This article is a step by step guide on opening a company in Hong Kong. I own a company there, so every piece of information that you’ll find on this page comes from personal experience.
Here what you’ll learn in this page:
- How to spot an honest agency and avoid scammers while opening your company (you need an agency if you don’t want to handle all the paperwork yourself and/or you don’t want live and rent an office there).
The pros of opening a company in Hong Kong
- Hong Kong is, along with Singapore, the most liberal economy in the world. Therefore, opening a limited company is simple, fast and cheap (the government requires a fee of 1,730 HKD for the Company Registration and a fee of 2,250 HKD for the Business Registration Certificate). You don’t even need to live there, as you can hire a secretary and get a registered office address for a small annual fee (there are several reputable agencies that offer this service).
- The required registered capital in Hong Kong is much smaller than in the majority of countries (only 10,000 HKD).
- You can run your business from any country in the world (if you don’t live in Hong Kong an agency can provide a secretary and a registered office address in Hong Kong for about 5-6,000 HKD per year).
- Hong Kong is a major banking center and, once you have incorporated your company there, you’ll be entitled to open a multi-currency business bank account (with e-Banking) at a bank recognized worldwide such as HSBC or Hang Seng Bank. This is a key feature if you plan to do business worldwide. Notice that, if you prefer, you can also open the bank account of your company outside Hong Kong, for instance in Singapore or Switzerland.
- Hong Kong is the best gateway to mainland China, and the Closer Economic Partnership Arrangement (CEPA) provides Hong Kong with additional and exclusive mainland market access benefits. So, if you’re planning to do business with a Chinese partner, having a company in Hong Kong may be your best bet, especially when it comes to receiving money from your Chinese business partner.
- Even if Hong Kong is, from a political point of view, a province of the People’s Republic of China, its legal system is different from mainland China’s, as English common law prevails.
Hong Kong has a very simple taxation system: your company will have to pay 16.5% tax on all profit.
If the director/s of the company doesn’t live in Hong Kong (and other conditions apply), you can then apply for “off-shore company” status. In this case your company will have to pay the 16.5% tax earned in the territory of Hong Kong and no taxes on profits generated elsewhere.
This means that if for example your company imports cell phones and tablets from China to then resell them to European wholesalers or on an American e-commerce site, then the government of Hong Kong will not require you to pay any taxes (again,so long as you’ve gotten “off-shore company” status.
Be careful because this doesn’t mean that you, as a shareholder (total or partial) of the business, won’t have to pay taxes in the country in which you live. In fact, to access your company’s profits you’ll have to be paid a salary or annual dividends. It is on that amount that you’ll have to pay personal tax in the country in which you reside. I repeat: spending your company’s money for personal use without declaring it is a crime in most of countries.
In addition, note that many countries have laws to determine if a foreign company is really run from the country in which one or more of the directors reside (Controlled foreign corporation (CFC) rules). In this case, the country in which the directors live could require payment of the difference between the tax on company profits in the country in which they reside and Hong Kong. For this reason, it is important to discuss this with an accountant in your country of residence before starting a company in Hong Kong.
The cons of opening a company in Hong Kong
- Opening a company in Hong Kong requires quite a bit of paperwork and, if you have never done this before, it may be difficult to sort everything out by yourself. Moreover, you’ll have to go there. You can solve this problem by hiring an agency that does all the work on your behalf for around 2,000 HKD (3,000 if you want the agency to help you open a business bank account).
- If you’re planning to live in mainland China your Hong Kong company can’t provide a Chinese VISA for you. In this case, you need to open a company in China, which is more difficult and requires a registered capital of about 250,000 HKD to start with (you can re-invest the capital into your business after you open the company though, so it’s not a deposit). The alternative is to go to Hong Kong every 3-6 months and get a new business VISA but it’s getting more difficult every year and China is cracking down on VISA runners.
How to open an Hong Kong a company without living or even go there
In the past, you were allowed to open a Sole Trader Company in Hong Kong without owning a Hong Kong resident permit. Nowadays, unless you’re planning to stay in Hong Kong, you can only open a Limited Company. As I said, you can go to Hong Kong and open the company by yourself. However the government requires your company to have an office and a secretary in Hong Kong.
The good news is that you don’t need to rent an office and hire a secretary. There are several agencies that will be happy to provide this service to you for around 5-6,000 HKD per year. They can afford to keep the cost low because the same person can act as a secretary for a lot of companies. This is the same for the office: the office of a given agency may be the registered office address of many different companies.
All the documents you need to register a company in Hong Kong and the procedure for opening it
First of all, you’ll need to pay the agency’s fee and choose a name for your brand new company. Your agency will then check whether the name is available in Hong Kong or is already taken.
Then you’ll have to send a copy of your passport, a copy of an official document as a proof of your residence (for instance, a driver’s license) and a questionnaire with standard questions such as your address, your passport number and the name of the director and shareholders (if you plan to open the company alone, you can be both director and unique shareholder) to Hong Kong.
