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10 Benefits of Starting a Company in Hong Kong

10 Benefits of Starting a Company in Hong Kong

Hong Kong is a key destination for businesses around the world. Its strategic location in Asia, easy access to major markets, and status as a gateway to China make it a prime spot for starting or growing your business.

In this article, we explore ten reasons why Hong Kong is the perfect place for entrepreneurs and investors looking for new opportunities or expansion.

1.    Strategic hub in Asia with good infrastructure

Hong Kong is a strategic cornerstone in Asia, perfectly placed to reach many Asian nations and mainland China. It's incredibly close to major markets, with every key Asian city within 4 hours flying, and half the global population reachable within a 5-hour flight radius.

You'll find that major business centres like Shanghai, Beijing, and Singapore share Hong Kong's time zone. This makes synchronizing business operations a breeze. Even cities like Tokyo and Seoul (+1) and Ho Chi Minh City and Bangkok (-1) are only an hour different.

The region's infrastructure further enhances its connectivity. The high-speed rail network seamlessly links Hong Kong with Shenzhen and Guangzhou, turning hours-long journeys into less than an hour, and even 15 minutes for Hong Kong-Shenzhen.

The Hong Kong-Zhuhai-Macao Bridge, has been connecting Hong Kong directly to Macau and opens up the Pearl River Delta region. This network of transport options positions Hong Kong as an unbeatable hub for regional business and trade.

2.    Gateway to mainland China

Hong Kong's status as the premier gateway to mainland China is not only a matter of geography. The city benefits immensely from the Closer Economic Partnership Agreement (CEPA), a key free trade agreement with the Central Government of the People's Republic of China.

The CEPA opens doors to the mainland market like no other, allowing businesses in Hong Kong to export goods to the mainland without the burden of tariffs.

This preferential access underlines Hong Kong's unique position as a bridge between global businesses and the vast Chinese market.

3.    Simplified company incorporation

Registering a company in Hong Kong is notably straightforward, especially when you compare it with the processes in neighbouring regions. Here, you don't need to wait for government approval to get started.

The most popular choice for business setup is the Private Limited Company by Shares, known simply as a "Limited Company."

The process can be wrapped up in about two weeks, and the financial barrier to entry is incredibly low, with a capital requirement of just HK$1 (around US$0.13).

While the procedure is user-friendly, the paperwork and supporting documents (like Articles of Association) can be intricate.

In such cases, the assistance of a professional service provider, like blynq, can streamline the process, ensuring a smooth and quick journey to establishing your Hong Kong-based company.

 

4.    Favourable tax regime

Hong Kong's appeal as a business destination is significantly boosted by its low and straightforward tax regime.

The city imposes only three direct taxes:

  1. Profits Tax for incorporated bodies
  2. Salaries Tax on personal income
  3. Property Tax for income from Hong Kong properties.

Since 2018, a two-tier profits tax system benefits companies,

  • Incorporated bodies: the first HK$2 million of profits is taxed at 8.25%, the remainder at 16.5%
  • Unincorporated bodies: the first HK$2 million of profits is taxed at 7.5%, the remainder at 15%

Moreover, Hong Kong's territorial tax system means only locally derived income is taxed, exempting profits earned outside Hong Kong.

Adding to its fiscal allure, Hong Kong has no sales tax, VAT, withholding tax, capital gains tax, dividends tax, and estate tax, making it an economically sensible choice for entrepreneurs and businesses.

 

5.    Free market economy

Hong Kong prides itself on its free-market economy, underpinned by the pillars of free enterprise and trade. This approach ensures a level playing field for businesses.

Renowned for being the world's freest economy, Hong Kong offers unrestricted investment flows and lacks foreign exchange controls or ownership limits. Its status as a 'free port' simplifies customs procedures, with duties applied only to a select few product categories (tobacco, liquors, hydrocarbon oil and methyl alcohol).

