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Why Australian Companies Should Consider Doing Business in Hong Kong
One of the best jurisdictions to consider for business expansion is Hong Kong. In addition to having a robust economy, Hong Kong is strategically positioned in the heart of East Asia, meaning that you can use it as a springboard to expand into the rest of the region.
So, how do you go about opening a company in Hong Kong? This guide has all you need to know. Keep reading to learn more about Hong Kong, the main advantages of moving your business there, and the process of company incorporation.
Hong Kong: An Economic Outlook
Before looking at the process of registering a company in Hong Kong, it is important to understand its economic background. Here are a few important facts about Hong Kong that you should know.
- Hong Kong, officially referred to as the Hong Kong Special Administrative Region (HKSAR), is an island and a metropolitan area in the People’s Republic of China. With a population of 7.5 million residents in only 1,104-square kilometres, Hong Kong is one of the most densely populated areas in the world.
- Although it is part of China, Hong Kong maintains a great deal of autonomy. For example, it maintains a separate economic and political system from mainland China. Hong Kong and China follow the principle of ‘one country, two systems’.
- Hong Kong has a mixed capitalist service economy, characterised by minimal government market intervention, low taxation and a well-established financial hub. Globally, Hong Kong is ranked as the 45th-largest economy, with a GDP of about USD 439.459 billion (in 2020). According to the Heritage Foundation’s economic freedom index, Hong Kong has also been ranked at the top for 20 different years, starting in 1995.
- By 2017, Hong Kong was considered the tenth-largest trading jurisdiction in imports and exports, trading more than its domestic product. A lot of traders in the export and import business prefer to use Hong Kong because it is a designated free port. Products from mainland China account for approximately 40% of transhipment traffic through Hong Kong.
- Hong Kong GDP was in a two-year recession between 2019 and 2020, mainly caused by political unrest and COVID-19, but it is now on a steady path to recovery. In 2021, the Hong Kong economy is expected to grow by about 4.6%. These economic figures evidently highlight a jurisdiction overflowing with potential and you should consider using it to grow your business.
Advantages of Registering a Company in Hong Kong
From every angle you look at Hong Kong, it is a jurisdiction that no business should want to miss out on. To demonstrate its potential, here is a list of the biggest benefits to anticipate after moving your business there.
For most Australian businesses, one of the concerns when considering offshore investments is tax. If you select a jurisdiction with high tax rates, the chances are that it will take a large portion of your profits. Hong Kong, however, follows a two-tiered tax rates regime for corporate profits.
If your company has an assessable profit of less than HKD 2 million, the corporate tax rate is 8.25%. However, profits exceeding HKD 2 million are charged 16.5%.
In addition to low corporate tax rates, other taxes are equally low. For example, the salary tax rate is 2-17% of assessable income while the property tax rate is 15% of the net assessable value of a property. The following taxes are not applicable:
- Dividend tax.
- Capital gains tax.
- Value-added tax.
- Withholding tax.
- Hotel accommodation tax.
Good Legal Environment
One of the primary reasons why businesses expand their businesses into Hong Kong is because it has a transparent legal system. The local laws in Hong Kong are designed to protect investors and spur growth.
Hong Kong has installed stringent regulations to help protect intellectual property rights. This means that you can optimise returns from any patent and registered design in Hong Kong. The Intellectual Property Department in Hong Kong also has extensive experience in handling all matters related to intellectual property rights.
Hong Kong Ranks Higher than Australia in Global Competitiveness
One way of determining which offshore jurisdiction to take your business to is by checking its ranking on the global competitiveness report, which is prepared by World Economic Forum. This report is very comprehensive, and you can rely on it as a holistic indicator of the business environment in the targeted country. In the 2019 report, Hong Kong was ranked position three, while Australia was a distant 16th.
While it is true that Australia is coming up impressively, Hong Kong remains the jurisdiction to beat in most parameters. For example, Australia leads Hong Kong in offering a flexible work environment, but the former is ahead when it comes to ICT adoption. This makes it pretty easy for companies to run virtual teams, market their products globally, and optimise profits.
Preferential Access to Mainland China
Hong Kong is strategically positioned in the Far East and serves as the gateway to mainland China.
After registering a company in Hong Kong, it gets preferential treatment if you want to trade in mainland China. By taking advantage of the free trade agreement signed between Hong Kong and the mainland Chinese government, your business can get exclusive mainland market access. For example, you can partner with a Chinese business to export products to China without any tariffs.
A Highly Developed Infrastructure
Another crucial feature that makes Hong Kong attractive to Australian businesses is its world-class infrastructure. The incredible infrastructure is also part of the reason why Hong Kong has become one of the largest business hubs in the world. With its well-connected and state-of-the-art transportation network, it only takes a few hours to reach any city in the surrounding countries.
In addition to a well-developed transportation network, Hong Kong’s ports and telecommunication networks are equally impressive. The natural conditions of Victoria Harbour make it very effective in handling different types of vessels, with great results for investors. The broadband network is superfast, allowing traders to effectively run digital programs to help in everything from online marketing to networking.