For a simple company structure, which unless you have special requirements shall be enough, your agency will setup your company via E-registration, which takes less than two hours, to get the brand new company’s certificate of incorporation and business registration certificate upon certified the relevant parties’ passport online, for instance via Skype.
That’s all! The whole process should take around five working days to get the company registered.
The total cost of registering and maintaining a company in Hong Kong
Assuming that you decide to hire an agency and that you need a secretary and an office address, during the first year you’ll need to pay for:
- The incorporation documents and company kit (seal, stamp and so on): about 2,070 HKD.
- The Company Registration (Government fee): 1,730 HKD.
- The Business Registration Certificate (Government fee): 2,250 HKD.
- The Provision for the Company Secretary: 3,500 HKD.
- The Provision for the Registered Office Address: 2,000 HKD.
- The Assistance for opening your business bank account (you can actually open the bank account on your own but it does take time and effort): 1,000 HKD.
Note that these are the fees that I paid to my agency (the prices are still the same). Also, even if the total is 12,550 HKD, the agency is now offering a discount of 3,000 HKD, so you’ll end up paying 9,550 HKD.
My experience is that most agencies will charge you a larger fee. You can also get a cheaper quotation, but be aware that the only agency that quoted me a better price later on tried to scam me (claiming that the quotation was for a sole proprietorship and not for a limited company). I’ll discuss how to assess the honesty and efficiency of an agency in the last part of this article.
Starting from the second year you’ll need to pay:
- The Business Registration Certificate (Government fee): 2,250 HKD.
- Annual Return (Government fee): 105 HKD.
- The Provision for the Company Secretary: 3,500 HKD.
- The Provision for the Registered Office Address: 2,000 HKD.
This means that, starting from the second year, you’ll pay 7,855 HKD per year in order to maintain the company.
Note that renewing the business certificate is a straightforward process, as you don’t even need to sign any documents: your agency will collect your fee, handle all the paperwork and send the new business certificate to you.
Finally, within 18 months of incorporation (and then every following April), you’ll have to fill a profit tax return. A decent agency will also offer you an accounting and auditing service. This doesn’t come for free and prices may vary as they are based on the number of invoices you produce.
Just to give you an idea, the first year I had 100+ transactions and I paid 2,800 HKD for the accounting and 6,000 HKD for the auditing.
Keep in mind that I only had to email my invoices (both my expenses and earnings) and my bank statements (you can download them from your online banking service) to the agency accountant responsible and they took care of everything else.
This was especially important to me, as I’m not a taxes expert and, before opening the company, my biggest fear was to screw up during the tax declaration.
In fact, the process went smoothly and I didn’t have any problems.
Summing up, the total cost for opening and maintaining a company in Hong Kong is…
- 7,855 HKD per year for renewing the business license, pay for the office address and the secretary (however the first year you’ll have to pay 9,550 HKD).
- Around 9,000 HKD per year (starting from the second year) for accounting and auditing (100+ invoices). This expense will grow as your business grows as it depends on the number of invoices. However, the more invoices you have, the less you pay per invoice (for instance, for 200 invoices you’ll pay much less than 18,000 HKD and so on).
How to open a multi-currencies business bank account in Hong Kong
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. Therefore, before accepting you as a customer, every bank has the obligation to collect certain documents in order to comply with anti-money laundering laws.
From a practical point of view, if you are a fresh businessman (that is, you have never had a business before), you’ll 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’ll need to write a business plan (your agency should help you prepare it if you don’t have previous experience). In my experience, 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 bank account, you’ll have to go to the bank’s branch in Hong Kong. There is no other way around this. However, for a small fee (1,000 HKD), your agency will 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. It shouldn’t take more than two hours.
Just remember to bring your passport and 10,000 HKD cash (this will represent the registered capital of the company and must be deposited into your company bank account on the same day you opened the account).
Finally, it’s also possible to open an off-shore bank account (for instance in Singapore or Switzerland) without visiting Hong Kong. I recommend you to discuss these details with your agency as choosing the right bank is extremely important.
How to choose an honest agency and avoid scammers
If you do a quick Google search, you will find hundreds of agencies that claim they can help you open and manage a company in Hong Kong. While some of them are honest, others are just scammers. My experience is that there are a lot of agencies that operate in a grey zone.
They may not steal your money. However, they may work as an intermediary for a real agency, therefore taking a percentage of your fee and slowing down the whole process. Or worse, they’ll claim services that they aren’t able to offer and, once you pay their fee, make you a more expensive counter offer. These agencies usually look cheaper than the honest ones (and for a good reason!).