Unlike many others, Hong Kong supports free flow of capital, and has substantial foreign exchange reserves, a debt-free public ledger, and a rigorous stance against corruption. These factors collectively fortify Hong Kong's attractiveness as a premier business hub.

 

6.    Stable currency

In Hong Kong, currency stability is a top priority, reflected in its monetary policy where the Hong Kong Dollar is pegged to the US Dollar.

The Hong Kong Monetary Authority ensures the exchange rate stays within a narrow range of HKD 7.75-7.85 per USD, a standard set since 1983.

This link between the two currencies anchors Hong Kong's financial stability, vital for its trade and logistics-driven open economy. The Hong Kong Dollar's reliability and convertibility attract investors globally, which is one of the factors that made Hong Kong a key global financial hub.

 

7.    Robust banking and finance system

Hong Kong's banking and finance landscape is remarkably dense and dynamic: it has the highest concentration of banking institutions globally. It's home to 70 of the world's 100 largest banks.

In total there are about 200 authorized financial entities: 164 licensed banks, 13 deposit-taking companies and 17 restricted license banks (data of 2020).

The city's stock market ranks impressively high, both globally and in Asia, often leading in IPOs.

As a critical link between mainland China and the international market, Hong Kong is the foremost offshore hub for the Chinese Renminbi.

While setting up a business bank account would seem straightforward, the reality involves navigating complex regulations and thorough due diligence.

Hong Kong banks are very protective of their financial services which results into providing extra documents and explanations, long processing times and no guarantee that your bank account will be set up.

To streamline this process, partnering with experienced corporate service provider, like blynq, is recommended for their expertise and higher success rates in account setups.

 

8.    Multilingual and skilled workforce

Hong Kong has a workforce that is highly skilled and well-educated as well as diverse and multilingual. The local talent is remarkably versatile, comfortably navigating international business landscapes, particularly those conducted in English.

Cantonese is the predominant language, yet a significant number of professionals are fluent in Mandarin, crucial for dealings with mainland China.

Additionally, the city's cosmopolitan nature is reflected in its international residents, who contribute a rich tapestry of languages including Japanese, Filipino, French, and more, further enhancing the workforce's dynamic capabilities.

 

9.    Part of the Greater Bay Area

Hong Kong plays a strategic role in the ambitious Greater Bay Area (GBA) initiative, launched in 2017 to transform the region into a global powerhouse of innovation and technology, to make China's “Silicon Valley”.

Encompassing Hong Kong, Macau, and nine municipalities in Guangdong Province, the GBA covers around 56,000 km², with a population of 86 million and a 2020 GDP of USD 1,668.8 billion.

Hong Kong's contribution is pivotal, serving as an international centre for finance, trade, and transportation, supported by its acclaimed professional services.

Key infrastructures like the Hong Kong-Zhuhai-Macao Bridge and the Guangzhou-Shenzhen-Hong Kong Express Rail Link are part of enhancing connectivity within the GBA.

10.   Full ownership for foreign investors

In Hong Kong, foreign entrepreneurs enjoy complete ownership in their Hong Kong-based companies. There's no necessity for local residency, enabling foreigners to hold sole directorship and shareholder positions.

Companies with non-resident directors can operate as offshore entities, with tax obligations only on profits made within Hong Kong.

A registered office address in Hong Kong is mandatory (no postal box), though this can be at a corporate services provider, eliminating the need for a physical office.

Additionally, appointing a local company secretary, either an individual or a company, is required. Collaborating with a corporate services provider is a common and effective way to meet these administrative needs.

 

Blynq is here to help

In conclusion, Hong Kong's blend of strategic location, favourable business conditions, and robust support systems makes it an irresistible choice for entrepreneurs and investors.

Whether it’s the ease of company incorporation, the attractive tax regime, the vibrant free-market economy, or the full ownership for foreign investors, Hong Kong stands ready to elevate your business to new heights.

Eager to explore how Hong Kong can transform your business aspirations into reality? Reach out to us at blynq and let's discuss how we can support your journey in this dynamic city.