Located in the heart of Asia, Hong Kong is well-known for being a major financial hub and business city. It is also one of the most popular countries business owners consider to set up their business in. Hong Kong’s tax-friendly environment makes it very attractive to investors and business owners. Hong Kong also has a stable political environment and effective legal system. Hong Kong acts as a gateway for business to enter the international market and its tax-friendly jurisdictions makes it favourable for incorporating a company.
So why should you incorporate a company in Hong Kong? Here are some reasons:
Ease of setting up a company
Setting up a business in Hong Kong is efficient and easy and it can be done in two weeks or less. A business is able to enjoy low corporate taxes and tax rates in Hong Kong. Its pro-business administration makes it very easy to open and operate a business.
There are some support initiatives for small and medium businesses. These support initiatives are run by the government. Rules and regulations are straightforward and easy to understand as the Hong Kong jurisdiction is very particular on intellectual property rights protection. The cost of setting up a company is also quite low as compared to other countries. Another plus point is that Hong Kong is known for being a popular Exhibition and Convention Centre for businesses who are thinking of expanding and having a strong presence in the business world.
Attractive Tax System
Many foreign business owners and investors are attracted to Hong Kong’s favourable tax regime. Businesses are able to make use of the tax exemption by the Inland Revenue Department (IRD) and they can avoid taxes on profits made outside Hong Kong.. This can help them save thousands of dollars.
The three main taxes used in Hong Kong are:
- Corporate Profits Tax
- Salary Tax
- Property Tax
Taxes that are not applicable in Hong Kong include:
- Dividend Tax
- Capital gains Tax
- Hotel Accommodation Tax (HAT)
- Value-added tax (VAT), Goods & Services Tax (GST), or Sales tax
- Withholding tax
Free Economy & Trade
Hong Kong has one of the most free economies in the world. The local economy follows the principles of free trade, free enterprise and a free and open market. Hong Kong allows businesses and companies to run all sorts of activities like E-commerce, manufacturing, trading, financial services and consulting services. These companies are also allowed to open bank accounts wherever they like without having to worry about being restricted by the government.
There are no restrictions on outward and inward investments. There are also no restrictions on foreign ownership or foreign exchange controls. Hong Kong is considered a free port and this means that on total exports, there are no taxes that have to be paid.
Straightforward access to Mainland China
With the close proximity between Hong Kong and China, it is possible for one to travel from Hong Kong to China’s cities within a day. Due to the Closer Economic Partnership Arrangement (CEPA) between Hong Kong and China, a business set up in Hong Kong gets preferential access to China’s economic market.
The Free Trade Agreement (FTA) was signed between Hong Kong Special Administrative Region (SAR) and ASEAN. This agreement helps in building connections through business trading, intellectual property, investments and economic cooperation.
Tax Rates
Income | Tax Rate |
Tax rate for corporations (First HK$2 million) | 8.25% |
Tax rate for corporations (Over HK$2 million) | 16.5% |
Tax rate for unincorporated businesses (First HK$2 million) | 7.5% |
Tax rate for unincorporated businesses (Over HK$2 million) | 15% |
Tax rate on capital gains | 0% |
Tax rate on shareholder dividends | 0% |
Tax rate on foreign-sourced income | 0% |
In summary, Hong Kong is now one of the most renowned and influential business hubs in the world. With incorporation being uncomplicated and taxes being extremely reasonable, it is the ideal country to incorporate your business in.
