For a long time, Hong Kong has been one of the most ideal jurisdictions for foreign investors to establish and run their business. Certainly, there are many appealing benefits that Hong Kong can offer to enterprises and business owners.
These advantages include ease of formation, favorable tax regime, many business opportunities, modern infrastructure, and a high-qualified workforce. If you are looking for a place to start your business venture, Hong Kong is definitely worthwhile to consider.
Ease of Formation
As of 2020, according to The World Bank, Hong Kong ranked third place in the list of best destinations to start a business. As a matter of fact, setting up a Hong Kong company can be done within 24 hours, sometimes in only a few hours.
Furthermore, the legal requirements to incorporate a private limited company, the most chosen type of company, are not restrictive. In particular, you do not have to hire a local director to open your Hong-Kong-based company.
All directors can be foreigners. This is an enormous advantage that Hong Kong has over its competitors in Asia, especially Singapore. No local director needed means you spend less budget on the initial incorporation fees.
Favorable Tax Regime
One of the most common reasons you should choose Hong Kong is its territorial tax regime. Under the tax regime, only your profits generated within or from Hong Kong are subject to profits taxes. Regarding the profits earned outside Hong Kong, they can be exempt from being taxed.
In order to be granted a tax exemption for foreign profits, your company needs to submit an offshore claim. Based on this claim document, the Inland Revenue Department (IRD) of Hong Kong will determine your source of profits.
Also, the tax rates in Hong Kong are relatively low. Some worth-noticing figures are:
– Corporate profits tax rates at 8.25% (on the first 2 million HKD of inward profits) and 16.5% (on the rest of inward profits)
– Salary tax from 2% to 17% progressively imposed on taxable income
– Property tax at 15% imposed on the taxable value of a property
Noticeably, up to now, Hong Kong doesn’t apply any of the following taxes:
– Capital gains tax
– Dividend tax
– Hotel accommodation tax (HAT)
– Value added tax (VAT) or Goods & Services Tax (GST) or Sales tax
– Withholding tax
According to the 2020 Index of Economic Freedom published by The Heritage Foundation, Hong Kong ranked second freest. Impressively, the jurisdictions had maintained the first position as the freest from 1995 to 2019. These top rankings represent Hong Kong’s free trade policies and monetary freedom, supported by the government’s integrity and transparency.
Hong Kong is open to most business fields, with very few exceptions. Hong Kong companies may open a bank account elsewhere outside of Hong Kong.
Furthermore, Hong Kong has maintained itself as one of the freest ports in the world by not putting barriers on trade. The city levies no tariff on imported and exported goods, with very few exceptions.
Licensing is required for certain products. This is to satisfy Hong Kong’s trade partners’ requirements; still, the processes of getting licensed are much simplified.
To the southeast of China, Hong Kong is located as one of the important gateways to the Mainland. In 2003, China and Hong Kong signed the Closer Economic Partnership Arrangement (or CEPA for short). This agreement allows qualifying products and companies from Hong Kong to have access to the China market. So, if you want to expand your business toward the Mainland, Hong Kong is one of the best solutions.
Moreover, Hong Kong carries on signing many more Free Trade Agreements and Double Tax Treaties with other countries as well, especially Asian nations.
As a business owner, you have a lot of opportunities to expand your business in Hong Kong because of these agreements’ benefits. If you are seeking the business trends in Hong Kong, help yourself to this infographic on Hong Kong business trends after mid-2021.
The growing number of established enterprises has increased the demand for a high-qualified and efficient infrastructure system. That is the reason Hong Kong invests much of its budget on building and constantly upgrading the transportation and other supporting systems.
The jurisdiction has some of the best airports and busiest ports in the world, namely Hong Kong International Airport and Victoria Harbour. It is also the home of many industrial parks, such as Hong Kong Science and Technology Parks. These places can provide integrated infrastructure and advanced environments for enterprises to grow and quickly develop their businesses.
Excellent Workforce and Life Quality
Laborers in Hong Kong are well-educated and highly trained. They are competitive and hardworking, very common characteristics of Asian work culture. Most of the workforce are bilinguals. People can speak fluent English, as the main communication language in business, as well as Chinese, because of the connection to the Mainland.
Specifically, Hong Kong workforce is highly regarded for its aptitude in the digital services sector . This was showcased in the Total Workforce Index 2021 statistics, where Hong Kong stood at second place to Belarus in the leading incubator markets in growth industries.
Regarding life quality, both local and foreign residents can easily enjoy well-constructed public transportation. It is clean, safe and affordable. The health-care in Hong Kong is also reliable, clean and affordable. The fact that more and more foreigners and entrepreneurs are coming to Hong Kong has shaped the jurisdiction suitable for almost everyone to live and work in.
Hong Kong offshore company formation is simple and easy. After establishing, your company can make use of the favorable tax regime in the jurisdiction. If the company earns profits entirely from outside Hong Kong, you need not pay any corporate profits tax at all.
Furthermore, there are many new business opportunities for you to capture since Hong Kong is the most common gateway for foreign enterprises to enter the China market and it has also signed numerous trade agreements with other foreign countries.
Together with world-class infrastructure and workforce, these are the reasons why Hong Kong is always standing out as one of the most ideal destinations for global enterprises to invest in.
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