By Miki Lai, Manager

Can a foreigner set up a 100% foreign-owned company in Hong Kong?

Definitely YES!! Any if expatriates, without Hong Kong permanent residency status, even you are NOT living in Hong Kong at all, and without Hong Kong identity card, YES, you can proceed to set up a 100% wholly-owned private limited company by shares in Hong Kong with yourself as the sole shareholder and sole director.

Hong Kong is one of the most popular jurisdictions welcoming new entrepreneurs and foreigners to start a business in Hong Kong, especially those looking for China and Asia opportunities, and those set up trading company for international trading business.

For a normal course of business, for example, a trading (import and export) business, local retail shop, online translation services etc., you are not required to apply for a specific license or restricting your company on one particular business to, you can perform all these businesses under the same company, which is best for your entrepreneurs with several skill sets to set up multiple websites and trademarks for engaging in different businesses to maximize the profits.

That is why there are more reasons that foreigners choose to come and register a company in Hong Kong for business-enabling reasons.

What are the basic elements for setting up a company in Hong Kong?

1. Company Name (English / Traditional Chinese or both)
2. Share Capital (at least 1 share in HK$1 capital)
3. At least One (1) individual (natural person) Director – any Nationality is OK
4. At least One (1) individual / corporate Shareholder – any Nationality is OK
5. Registered Office Address MUST in Hong Kong
6. A Company Secretary MUST be a resident or corporation in Hong Kong
7. A Designated Representative MUST be a resident or corporation in Hong Kong (Director / Employee / Member / TCSP Licensee)

What are the Benefits of Registering a Company in Hong Kong?

Yes, tones of benefits!!!  A Private limited company is the most popular type of company in Hong Kong because it has tones of benefits.  That’s why many foreigners around the world come to Hong Kong registering a company in Hong Kong for any business in connecting all sorts of Hong Kong, China, and Asia business opportunities.

• Low Tax – No. 1 Top Reason is, of course, the low tax regime.  This one good reason already attracts many foreigners in choosing Hong Kong for company incorporation.  8.25% on first HKD2,000,000 assessable profit (profit after ALL deductible expense), thereafter at a fixed rate of 16.5%, still way lower than most of the jurisdictions.

• Saving More Profits – other than profit tax obligation, there is minimal tax duties in doing business in Hong Kong, NO VAT, GST, Social Security Tax, Environment Tax etc.  Basically, the overall tax rate of Hong Kong companies is extremely attractive, especially suitable for a new business or start-ups saving more profits, which enables them catching a rapid expansion stage in securing the market position.

• True Limited Liability Status – In China, if you are the sole owner of a limited company, even the liability of the company should be separated from the shareholder, yet, in practice, most of the cases are not true.  Hong Kong, in contrast, for a private limited company by shares, even you are the only person as the sole shareholder and sole director of the company, the limited liability status is true and definite unless such liability is caused by a fraudulent act of the owner. 

• Top Choice for China WFOE Set Up – Nowadays, Chinese is still the only official language in China, where foreign investment, especially by means of money in and out of China still with certain barriers, and therefore, the Gateway Status of Hong Kong creating an unique position for foreigners entering the China market while retaining sufficient protection and freedom, no matter at time of on-boarding, and that of exit procedure.

• Low / NO Capital Requirement – You can register an HK$1.00 in 1 share capital company in Hong Kong, even you are engaging a restaurant business, where investment might cost you as least HK$1,000,000 for initial set up, there is no restriction to set up a 1 dollar company where you can make the money available in other forms, such as shareholder loan (convertible loan) with interest or find an investor to allow a much more flexible way in doing business, no need to worry about the locked capital difficult to withdraw.

• 100% remotely set up is possible – for some on-shore jurisdictions, although online company registration portal is available, yet, in practice, a local arrangement is required.  e.g., Singapore company requires at least one local resident director, which means ultimately, local presence is required, or else, an additional cost to hire a residential director will be charged.

