How to Incorporate a Subsidiary in Hong Kong
A subsidiary is a separate legal entity from its owner, typically in the form of a limited liability company. Hong Kong is a popular location for Western companies looking to establish new overseas subsidiaries.
Thanks to the well-developed infrastructure, shareholders can open a new subsidiary in Hong Kong within a week to take advantage of the Hong Kong business environment, including favorable tax rates. If you wish to do the same, this article provides a brief overview of how to open a new subsidiary in Hong Kong.
Key Facts and Requirements
100% foreign-owned: Opening a subsidiary in Hong Kong does not require citizenship or residency. It can be wholly owned by a foreign company and have foreign directors.
Director: A subsidiary must have at least one director. It can be a local or foreign director, and it must be a legal-age individual or body corporate.
Local company secretary: A company secretary is not a clerical worker but a legally required liaison position usually fulfilled by an individual or corporation.
Auditor: When it comes to filing a tax return, a subsidiary is required to appoint an auditor who holds a practising certificate issued by the Hong Kong Institute of Certified Public Accountants.
Local office: Hong Kong law requires a physical office address to register a company. It cannot be a PO box, although it can be a corporate service or home office address.
Shareholders: A subsidiary must have at least one shareholder or a maximum of 50.
No minimum share capital: A single shareholder can open a subsidiary with HK$1 of share capital. The only exceptions are certain regulated industries where a business requires a license to operate, such as financial services.
Timeline: A new subsidiary can be incorporated within a few hours. However, from a practical standpoint, you need to allocate sufficient time for various administrative procedures, which include KYC processes, signature collection, and coordination with service providers.
Practical Operations When Incorporating a Subsidiary
Before incorporating a subsidiary in Hong Kong, carefully examine how the new subsidiary will function within the organizational chart, both from practical and tax standpoints.
Most companies open subsidiaries in Hong Kong to mitigate tax liabilities, as Hong Kong has low corporate taxes and no value-added taxes (VAT).
Consider the following questions when making the decision on whether to start a subsidiary:
What specific issues might a Hong Kong-based subsidiary solve?
How can the subsidiary leverage Hong Kong's financial ecosystem and tax systems?
How does the subsidiary impact supply chain logistics, distribution, and efficiency?
Use a Subsidy in Hong Kong to create a Wholly Owned Foreign Entity in Mainland China
A common strategy utilized by organizations that wish to open a Wholly Foreign Owned Enterprise (WFOE) in China is to create a Hong Kong-based company to be the parent of the WFOE. This is favourable because Chinese regulators and service providers are familiar with documents arriving from Hong Kong, and the same is true for other foreign companies in Hong Kong.
Another consideration that could make incorporating a subsidiary more streamlined is to appoint a local director. Although not a legal requirement, administrative work will be more efficient and stress-free. For instance, it is easier for a local director to open a business bank account, as they can attend an in-person appointment. We offer this as a service.
If your organization is opening a limited company in Hong Kong to conduct a preliminary evaluation or feasibility study, consider a Representative or Branch Office instead. Limited companies are easy to open but challenging to close. Read more about different company types in Hong Kong Business Registration: What You Need To Know.
