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Why run your business in, or from, Hong Kong?
Hong Kong is considered as one of the best cities to establish and run a business, as it scores high on factors that matter to businesses. This article illustrates the key benefits of setting up a business in Hong Kong and provides you with the answers to the question “Why choose Hong Kong to set up a business?”.
Today, many investors and entrepreneurs are choosing to set up their businesses overseas – especially in jurisdictions like Hong Kong.
The rationale behind this trend is to primarily facilitate entry into an international market and to benefit from tax friendly jurisdictions.
- Strategic Location
- Ease of doing business
- Attractive Tax Regime
- World’s freest economy
- Business Support & Assistance
- Liberal Immigration Policy
- Sound Legal Environment
- Clean Governance
- Productive Work Force
- Robust Infrastructure
- Quality of Life
Below are some of the factors that continue to contribute to its success:
- strategic location
- productive work-force
- stable economic and political environment
- attractive tax regime
- pro-business environment
- world-class infrastructure
- an effective legal system
| Ranking Category | Hong Kong's Rank | Source |
| World’s best financial system | 1 | World Economic Forum: The Global Competitiveness Report 2019 |
| World’s best global financial centre | 3 (1 in Asia) | The Global Financial Centres Index 25 2019 |
| World’s leading investment hub for FDI (Foreign Direct Investment) inflows in Asia | 3 | United Nations Trade and Development (UNCTAD): World Investment Report 2020 |
| Best location for IPO and M&A activity in Asia-Pacific | 1 | Baker Mckenzie & Oxford Economics: Global Transactions Forecast 2019 |
To learn about how to setup a company in Hong Kong, please refer to Hong Kong Company Setup guide.
Strategic Location
Hong Kong is strategically located at the heart of the Asian continent. A five-eight hour flight will connect you to most markets in the Asia-Pacific region.
If you need to tap into the Mainland Chinese market you will find that Hong Kong is perfectly situated on the southeast coast of Mainland China, flanking the mouth of the Pearl River Delta. This facilitates travel to and from Hong Kong to Beijing, Shanghai and other major Chinese cities within a single day.
The Hong Kong International Airport (HKIA) is the eighth busiest international passenger airport with 100 airlines servicing over 180 destinations, including major cities in the Asia Pacific, North America, Europe and the Middle East and to about 40 destinations in mainland China. The HKIA is often ranked as the ‘Best Airport in the World’ and consistently receives accolades and awards.
Cross-boundary ferries provide speedy sea transport to and from six mainland ports and the coach service covers more than 90 PRD cities and towns. Hong Kong is also a focal point of all maritime activities in southern China and is one of the major ports of the world in terms of tonnage of shipping using its facilities, cargo handled and the number of passengers carried.
Ease of doing business
Hong Kong is renowned for being an easy place to set up a business. You can open your company in about two week’s time in Hong Kong.
It is noted for its excellent infrastructure facilities and business premises are easily available.
Intellectual Property protection is taken seriously, with strict regulations in place. There are various dispute resolution channels that businesses can avail of.
The simple and business friendly tax system draws foreign investors to the city.
Foreigners who wish to setup business in Hong Kong can easily relocate by applying for an appropriate work visa.
| Ranking Category | Hong Kong's Rank | Source |
| Ease of doing business ranking | 3 | The World Bank's Doing Business 2020 Report |
| World's business environment rankings | 4 | The Global Financial Centres Index 25 2019 |
| Best countries for business | 3 | Forbes lists, 2019 |
| World's fastest place to start a business | 5 | World Economic Forum: The Global Competitiveness Report 2019 |
| Global competitiveness | 3 | World Economic Forum: The Global Competitiveness Report 2019 |
Attractive Tax Regime
Taxes are the main concern for any entrepreneur who intends to set up a business in a given jurisdiction. In this regard, Hong Kong boasts of being one of the lowest tax jurisdictions in the world.
Personal income tax, or salary tax as it is known, starts at 2% and goes up to 17% for income above HKD 200,000.
Corporate tax is set at 16.5% of assessable profits for corporations and 15% for unincorporated businesses. In Hong Kong, corporations have two options for Profit Tax Rates:
- Single-Tier Corporate Tax System - The Single-Tier Corporate Tax System-corporations are taxed at 16.5% on assessable profits and unincorporated businesses are taxed at 15%.
- Two-Tier Profits Tax Regime - The Two-Tier Profits Tax Regime applies to both corporations and unincorporated businesses by lowering the tax rate for the first $2 million of assessable profits.