Want an example? You’ll ask if it’s still possible to open a Sole Trader Company in Hong Kong (it’s cheaper than a Limited Company) even if you don’t plan to live there (it was possible until 2010). You’ll receive an email that states that there are no problems with this, and that of course it’s possible! Then, once you have wired the money, you’ll receive another kind of email that claims something on this line:
“Sorry Mr Smith, the law changed last month and now you can only open a Limited Company in Hong Kong if you don’t live here. I’m very very sorry. Just send us additional 5,000 HKD and we’ll be happy to handle it for you! You’ll get your limited company within 12 working days!”
This is quite a common scenario. Would you work with an agency that acts in this way? Good, I wouldn’t work with them either.
If you already know someone that owns a company in Hong Kong, you should ask them what agency they used and if they would recommend it. Or, you can contact us and I’ll suggest an honest agency to you (the one I used to open my own company).
Here, as promised, is some advice for spotting an honest agency:
Step 1: Check the agency’s website
Let’s suppose you did some research on Google.com and you found three to five agencies that offer a company incorporation service.
Does their website look professional? Is their English any good? Can you easily understand what the agency offers to you? How old is the website? Would you trust an agency that opened its website two months ago? Good, me neither.
p.s. You can check the age of an internet domain for free on who.is.
Does their website provide a physical address in Hong Kong, a phone number and an email address? Is there any way to check if the website belongs to a real company?
If they ask you to pay by credit card, are you redirected to a page protected by an SSL certificate (you’ll see an URL that starts with https:// instead of http://) or not?
Note that none of the information I’ve listed will ensure the honesty of the agency. I see them more as necessary but not sufficient conditions of doing business with me.
Step 2: Getting more info about the agency
Let’s suppose that the name of the agency that you’re researching is “HK Companies Incorp Limited” (a random name that I just made up).
Check on Google.com for queries such as “HK Companies Incorp Limited scam,” “HK Companies Incorp Limited problems” and so on. The goal here is to discover if someone else is complaining about the agency in a forum, blog or website.Of course, if you don’t find any suspect information, you can’t be sure that the agency is honest. But if you do find something, you may reconsider your choice.
Step 3: Contacting the company
Let’s say that HK Companies Incorp Limited is a real company, it has a professional website and you didn’t find any complaints about them. Now it’s time to contact the agency.
If you call them during business hours, does somebody answer the phone? Does he/she speak decent English? It doesn’t have to be perfect, as English isn’t the main language in Hong Kong after all. However, all the documents concerning your future company will be in English, so you do need to deal with somebody that has sufficient language proficiency.
p.s. If their English is bad you’re probably dealing with a mainland Chinese person that acts as an intermediary for a real agency or, worse, is just trying to scam you.
Can you pay by PayPal or wire transfer or do they insist on collecting your money through Western Union? If they only accept Western Union, run away! Why? Because you can’t track the transaction and they can easily run away with your money. This holds true for any monetary transaction, not just when opening a company.
If you send an inquiry by email, does somebody answer within 24-48 hours with good English and without pushing you to buy their service as soon as possible? An established agency has a healthy number of customers and doesn’t need to be pushy. But a scammer? They just want you to send them some money and then run away before you realize they don’t know much about incorporating companies.
When you ask for a quotation, do you receive a clear answer to all of your questions and a list with the cost of each service (company incorporation service fee, business bank account opening service fee, Hong Kong government annual fees and so on)?
I think it’s important not only to spot a potential scammer but also to assess how efficient the agency will be in future. Remember that if you decide to buy their service, they’ll handle a key part of your business. Therefore, their communication skills are an important piece of the puzzle.
Frequently Asked Questions
Do I need to live in Hong Kong to start and run a business?
No, in Hong Kong that isn’t necessary at all.
If though you want to live in Hong Kong, then your company will have to apply for a work or “investor” visa in your stead. Note that to obtain the visa you’ll have to be able to demonstrate that your company will benefit the city of Hong Kong, whether by hiring local people, the volume of taxes paid, innovation, and so on. Basically if you just have a side business or are using it as a front, don’t expect to get a visa.
Do I have to go to Hong Kong to start a business?
No, it’s absolutely not necessary.
Do I have to go to Hong Kong to open a bank account?
If you decide to open a bank account for your company with a bank in Hong Kong, yes, you’ll have to personally make an appointment with the bank. If instead you decide to use an off-shore bank account then it’s possible that you don’t have to physically go to Hong Kong.
How long does it take to start a company in Hong Kong?
Usually just a few days.
Can the agency that starts the business also handle its accounts?
It depends on the agency. The one that we recommend can also handle your company’s accounting.
Are you looking for an agency that can help you to set up your Hong Kong company?
If you want to know the name of an honest agency that can help you to register and manage your company, just send us a message using the following form:
p.s. Notice that we receive hundreds of emails every day and, sometimes, we can’t reply fast. At the same time, we assume that you want to get this info ASAP, so we’ll also forward your message to the agency we recommend. In this way they can get in touch with you much faster!
[Cover Photo’s Copyright: Depositphotos.com]