Doing Business in Hong Kong: A Guide for Canadian Businesses

Hong Kong: A Closer Look

Hong Kong, one of the Special Administrative Regions (SAR) of China, is a metropolitan region in China. It has a population of more than 7.5 million people and is one of the most densely populated jurisdictions in the world. It also serves as a gateway to Mainland China, meaning that you’ll get to enjoy a bigger market.

Hong Kong’s GDP in 2020 was USD 439.459 billion, ranked as the world’s 45th-largest economy. Hong Kong’s economy is a mixed capitalist model, characterised by limited government intervention and low taxation. These attributes have played a huge role in making Hong Kong the financial hub we know today.

In 2017, Hong Kong was ranked the tenth-largest trading jurisdiction in imports and exports. As it is a free port, the bulk of the goods handled in its ports are trans-shipments. Other important facts about Hong Kong include:

• Hong Kong has little land for agriculture and mineral resources. Therefore, the bulk of its food, about 90%, is imported.
• Unlike in the past when Hong Kong largely relied on manufacturing, the majority of the economy today is service driven. The service sector generates about 92% of its economic output.
• Infrastructure in Hong Kong is highly developed. More than 90% of the daily transport in Hong Kong relies on public transport, the highest percentage in the world.
• Hong Kong generates most of its electricity locally; 47% of this energy comes from petroleum while 46% is generated from coal.

Why You Should Invest in Hong Kong

Whether you are planning to start a company in hospitality, telecoms, financial services, or any other industry, Hong Kong does not disappoint. Its administration has installed pro-business policies, which you can rely on to grow your enterprise fast. Here are the main reasons why you should incorporate your company in Hong Kong.

Hong Kong Is an International Hub

When you incorporate your company in Hong Kong, the jurisdiction provides the perfect entry point into the Far East. The country has a trade agreement with Mainland China, meaning that you can easily trade with Chinese customers and clients in Mainland China. For example, you can partner with other companies in China to supply them with your products.

Hong Kong also enjoys good economic ties with other nearby countries. Through ASEAN, you can exploit the neighbouring markets to grow the sales and profits of your Hong Kong company. When managing a business in Hong Kong, it is a matter of deciding which market to target first and then planning for growth.

It Is Ranked the World’s Freest Economy

Since 1997, when sovereignty over Hong Kong was transferred from the UK to China, many efforts have been directed at helping to make it a business hub and this focus has yielded real results. The jurisdiction is now run by the principles of free trade, free markets and free enterprise. Unlike other jurisdictions where investment in some industries is prohibited or restricted, Hong Kong is different because you can invest in any industry of interest.

You will also be pleased to hear that Hong Kong has no legal restrictions on outward and inward investments. Factors such as a strong legal system, stable banking system and a strict anti-corruption regime help to make Hong Kong a business-friendly jurisdiction. Hong Kong even allows foreigners to have a 100% shareholding of their companies.

Impressive Support for Businesses

To stand out from other jurisdictions in the region, the Hong Kong administration spares no effort in supporting companies in becoming successful. It has established different financial incentives and business support programmes that encourage small and medium-sized enterprises to thrive.

The Hong Kong Trade Development Council is particularly notable in its efforts to support companies in both Hong Kong and mainland China to access new markets. Another incredible organisation is the Hong Kong Productivity Council, which helps in promoting more efficient methods of production. Hong Kong also offers financial support through government funding schemes.

Simple Company Registration Process

If you read into the process of company registration in many jurisdictions, it can get very complicated. In some instances, the process might be guided by multiple laws and even drag on for many months. However, incorporating a company in Hong Kong is remarkably straightforward.

The process is guided by the Companies Ordinance, which outlines everything you’ll need. Furthermore, it only takes five to seven working days to get your company registered. Now, onto the best part: you can register a company in Hong Kong without even travelling there.

The Companies Ordinance allows registered expert agencies to assist foreigners in registering their companies in Hong Kong. Once you identify your preferred agency, the experts can help to prepare all the documents and quickly complete the process.

Straightforward Tax Regime

To make Hong Kong more attractive to foreign investors, it has a low tax regime, which serves two goals: spurring growth and ensuring investors keep the bulk of their profits. It uses a two-tiered tax rate model for corporate profits.

For a company that makes a profit of less than HKD 2 million, the corporate tax rate is 8.25%. However, any amount over HKD 2 million is charged 16.5%. This means that if your business is still small and yet to hit a profit margin of HKD 2 million, the payments will be low.

That’s not all Hong Kong does to make taxes low for businesses. Hong Kong is a great business investment destination because the following taxes do not apply:

• Value-added tax.
• Dividend tax.
• Capital gains tax.
• Withholding tax.
• Hotel accommodations tax.

