Hong Kong is a jurisdiction that is extremely attractive to investors and those looking to establish a company in a multi-cultural city.
It is a financial hub that is deemed to be one of the best in the world in which to set up a company.
Hong Kong brings together a number of elements that have international appeal in the business world.
Below we explore just some of the benefits of setting up a company in Hong Kong.
Hong Kong: A stable political environment and pro-business culture
Hong Kong holds impressive rankings in global business surveys such as its classification as the 5th most economically efficient jurisdiction in the world (IMD World Competitiveness Yearbook).
Hong Kong is also ranked as the 11th least corrupt jurisdiction in the world (Transparency International – Corruption Perceptions Index 2020).
The Corruption Perceptions Index collects data from a number of different sources that provide perceptions of experts and business people regarding the level of corruption in the public sector.
Hong Kong has consistently remained in the top 20 economies in the world in the Index.
In 2020, Hong Kong obtained its highest ranking since the index began, in 1995.
Hong Kong Legal system
Hong Kong was a colony and dependent territory of the British Empire from 1841 up until 1997.
In July 1997, the sovereignty of Hong Kong reverted back to the Peoples Republic of China.
However, the Sino-British Joint Declaration dictated that Hong Kong retain its common law and capitalist system for 50 years after the handover in 1997.
Infrastructure
Hong Kong is one of the most modern cities in the world. It is well equipped in terms of infrastructure such as transportation, telecommunications, IT connectivity, and utilities.
The combination of world-class and efficient logistics facilities, such as the cargo airport and shipping container port, makes Hong Kong attractive for international business.
Rules and regulations to incorporate a company in Hong Kong are simple and straightforward.
The principal forms of business are limited liability companies (including public and private companies), partnerships, sole proprietorships, and branch or representative offices of a foreign company.
A private limited company in Hong Kong requires at least one individual director and one company secretary. A non-Hong Kong resident can be appointed as a director. There is no requirement for shareholders to be Hong Kong residents.
Intellectual Property (IP)
Hong Kong is committed to enforcing stringent regulations for registered designs, trademarks, patents, copyright, and for the protection of Intellectual Property Rights (IPR) in general.
Hong Kong has set up a special department that is highly reputed for handling IP matters, known as the Hong Kong Intellectual Property Department.
A strategic location with a stable economy
As one of the world’s most dynamic economies, Hong Kong is a financial hub for many business entities.
The economy of Hong Kong expanded 7.9 percent year-on-year in the first quarter of 2020, above preliminary figures of a 7.8 percent increase.
It was the fastest increase in economic output since March of 2010, amid a sharp recovery in global demand.
The government of Hong Kong confirmed its forecasts that the economy will grow by 3.5% to 5.5% in the current year.
From the point of view of logistics, the cost of transportation is relatively cheap for imports to Hong Kong from abroad and is cheaper than transporting goods straight into mainland China.
Strategically located in close proximity to mainland China, Hong Kong plays a vital role in accessing the mainland China market for many foreign entrepreneurs.
It is just one hour’s drive from the world’s largest manufacturing region, the Pearl River Delta, which produces 30% of China’s exports.
Hong Kong accounts for a large share of inward investment to mainland China and mainland China is the largest trading partner for Hong Kong.
Statutory requirements in Hong Kong
Hong Kong as a jurisdiction also has some statutory requirements which need to be complied with and which we will outline below:
Annual audit requirements
All Hong Kong incorporated companies, regardless of whether they operate in Hong Kong, must prepare annual audited financial statements.
Private companies are not required to file annual financial statements with the Companies Registry but must maintain proper accounting books and records.
It is necessary to appoint a Hong Kong Chartered Public Accountant for the auditing of the accounts.
Filing of profit tax returns
The Hong Kong Inland Revenue Department requires profit tax returns to be filed annually.
Audited financial statements must be submitted to the Inland Revenue Department with the annual profits tax return.
For small and dormant companies, it is necessary to complete the return but in those cases, it is not necessary to submit audited financial statements.
Profits tax returns are requested by the Inland Revenue Department on the 1st of April of any given year.
The profit tax return must be filed within the prescribed time limit, within one month from the date of receipt of the request to complete the return.
Companies within the same group must file their own tax returns and pay tax separately.
For newly incorporated companies, the notification is generally sent on the 18th month after the incorporation date.
Annual returns
An Annual Return is a document, in a specified form, containing the particulars of the company, such as the address of the registered office, shareholders, directors, secretary, etc.
An Annual Return must be filed once in every calendar year (except in the year of incorporation) within 42 days of the anniversary of the company’s incorporation date.
Even if the information that needs to be included in the Annual Return does not change, it is still necessary to file an annual return before the due date.
Director and shareholder information
The Identity of directors and shareholders is publicly disclosed at the Companies Registry.
Companies incorporated in Hong Kong are also required to create and maintain a ‘Significant Controllers Register’ or SCR.
This is similar to the beneficial owner’s registers now required in other jurisdictions.
The SCR register must be kept at the company’s registered office address, or at another location in Hong Kong.
The company is required to file a form with the Companies Registry reporting the location of SCR if it is not held at the registered office.
Please note that the register will not be publicly available but will be open for inspection by law enforcement officers upon demand.
Choose your business entity as per your requirements, and incorporate it in Hong Kong. The many benefits, as we have outlined include:
- A stable economic and political environment with a pro-business culture.
- An effective legal system.
- World-class infrastructure.
- Straightforward incorporation requirements.
- Emphasis on protection of Intellectual Property rights.
- A strategic location with close proximity to mainland China.
Besides all these essential benefits, Hong Kong is a prestigious business location.
It offers an ample number of advantages for those who are looking to or already own, a company in China.
Please note that this is a general overview of the benefits offered by Hong Kong as a jurisdiction and that we always advise that you seek professional guidance in order to meet your individual needs.
OMC is ready to assist you with a number of services linked to this attractive and dynamic jurisdiction.
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