There is no capital gains tax, nor any withholding tax on dividends and interest or collection of social security benefits.
Furthermore, there is no sales tax or VAT in Hong Kong.
For more information on taxation in Hong Kong, refer to Hong Kong Tax Guide.
| Ranking Category | Hong Kong's Rank | Source |
| World's lowest tax jurisdictions | 1 | The World Bank's Doing Business 2019 Report |
| World's most business-friendly tax system | 1 | PWC & The World Bank Group: Paying Taxes 2019 |
World’s freest economy
Hong Kong is one of the world’s most dynamic economies driven by the principles of free enterprise, free trade and free markets open to all. The robust economy over the past two decades has contributed to the GDP growth at an average annual rate of 5% in real terms.
There are no restrictions on inward and outward investments, no foreign exchange controls and no foreign ownership restrictions.
Factors such as a sound banking system, almost no public debt, a strong legal system, sizable foreign exchange reserves and a strict anti-corruption regimen serve to strengthen Hong Kong’s position as a business friendly region.
Furthermore, businesses that are set up in Hong Kong (i.e. any Hong Kong company regardless of nationality) can now benefit by gaining preferential access to the Mainland China market from the Closer Economic Partnership Arrangement (CEPA) – a free trade agreement between the Central Peoples Government and the Government of the Hong Kong Special Administrative Region.
All goods qualified as Hong Kong origin may be exported to the Mainland tariff free.
Moreover, Hong Kong service suppliers in 40 areas are eligible to receive preferential treatment in providing services in the Mainland.
| Ranking Category | Hong Kong's Rank | Score |
| World's freest economy | 1 | Index of Economic Freedom, 2019 |
| World's most competitive economy | 5 (2 in Asia) | Swiss-based International Institute for Management Development (IMD): World Competitiveness Yearbook 2020 |
Business Support & Assistance
A number of programmes have been established by the Hong Kong government and the private sector to help your company grow and improve in every aspect of your business. A number of business support programmes and financial incentives to foster the growth of SMEs have been established.
Organisations such as the Hong Kong Trade Development Council help international companies do business in the Mainland and Asia, and also aid Hong Kong companies find new markets.
The Hong Kong Productivity Council promotes increased productivity and the use of more efficient methods throughout Hong Kong’s business sectors.
The Support and Consultation Centre for SMEs is a comprehensive information and advisory centre for SMEs.
Financial assistance is available through a number of Government Funding Schemes.
Liberal Immigration Policy
Hong Kong follows a liberal immigration policy. Nationals of about 170 countries and territories are allowed visa-free visits to Hong Kong for periods ranging from 7 to 180 days. Short-term visitors may conduct business negotiations and sign contracts by entering Hong Kong on a visitor visa or entry permit.
The government has introduced appropriate work visa provisions, anticipating the needs of business entrepreneurs who may wish to relocate to Hong Kong to run their business or who may want to hire foreign professionals to work in their company.
There are various policies and schemes for the employment of foreign professionals, employment of Mainland talents and professionals, those wishing to enter for investment etc.
Dependant visas are issued and allows the holder to undertake almost any type of lawful employment in Hong Kong. For more information, refer to Hong Kong Work and Business Visa Schemes.
| Ranking Category | Hong Kong's Rank | Source |
| World's ease of hiring foreign labour rankings |
53(Score: 4.3 [1 = very much limits hiring foreign labour, 7 = does not limit hiring foreign labour at all]) |
The Global Competitiveness Report 2019 |
Sound Legal Environment
Noted for its transparency, law and order is central to Hong Kong’s success. All are considered equal before the law.
Hong Kong’s legal system is separate from Mainland China’s, and English common law prevails. With the establishment of the International Arbitration Centre in 1985, Hong Kong has become a key centre for arbitration in Asia and arbitration is now a popular method of dispute resolution in Hong Kong.
The law is committed to the protection of Intellectual Property Rights (IPR) and enforces stringent regulations for patents, copyrights, trademarks and registered designs. The specially set up Intellectual Property Department monitors the IP regime in Hong Kong and is reputed to have extensive experience in handling IP matters.
There are distinct rules and regulations concerning trade and commerce, employment, taxation and other business-related areas, making it an attractive place to setup and operate a business.
| Ranking Category | Hong Kong's Rank | Source |
| Judicial independence in Asia | 8 | World Economic Forum: The Global Competitiveness Report 2019 |
| World's most efficient legal framework in settling disputes | 4 | World Economic Forum: The Global Competitiveness Report 2019 |
| World's intellectual property protection rankings | 5 | World Economic Forum: The Global Competitiveness Report 2019 |
Clean Governance
Hong Kong is a Special Administrative Region of the People’s Republic of China with a high degree of autonomy in all matters except foreign and defense affairs.