How to Register a Company in Hong Kong

Once you have noted the benefits of investing in Hong Kong, the next step is incorporating your business there. You can do this by following three main steps:

Step One: Select the Preferred Type of Business and Get Its Name Approved

As mentioned earlier, Hong Kong is one of the most liberal economies in the world and this is evident with regard to the many types of business that you can select. Here are the main ones: 

1. Limited Liability Company: This is the preferred type of business to form in Hong Kong. Foreigners prefer it because it is a separate legal entity, meaning that no one will come after your assets in the event of instances like bankruptcy.

   The main types of companies that you can select include a private limited liability company (limited by shares), a public limited liability company (limited by shares) and a company limited by guarantee.

2. Partnership: This is a type of business where you identify a partner and form a company together. In a partnership, you have to constantly consult when making decisions and share the profits from the company.
3. Representative Office: As the name suggests, this type of business is only formed to represent the parent company back home. Unlike a limited liability company, a representative office comes with major limitations, such as being disallowed from conducting profit-based activities. A representative office is recommended only when conducting non-profit-based activities, such as market research and looking for partners.

After selecting the preferred type of business, get a name and have it approved before making your application. This is crucial to avoid a conflict of interest when the company finally starts operating. Note that the name can be in English, Chinese or feature a combination of Chinese and English words.

If you opt for a combination of English and Chinese words, no single word should bear both Chinese and English characters.

Step Two: Prepare the Required Documents for Company Incorporation

This is another very important stage of company registration because the Companies Registry largely relies on documents to approve or decline applications. Therefore, it is paramount that you prepare your documents professionally to get the application approved. Consider working with an expert firm with experience with the Hong Kong company registration process.

Here are the main documents that you need to prepare:

• A duly completed company registration application form.
• Copies of passports of foreign shareholders and directors.
• The company’s articles of association.
• If the company has resident directors and shareholders, provide copies of their ID cards.
• Proof of address of foreign shareholders and directors.
• Attach a copy of the company's approved name.
• Provide a copy of the ID card of the company secretary. If you want to use a corporation as the company secretary, provide its certificate of incorporation.

Step Three: Submit the Documents to the Companies Registry

Finally, all the documents you have prepared should be presented to the Companies Registry for review. Then, wait for about five to seven days to get the certificate of incorporation if the application is approved.

Working With a Firm of Experts When Investing in Hong Kong

Hong Kong’s primary aim has been to make the process of company registration easy and straightforward and this objective has been successfully achieved. However, most foreign investors still find the process lengthy and complex. For example, preparing all the documents can be tiring, especially if you are busy looking for more money to fund the new enterprise.

For others, taking several trips to Hong Kong to register a company, recruiting a company secretary, and getting an office can be expensive and tiring. However, there’s a professional way to avoid this process: using a firm of experts.

How Do Firms of Experts Work?

The Hong Kong Companies Ordinance allows foreigners to seek the assistance of agencies in registering their companies. These agencies are registered entities that specialise in company incorporation, meaning that you can rely on their expertise to complete the process quickly and professionally.

To get help from these experts, all you need is to send them your details and pay the required fees. They will then professionally prepare the documents and quickly complete the process of company registration. With an agency, you do not need to fly to Hong Kong to register a company. 

Special Benefits of Working with Experts

The main advantage of working with a firm of experts to register a company in Hong Kong is that it’s very convenient. Imagine being able to incorporate your company without even booking a flight. There are also many other advantages of using an agency to register a company in Hong Kong.

The agency can help you to recruit a company secretary and get an address for your company. You can even use the agency to act as your company secretary and address. This can help you save the money that could have gone into running adverts to recruit a secretary or search for an office.

As agencies are run by experts with years of experience, they can come in handy when helping you to develop the right strategies for growth. Since they have helped other companies enter the Hong Kong market, it will be easy for them to tell you the strategies that work and which to avoid. This is a great way to give your business a boost and accelerate its growth.

After getting the certificate of incorporation, you may be required to apply for additional licenses depending on the industry. For example, if your business in Hong Kong is in the telecoms, hospitality, education, or financial services industry, additional permits will be required.  A firm of experts will be invaluable in helping you get additional permits and do the following:

• Apply for a Business Registration Certificate
• Prepare the Significant Controllers Register.
• Open a bank account.

If you are a Canadian entrepreneur and want to expand abroad, Hong Kong is one of the best jurisdictions available. It not only boasts a supportive administration but also serves as an international junction that you can use to rapidly grow your enterprise throughout the region. By working with a firm of experts, it will be even easier to register your company in Hong Kong and craft strategies that work for your business.