Benefits of starting a business in Hong Kong
Hong Kong offers a favourable business environment with a stable legal system, transparent regulations, and a skilled workforce. The government's support, easy business setup procedures, and tax benefits make it an attractive destination for companies looking to expand their operations.
Here, we offer a roundup of the advantages of entering the Hong Kong market.
The benefits that we will cover in this article include:
It’s the world’s freest economy
Proximity to Mainland China as a global financial centre and logistics hub
Government initiatives to support businesses
Streamlined Business registration, incorporation and licensing
A range of working visas are available
Taxation is simple and comparatively low for both the employer and employee
Hong Kong is the world’s freest economy
According to the Fraser Institute, Hong Kong consistently ranks as the world’s freest economy. The low tax rates and pro-business environment in Hong Kong will allow your company to maximize profits. In addition to the tax benefits, Hong Kong also offers a stable legal system, transparent regulations, and a highly skilled workforce with expertise in finance, legal, and intellectual property matters.
Proximity to Mainland China as a global financial centre and logistics hub
Hong Kong's strategic location and world-class infrastructure provide easy access to major markets like China, East Asia, and India. As a global financial hub, Hong Kong also has a sophisticated network of service providers offering financial, legal, accounting, shipping, and manufacturing support for businesses.
Government initiatives and funding to support businesses
Hong Kong offers a range of government and private funding options to startups. They aim to help entrepreneurs get their businesses off the ground or expand in Hong Kong.
Funding ranges from covering initial company registration and operating costs, through to streamlining an existing business and even providing support for international exports. With the right information and resources, you can secure funding to set up your business for success.
Startmeup.hk is a business support directory of available grants. In particular Science and Technology Park and Cyberport aim to attract research and development and technology investment in Hong Kong. Refer to our article on obtaining government funding for more details.
Business registration, incorporation, and Licensing
The most common type of business registration for foreign SMEs is a Limited Liability Company (LLC). Business registration and incorporation are relatively streamlined and low cost, and there are no licenses/permits for many industries. Limited liability companies have the following advantages:
Advantages for Hong Kong-based LLCs:
Provides a separate legal entity where the parent company and owners are not held accountable for the debts and obligations of the Hong Kong company, Hong Kong offers tax benefits to limited companies, whereby only the profits from the Hong Kong business are subject to tax. There is no capital gains tax, sales tax, and VAT.
Can be fully foreign-owned and have all foreign directors, and these directors or shareholders can change over time, selling shares or issuing new shares without affecting the existence of the limited company.
Raising capital and securing loans from banks is a more simple process compared to other entities.
Cost-effective and low maintenance when compared internationally, especially relative to Europe or South East Asia.
A range of working visas are available
Securing a working visa for foreign staff is relatively straightforward compared to other countries, even more so if the role is on the Talent List.
In addition, there are options for the following groups:
Entrepreneurs
Dependent visas: The applicant’s family members can enter Hong Kong on a Dependent Visa. Typically, family members can work in Hong Kong, making this an attractive visa type for double-income households.
Find the comprehensive overview in our Guide for Employers.
Taxation is simple and comparatively low for both the employer and employee
As mentioned above, Limited Liability Companies also offer tax benefits, whereby only the profits from the Hong Kong business are subject to tax. There is no capital gains tax, sales tax, GST or VAT.
Employees benefit from the progressive and ‘flat’ tax system
Hong Kong has a progressive tax system with rates ranging from 2% to 17%, depending on the level of taxable income after deductions and allowances. However, individuals also have the option of paying a standard “flat” rate of 15% of their income.
Allowances and deductions can significantly reduce assessable income and lower tax liability.
As you’ve read, there are several advantages when starting a business in Hong Kong.
Contact us to talk through the factors that are relevant to your business and to incorporate a Limited company in Hong Kong.
