Four Things to Know When Entering the Hong Kong Market
Entering a new market can be challenging, and the Hong Kong market is no exception; here are the four things you should know when entering the Hong Kong market. While Hong Kong offers numerous business opportunities, it's crucial to navigate the market effectively and avoid common mistakes. In this article, we will explore some of the pitfalls often encountered by businesses entering Hong Kong and provide valuable insights to help you succeed.
Don’t be intimidated by it
Many people perceive doing business in Mainland China as complex, which can lead to similar concerns about the Hong Kong market. However, you might be surprised to note that Hong Kong operates under a separate set of laws, making it significantly easier to do business when compared to Mainland China.
In fact, according to the Fraser Institute, Hong Kong is recognized as the freest economy globally, primarily due to its low administrative burden and taxes. By understanding the unique characteristics of the Hong Kong market, you can overcome any initial intimidation.
Choose the right advisor
When entering the Hong Kong market, it is crucial to select the right advisor who can provide valuable guidance and support. There is a diverse range of companies in Hong Kong offering services such as company setup, accounting, tax assistance, and visa applications. However, not all advisors are created equal.
Local firms in Hong Kong are well-suited for serving the local market, offering lower fees. However, they often assume that clients have a basic knowledge of local business practices. They might lack familiarity with your home jurisdiction and may not be able to explain the differences between your home market and the Hong Kong market effectively.
On the other hand, large international firms like Vistra or Intertrust operate globally and can assist with incorporating entities in multiple jurisdictions. However, they tend to be more expensive and experience higher staff turnover, potentially resulting in frequent changes in your relationship manager.
As expats ourselves in Hong Kong at Shepherd Asia, we understand the challenges of starting fresh in a new place. We are committed to providing comprehensive support and explaining the major differences between company requirements in major markets such as the UK, Germany, France, and Hong Kong. With our expertise in Hong Kong, we can address all your questions related to the back-office administration of your Hong Kong company.
Get help with staff visas
Hong Kong is known for attracting expats from around the world to work in the city. While applying for a staff employment visa is comparatively easier in Hong Kong than in many other countries, there are still important requirements to fulfil. Working with an advisor who understands the intricacies of visa applications is essential.
Your advisor should be familiar with the language and requirements expected by the Immigration Department. Surprisingly, even when starting a new office in Hong Kong with only one staff member, you may still be required to rent office space. Some assumptions made during the COVID-19 pandemic, such as allowing employees to work remotely, might not align with the Immigration Department's regulations.
When applying for a staff visa, always emphasise the benefits your business will bring to Hong Kong, such as job creation, training opportunities for locals, and contributions to the economy and society. Approaching the visa application from a perspective of mutual benefit is crucial.
Don’t buy a shelf company because of the bank account
Opening bank accounts in Hong Kong, especially for businesses established overseas, has been considered a challenging task. Some entrepreneurs believe that purchasing an existing company with a bank account is a shortcut to overcome this obstacle. However, this approach is often ill-advised.
When a company changes ownership, the bank will conduct a thorough Know Your Customer (KYC) process, including reevaluating the company's background and financial records. In many cases, the bank may decide to close the account, leaving you with a company but no bank account. The purchased company may also have prior tax issues or incomplete records, making it difficult to prepare financial statements and tax returns.
Instead, opening a new company offers a fresh start and allows you to build a solid foundation. Additionally, there are alternative options for bank accounts, such as digital banking services like Airwallex, which streamline the account opening process. Leveraging relationships with your existing bank in your home jurisdiction and obtaining a referral to their Hong Kong branch can also facilitate the opening of a bank account in Hong Kong.
