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‘How do I select a good jurisdiction to help grow my enterprise overseas?’ The best jurisdiction should have a supportive administration and good systems to help your business grow into the multinational of your dreams. It should also have a low tax regime to make it possible for you to retain the bulk of the profits and one jurisdiction that offers all of this plus a lot more is Hong Kong.
Don’t limit your enterprise to working solely in the UAE; Hong Kong is a perfect springboard to success. Keep reading this guide to help you learn everything that you need to know about setting up and investing in Hong Kong.
Hong Kong serves as a Special Administrative Region of China and maintains a great deal of autonomy from mainland China. For example, it has its own executive, legislative and judicial powers that are devolved from the main government. The Hong Kong administration has used this autonomy to build a business-based economy.
In 2020, Hong Kong’s GDP was approximately USD 439.459 billion, the 45th-largest in the world. It is ranked the tenth-largest trading jurisdiction in the world in terms of imports and exports. Most of the cargo handled in Hong Kong is transhipments, with China accounting for about 40% of the traffic. In January 2021, the exports expanded 44.0% compared to 11.7% reported in the previous month, December 2020. This is a crucial indicator of how fast the Hong Kong economy is responding as measures installed to counter the COVID-19 pandemic, such as vaccination get enrolled. Other important economic information about Hong Kong includes:
The biggest advantage of taking your business to Hong Kong is a supportive administration. Hong Kong has passed progressive policies that help to not only attract investors but also ensure their businesses become successful. Other reasons you should consider expanding your enterprise to Hong Kong include:
As an investor, one of the most important factors is the market for your products. Taking your business to Hong Kong means you can easily access a larger market throughout the Far East. Hong Kong serves as a gateway to mainland China, meaning you can easily access the huge Chinese market of more than 1.3 billion people.
Hong Kong has also signed bilateral agreements with most of the surrounding countries so that you can also access their markets. If you have conquered your local UAE market or the competition is becoming stiff, expanding to Hong Kong will be a great way to achieve faster, sustained growth.
Hong Kong has also signed bilateral agreements with both neighboring countries and others across the globe so that you can easily access their markets. In 2010, Hong Kong entered into an agreement with the UAE on avoidance of double taxation. This agreement covers the taxation of income generated from trading in Hong Kong and UAE to help traders avoid double taxation. It is a sure way to help you get to keep the bulk of the profits generated by your Hong Kong business.
If the profits you get from your business are low because of high taxation, it’s time to consider a different jurisdiction. Hong Kong uses a two-tiered tax rate model for corporate profits to determine the amount you should pay.
For companies making less than HKD 2 million, the corporate tax rate is only 8.25%. This means that if your business is just getting started or is small, you get to keep the bulk of the profits to spur further growth. The corporate profit tax rate is increased to 16.5% for assessable profits that exceed HKD 2 million.
Hong Kong is also attractive because its other taxes are equally low. For example, the salary tax rate ranges from 2-17% while the property tax rate is 15% of the assessable value of the property. Now onto the best part, the following taxes are not applicable in Hong Kong:
As a small island with little land available for agriculture or mining, Hong Kong uses a pro-business model to increase its source of revenue. To achieve this, the Hong Kong administration has adopted policies that have made it win the label of the world’s most liberal economy according to the Heritage Foundation and World Bank. For example, Hong Kong allows corporations to run businesses in all types of industries, from hospitality to export and imports businesses. For example, Hong Kong accepts corporates to run businesses of all types, from hospitality to export & imports. In 2019, Hong Kong was ranked 3rd on the World Bank's Doing Business 2020 Report on ease of doing business, while UAE came 16th.
Another factor that helps make Hong Kong a destination for free trade is its function as a free port. This means that excise duty is exempted on all exports, except for some goods such as motor vehicles and alcohol Furthermore, Hong Kong companies are free to open bank accounts anywhere on the island with no restrictions.
To take your business to Hong Kong, the first step is selecting your preferred business format according to the guidelines in the Companies Ordinance. So, what options are there?
In this type of company, the liability of the members extends to their shareholding. This means that the company is a separate legal entity and in case of events like bankruptcy, no one can come for your assets. Limited liability companies are the most preferred business entities in Hong Kong.
In a company limited by guarantee, there is no share capital. Instead of using shares, the liability of members is limited to the guarantee they commit to contributing in the event that the company gets wound up. This type of company is mainly preferred by organisations that run non-profit operations in Hong Kong.
The main thing that differentiates a sole proprietorship from other forms of businesses in Hong Kong is that it is not a separate legal entity. This means that the owner of the business and the business are one and the same and in the event of a problem such as bankruptcy, your assets can be auctioned to settle any debts.
This type of business is recommended only for very small businesses because the owner does not have any protection for their personal assets. Raising capital for expansion might also be challenging because many investors are hesitant to work with non-corporate organisations. Instead of using a sole proprietorship, it is advisable to opt for a limited liability company.
This is a type of company that is owned by two or more people with the intention of sharing profits. The main advantage of using a partnership is that you can use the network of a Hong Kong partner to rapidly grow your company. However, decision making can be slow because you have to consult and agree on everything, from staff recruitment to product development.
This is one of the simplest types of business entities that you can form in Hong Kong. It is favoured by UAE businesspeople, especially when looking to establish places of business. As a representative office, this company is considered an extension of the parent company back in the UAE but it comes with major restrictions.
With a representative office, you are not allowed to conduct any profit-making activities. We advise only considering this form of business entity when running activities such as searching for business partners or doing market research.
Minimum Statutory Requirements for Company Registration in Hong Kong
Now that you know the benefits of opening a Hong Kong company and their different formats, the next step is registration. The minimum statutory requirements for creating a company in Hong Kong are as follows:
Once you meet the minimum requirements, the next step is preparing all the required documents and submitting them to the Companies Registry. Make sure to also pay the required fees and then wait for about five to seven working days.
Make Sure to Get the Following After Registering Your Company
Once you get your certificate of incorporation, there are still a few more steps to follow before you can get started. For example, you need to open a bank account so you can get paid and pay bills for the new company. Here are five more tasks that you will need to complete:
The most popular method for registering a company in Hong Kong is through the use of an agency. These are firms of experts that have been working in company registration for years, meaning they understand the process very well. Here is a demonstration of how professional agency firms work and why you should use them.
Once you identify your preferred expert agency, all you need to do is send them the required documents and fees. For example, you will need to send them details about the shareholders and directors of the company. If you have already prepared other documents, such as the articles of association and company profile, send them too, but the firm can also prepare these for you.
Most people prefer asking expert agencies for help in preparing their documents to make them seem more professional. Having helped other investors to apply to establish companies in Hong Kong, using experts increases your chances of getting your application approved. Other benefits of using expert agencies include:
This means saving money that may have gone into running adverts to search for a suitable candidate. The time that may have been used to prepare documents and flying to Hong Kong can now go into raising more funds for your new company.
If you are registering a company in Hong Kong is one of the surest ways to catapult your business to success. To make the process even more convenient, you should find and work with an agency of experts. These are experts who not only know how to register companies in Hong Kong but can also help you craft incredible strategies to grow your business.
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