7 Reasons Why you should do your Business in Hong Kong

If you intend to launch or extend your business activities to Asia, Hong Kong is one of the first business hubs to do so. Why is that? In this article, we give you 7 key reasons on why you should set-up and operate a business in Hong Kong.

Strategic Position in Asia

Hong Kong is the perfect location if you want to grow a business in Asia. Major cities in North East Asia are reachable in less than 5h flights, and Hong Kong International Airport is one of the most efficient airports worldwide, with over 1,000 flights a day from 100 airlines travelling to more than 180 destinations. There is also little to no time difference (up to 1-2h) between Hong Kong and major APAC hubs such as Singapore, Beijing, Shanghai, Taipei, Seoul, Tokyo, Bangalore, and Perth, which allows businesses to communicate with their clients, business partners and counterparts easily, without having to worry about differences in time zones. 

Gateway to China

Hong Kong’s proximity to Mainland China, both geographically and culturally, makes it the ideal springboard to do business in China.. In fact, there is nowhere better than Hong Kong to gather the expertise, information and facilities needed to penetrate the China market. Cross-border transactions are easy and supported by the regulatory framework.  These include the Arrangement for the Avoidance of Double Taxation concluded between Hong Kong and China, which clearly allocates the right to tax between the two jurisdictions, and the Closer Economic Partnership Arrangement (CEPA), which further entice Hong Kong businesses to penetrate the China market. In the future, Hong Kong shall also strengthen its strategic position in the region, while supporting the Greater Bay Area and Belt and Road Initiatives.

Friendly Tax Environment

Hong Kong relies on a territorial tax system, under which Hong Kong residents (both corporate and individuals) are only taxed on their Hong Kong income, while foreign-source income is not subject to Hong Kong tax.

Hong Kong companies are thus liable to profits tax on their Hong Kong income at the standard rates of 8.25% for the first 2 million HKD of profits and 16.5% beyond. Foreign-source income is, in principle, not subject to Hong Kong profits tax and companies deriving most of their profits from offshore activities may apply for an offshore income exemption, though such preferential tax treatment is not automatic and requires a prior tax investigation from the tax authorities.

Hong Kong individuals are subject to salaries tax on any income arising in or derived from an office, employment or pension in Hong Kong. Salaries tax is levied at progressive rates on the net chargeable income and is capped at 17%. However, the total salaries tax charged to an individual residing in Hong Kong shall not exceed 15% of that person’s net assessable income.

Hong Kong does not levy tax on capital gains, dividends and/or interest, and withholding taxes only apply to certain types of royalties (paid to non-residents for the use of intangible assets located in Hong Kong). There is no Value Added Tax in Hong Kong (contrary to Mainland China), while Stamp and Custom Duties remain marginal. 

These tax rates are much lower than what other Asia cities can offer.

Ease of Accounting and Tax Compliance Rules

Hong Kong accounting, tax and regulatory compliance are in line with international standards while remaining quite simple.

Companies established in Hong Kong are required to keep and file financial statements in accordance with local accounting standards. With a view to attract foreign investors, Hong Kong Accounting Standards (HKAS) and Financial Reporting Standards (HKFRS) are largely aligned with internationally accepted principles (i.e. IFRS), which is not the case in Mainland China where specific accounting standards have to be adopted.  Simplified standards are also available in Hong Kong for Small and Medium Enterprises (SME). 

Reporting obligations are quite straightforward. Hong Kong companies only need to complete three yearly declarations as follows:

  • Annual Return: Within 42 days from the anniversary of their incorporation, companies shall submit an Annual Return to the Companies Registry, recording key information and changes occurred during the former year. 
  • Employer’s Return: Every year in April, Hong Kong companies shall report the salaries paid to their staff (as well as to freelancers) and subject these to Hong Kong taxation. 
  • Profits Tax Return: At the end of their financial year, Hong Kong companies are required to complete and submit a Profits Tax Return to the Inland Revenue Department, together with a certified copy of their audit report. Hence, audit is mandatory in Hong Kong, though exceptions would sometimes be made by the tax authorities for very small businesses (this is not automatic and depends on particulars of the case). 

Established Rule of Law 

Hong Kong legal system is based on the Rule of Law and the independence of the judiciary. Everyone in Hong Kong is equal before the law. Everyone has access to justice. Under the “One Country, Two Systems” principle, the laws previously in force before the handover of Hong Kong in 1997 (i.e. the Common Law, rules of equity, ordinances, subordinate legislation and customary law) have been maintained, in accordance with the Basic Law which has now become its constitutional roots. The legal system of Hong Kong is hence separate from the Mainland’s. Its stability and maturity remains a key factor for the international community and foreign investors.

Pool of Talents

Hong Kong is home to a diversed pool of talents, having the skills, knowledge, languages, multi-cultural background and international outlook to drive business in Asia. Selective immigration policies also enable overseas talents and investors to obtain Employment Visa and/or Investment Visa, to come, stay and work in Hong Kong. The lifestyle, international standards, and quality of Hong Kong’s education system, as well as the diversity of its universities programs draw the attention of more and more international profiles. In an effort to further attract international talents, Hong Kong recently issued a Talent List which pinpoints 11 professions that Hong Kong needs most, including asset management, marine insurance, FinTech, data science, cyber security, innovation and technology.

Supporting Innovation and Tech

While Shenzhen might take the lead regionally in terms of hardware production, Hong Kong is attracting more and more innovative and technology driven businesses, including FinTech projects. In fact, 4 Hong Kong Unicorns are FinTech related (i.e. WeLab, TNG, BitMex, and AirWallex). A growing number of initiatives are adopted to boost that trend, such as the multiplication of incubator programs, incentive schemes, funds, and R&D tax incentives.


These all make Hong Kong an attractive business center in Asia, and an ideal “laboratory” to test and validate your potential of growth in the APAC region. 

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