• Hassle-Free Set Up, Dormant, Deregistration Process – Formation of Company, Business Exit, Deregistration are all straight forward and easy to apply, there is no specific restriction or government policy to restrain foreign entrepreneurs from withdrawing the company gains and profit leaving Hong Kong, simply follow the standard procedures.

• Freedom in Doing Business – There is NO object clause requirement for Hong Kong Company, unlike China company which only those businesses within the object scope are allowed.  Company in Hong Kong does not require to be restricted to one or two types of businesses, instead, can freely engaging into several businesses at the same time (Trading, Property Investment, Logistics Arrangement … etc.), where for specific businesses, for example, Travel Agency Business, simply apply for a specific license on top of the business registration is sufficient.  Whether or not such particular business requires a license in Hong Kong or not, entrepreneurs can simply check it from Government Website for information. 

• Bi-lingual corporate documents – English and Chinese, are the two (2) official languages in Hong Kong, which enable you to use the corporate documents in most of the countries as holding structure and for business or investment around the world without any headache on translation matters.  This single reason makes Hong Kong company a popular choice for foreigners in performing investment activities in any location where Chinese as the official language, such as China and Taiwan, at the same time maintaining a high level of beneficiary protection.  On the other hand, best for China individuals and corporations in investing outward, and therefore, highly recommended in One Belt One Road investment project, especially for Joint Venture with China type of projects.

• Legal Framework with Top-Tier Protection – Hong Kong adopts the common law system with the fundamental principles of “Rule of Law” provides a fair and sound legal framework for doing business in Hong Kong.  No matter you are local residency or a foreigner, all are treated fairly under the law, where Consumer Protection, Contract Law Protection, Business Disputes, International Agreements and Treaties, Companies Law, all facilitate in businesses protection, therefore, Hong Kong company is widely accepted by global businessmen as a trusted business partner.

• Excellent Holding Structure – Hong Kong is one of the top choices for International MNC in establishing Asia Regional Headquarter, also for investment holding structure allowing the company to seek other investors and investment opportunities within the fast-growing regions in Asia. Further that, the holding structure can enjoy the Dividend Tax-Free, Offshore Territorial Source Principle of Taxation jurisdiction, and the free flow of capital for ease of shifting from project to project and diversifying the investment risk.

• World Recognition – Hong Kong is one of the Hague Apostille Members, which means the apostilled corporate documents of a Hong Kong company will be accepted by other member countries, which helps the process in investing with a wide range of locations with the same Hong Kong company to diversify the risk of investments, for example, some of our customers investing in property market have properties in China, Japan, Germany, United Kingdom, New Zealand, and Hong Kong, where all under the same Hong Kong company as investment holding purpose, save a huge administrative cost in maintaining different companies for properties in different locations.

• Transparent Structure with Sufficient Protection – Yes, Hong Kong company search records would be obtained through company search, but not a free public record like UK companies, further than, Records of Significant Controllers, Ultimate Beneficial Owners although are mandatory, only in house record keeping is required, NOT a public record available for search, which provides a great protection on personal privacy.  Furthermore, the accounting records, audited reports of Hong Kong private companies are private records, where the public search is not available, unless, this is a listed company or a limited company by guarantee (Charitable Company, NGOs).

• A Transitional Solution to Economic Substance – since 2019, after the release of the economic substance law in CAY, BVI, SEY and other famous offshore jurisdictions, Offshore Tax-Free (Tax-Haven) has come to the end.   Maintain an offshore company MUST provide a tax residency proof (Tax ID) as filing support, which makes it a headache to many existing offshore companies, and therefore Hong Kong Company (Non-HK Company) become a transitional solution for the time being.  Of course, afterwards, a case-by-case evaluation is still required to see whether the offshore company should be maintained or simply transfer the business to a Hong Kong limited company for a clear cut.

If you would like to obtain for more information and detail about the company set up in Hong Kong, please feel free to contact us.