Three Steps to Register a Company in Hong Kong
To enjoy the above benefits, you need to make the first and perhaps most important step: registering a company in Hong Kong. The great thing about this registration process is that it’s remarkably straightforward and the entire process is outlined in the Companies Ordinance. The main steps to follow are described below:
Step One: Decide the Preferred Company Format
If you already have a very successful business in Australia or if it’s not performing well, it might be time to venture into the international market. If you have a high-potential business idea, you need to make the big step to expand offshore to nurture it and turn it into a major enterprise. Consider conducting several market surveys to ensure that the decision is indeed the right one.
The decision to incorporate your company in Hong Kong should be followed by selecting the preferred business format. For example, would you prefer a partnership or a branch office? Here are the main types of businesses that you can establish in Hong Kong:
- Limited liability company. This is the most preferred company format in Hong Kong. The company can be a private company limited by shares, a public company limited by shares, or a company limited by guarantee.
- Sole proprietorship.
- Branch office.
- Partnership.
- Representative office.
Once you have selected the business format, identify your preferred business name and have it approved. This is very important because it helps you to avoid taking a name that has already been reserved for another company. This business name will be part of the documents required by the Companies Registry when reviewing your application.
Step Two: Prepare the Required Documents
The main documents required for company registration include:
- A duly completed company registration application form.
- A copy of the company’s articles of association.
- Copies of the passports of foreign directors and shareholders.
- Proof of address of foreign directors and shareholders.
- If you have Hong Kong resident directors and shareholders, provide copies of their ID cards.
- Details of the resident company secretary.
- Approval of the company’s proposed name.
Step Three: Submit the Documents to the Companies Registry
Once all the documents are ready, they need to be submitted to the Companies Registry upon payment of the required fees. Next, all you need to do is wait five to seven days. If the Companies Registry needs some additional clarification or more documents, be sure to provide them promptly so that the approval can be completed quickly.
Post-Incorporation Requirements for Your Company
After the application is approved and the certificate of incorporation has been issued, you have a few additional tasks to complete before commencing operations, including:
Applying for Business Permits
Depending on the nature of your business, you might be required to get additional licenses and permits in Hong Kong. Note that if additional permits or licenses are required, you need to acquire them within 30 days of setting up the firm. Some of the businesses that might require you to get permits include companies in the following industries:
- Hospitality
- Education
- Financial and investment services
- Insurance services
- Imports and exports
- Event management
- Drugs and herbs
- Telecoms.
Opening a Corporate Bank Account
You may now have a certificate of incorporation, but it will be impossible to complete any business transactions without a bank account. Therefore, you need to open a bank account in Hong Kong straight away.
A bank account will make it easy for your business to get paid and also to pay bills. It will also come in handy when maintaining your books of accounts and when filing tax returns. So, be sure to go for a bank that can help you realise your dreams of faster growth and success for your business.
Applying for a Business Registration Certificate
A Business Registration Certificate (BRC) is another crucial document that you must get and always display on your business premises. A BRC states the details of the business and proves that the company is validly registered with the Inland Revenue Department (IRD). You need to apply for one from the IRD within 30 days of commencing operations in Hong Kong.
Registering a Company Using an Agency
Many people from Australia find the process of registering a company in Hong Kong challenging because of the large number of documents that are required. Some of them are also complicated and they can be challenging to prepare, especially for businesspeople with no legal background. However, this doesn’t mean you should give up on expanding your enterprise into Hong Kong because it is always possible to use an expert agency for company registration.
The Companies Ordinance allows foreigners to seek the help of company registration agencies to register their businesses in Hong Kong. Once you select your preferred agency, they will help you with the registration process, including preparing the documents and filing them with the registry. This means that you can concentrate on looking for more funds and market research.
Other advantages of using a company registration agency in Hong Kong are as follows:
- Agencies are run by experts who professionally prepare documents to increase the chances of your application for a company being approved.
- With an agency, you can quickly complete the registration process. It is the surest way of getting the company registered promptly and entering the lucrative Hong Kong market.
- Using an agency makes it possible to register a company in Hong Kong without flying there. This is a great way to keep the costs of registering a new company in Hong Kong low.
- You can also use the agency to act as your company secretary and address.
- A good agency should have experts who can help you to craft good strategies for entry into the Hong Kong market and for expanding into China.
For Australian businesses, opening a business in Hong Kong is a great idea because it serves as a good launching point for future success. You can make the most of Hong Kong’s supportive administration, well-developed infrastructure and strategic location to rapidly grow in the Asian market. To make the entry easier, more convenient and more enjoyable, consider working with an agency.
Agencies have helped many other companies expand into Hong Kong and they can tell you the strategies that work and those that do not. There’s no need to take the next step in your adventure alone; agencies have experts with all the experience you need to succeed in the new Hong Kong market.
We're here to help
Want to talk about your company's Incorporation