; and monthly fees (if any). |
What if the application is rejected?
- In general, banks should provide reasons for rejecting account opening applications. Moreover, banks have established Review Mechanism for unsuccessful applications. The rejected applicants can ask the banks concerned to re-examine their account opening applications.
- Go to another bank for account opening.
- Contact the HKMA (Email: accountopening@hkma.gov.hk) to make comments or enquiries.
Useful Business Links for Getting Started In Hong Kong
- Business & Trade in Hong Kong
The Business & Trade section of the Hong Kong Government one-stop portal (GovHK) – useful for foreign investors and companies and features information to assist you in planning and establishing your business in Hong Kong.
- Employment in Hong Kong
The Employment section of GovHK features information and services about recruitment, labour legislation, employees’ protection and compensation, the Mandatory Provident Fund Scheme, and occupational safety and health in Hong Kong.
- Tax Obligations of Non-Resident Business Operators
Find out how to register your business and what kind of tax you need to pay when you invest or operate business in Hong Kong.
- Mandatory Provident Fund (MPF) System
This section of GovHK directs you to a range of information about the MPF system, from how it works to the obligations of employers and employees.
- Capital Investment Entrant Scheme
The scheme allows people who make capital investments in Hong Kong to be granted entry into the territory for residence purposes.
- Business & Company Registration
Find information and online services for business registration, licensing and permits here.
- General Information for Foreign Enterprises
Learn about the support and services for foreign enterprises looking to establish or expand their presence in Hong Kong.
- Gateway to the Mainland Market
Learn more about how your business can benefit from Hong Kong’s status as a gateway to the Mainland Chinese market here.
Key Takeaway
Keep an eye on legal procedures, registration, taxes and immigration laws to ensure that you stay ahead and on track. Good luck and don’t forget that there this a whole range of support out there to help you. |
Open For Business
A look at Hong Kong’s vibrant StartUp Ecosystem to get the word out
Hong Kong offers myriad opportunities for like-minded entrepreneurs to get together, discuss ideas and offer support. However, it is also about building your brand and reputation with investors and corporates that can help and support you.
Becoming active in the community and utilising the facilities that Hong Kong offers can be a strong catalyst for success, not only from a domestic market perspective but also in terms of developing a springboard for expansion.
Government Support
Invest HK – Invest HK
Startmeup – http://www.startmeup.hk
Hong Kong Science and Technology Parks – www.hkstp.org
Cyberport – http://www.cyberport.hk
Incubators and accelerators (For short-term access to facilities)
Nest – www.nest.vc
Paperclip – www.papercliphk.com
CoCoon – www.hkcocoon.org
Blueprint – www.blueprinthk.com
TusPark Global Network – www.tgnglobal.com
Early-stage investor associations
Hong Kong Venture Capital and Private Equity Association – http://www.hkvca.com.hk
Hong Kong Business Angel Network – www.hkban.org
Stay relevant with news on Hong Kong StartUps
StartupsHK – www.startupsHK.com
Hong Kong is the gateway to 5.1 million high net work individuals in APAC with wealth totaling US$17.4 trillion – PWC
Having the appropriate support system in place when starting out is critical to the success of your private business. You will need to actively engage with the right professionals who can act as your key advisors to support you through every stage of your business.
Key Takeaway
Every entrepreneurial journey is unique, and represents the dedication, sweat, and tears that ultimately lead to success. Remember, your entrepreneurial journey will be a unique experience and you don’t have to go at it alone. Maintaining a strong focus on your company’s vision, and surrounding yourself with Hong Kong’s vibrant StartUp Ecosystem, will help you achieve your goals and plan for success into the future. |
Conclusion
A Brave New World For StartUps
There’s a lot to like about Hong Kong. The abundance of opportunities to gain a foothold into the Chinese market, for one. But perhaps more important is the region’s staunch support of its business community. With the exception of Singapore, there may be no better place to start a business than Hong Kong, which has the advantage of being the world’s freest economy with its prudent economic policy, transparent legal environment, regulatory efficiency, secured property rights and a number of fast-growing business districts.
For entrepreneurs and SMEs interested in starting a business in the Pearl of the Orient, the path ahead is relatively straightforward.
Hong Kong’s support for businesses in particular is evident in its low business licensing fees, its lack of red tape, and an abundance of state-backed resources. Few countries can boast a similar lack of regulation that lets businesses be born almost as soon as they are conceived, with only a small out-of-pocket investment.
“Go out on a limb, that’s where the fruit is” – Jimmy Carter
From Imperial China to the British Empire to the People’s Republic of China, the port city of Hong Kong has always been on the world stage. It has survived the tribulations of the Opium Wars, World War II and now holds the keys to its own destiny, albeit as an autonomous territory of China and a brave new world for startups.
Here’s to your Success!
About Compass Offices
With a network of more than 10,000 workstations in eight cities across APAC, Compass Offices’ growing portfolio of over 30 business centres provide a wide range of services to startups, SMEs and large corporates. Our clients use different variations on the Compass theme to tailor new work arrangements to their own needs. From fully furnished serviced offices, virtual offices, meeting rooms and prominent business addresses to concept co-working spaces and habitats, we provide workspaces that reshape industry, transform cities and enrich lives. Visit us at http://www.compassoffices.com
Sources
- StartupsHK – startupsHK.com
- Hong Kong is the gateway to 5.1 million high net work individuals in APAC with wealth totaling US$17.4 trillion – (Source: PWC)
- “Go out on a limb, that’s where the fruit is” – (Source: Jimmy Carter)
- Compass Offices – http://www.compassoffices.com