According to the Sino-British Joint Declaration (1984) and the Basic Law, Hong Kong retains its political, economic, and judicial systems. This setup is often referred to as “One China, Two Systems”.
Most businesses choose to set up operations in Hong Kong as it believed to be politically stable with a pro-business governance and free market principles.
It is also cited as one of the most corruption-free economies in the world. Hong Kong has even set up an anti-corruption watch-dog – the Independent Commission Against Corruption (ICAC) – mandated to deal with both public and private sector corruption.
| Ranking Category | Hong Kong's Rank | Source |
| The index of political stability and absence of violence/terrorism | 8 (in Asia) | The World Bank 2018 |
| Corruption perceptions index | 2 (in Asia) | Transparency International 2019 |
Productive Work Force
Hong Kong consists of a highly trained, well-educated and skilled wok-force. The workforce consists of a local talent pool of experienced and entrepreneurial professionals who are known to be especially well versed with the business culture in the fast-growing Mainland cities.
Employees are generally considered to be hard-working, competitive and are constantly seeking to improve themselves.
Although English is the language of communication in business settings, bulk of the workforce is also conversant with Cantonese and Mandarin, owing to the country’s link to China.
| Ranking Category | Hong Kong's Rank | Source |
| World's best cooperation in labour-employer relations | 9 | World Economic Forum: The Global Competitiveness Report 2019 |
| World's total workforce engagement | 2 | Total Workforce Index Rankings 2019 |
| World's easiest place to find skilled employees | 17 | World Economic Forum: The Global Competitiveness Report 2019 |
| World's best labour market | 7 | World Economic Forum: The Global Competitiveness Report 2019 |
Robust Infrastructure
Hong Kong has taken endless measures to continuously upgrade its infrastructure in order to meet the growing demands of businesses. It is said to have one of the Best Airports and Busiest Ports in the world. Transportation services are efficient and cheap connecting all major centres.
Hong Kong is also the preferred Exhibition and Convention Centre for most businesses in the region. The Hong Kong Exhibition and Convention Centre has received several awards and accolades. It is often voted as the ‘Best Convention and Exhibition Centre in Asia Pacific’.
Hong Kong is home to world-class industrial/business parks like Cyberport and the Hong Kong Science and Technology Parks. These parks provide integrated infrastructure in one region that help reduce the per-business expense, and also help companies operate in a highly conducive, environment friendly setting.
Hong Kong's telecommunications infrastructure is one of the most technically advanced in the world. Broadband coverage is available to virtually all commercial and residential buildings. Hong Kong's open markets ensures there are several competitive mobile phone and Internet service providers. Broadband Internet connection is available to over 98% of households in Hong Kong.
| Ranking Category | Hong Kong's Rank | Source |
| Infrastructure competitiveness rankings | 1 | The Global Financial Centres Index 25 2019 |
| World's innovation capability rankings | 26 | World Economic Forum: The Global Competitiveness Report 2019 |
| World's liner shipping connectivity rankings | 4 | World Economic Forum: The Global Competitiveness Report 2019 |
| World's airport connectivity rankings | 21 | World Economic Forum: The Global Competitiveness Report 2019 |
| World's digital competitiveness rankings | 8 (2 in Asia) | IMD: World Digital Competitiveness Ranking 2019 |
Quality of Life
Most foreign professionals and entrepreneurs who setup a business in Hong Kong tend to re-locate with their family.
Consequently most individuals are concerned about the quality of life in Hong Kong – the social environment, cost of living, accommodation, education etc.
- The social and ethnic fabric is a unique blend of cultures and people rendering a cosmopolitan lifestyle.
- The city is considered modern and westernised but unfortunately experiences a high level of air pollution and traffic congestion.
- In Hong Kong you will find that residential rentals are expensive and are considered in line with those in major international cities such as London and New York.
- Hong Kong is commonly cited as the food capital of China with a wide array of Chinese regional cuisines. It also offers equally impressive gastronomical fare to suit international tastes.
- The public transportation system is well connected, clean, safe, efficient, reliable and above all affordable. Getting around Hong Kong is easy, given its wide network of buses, trains, ferries and taxis.
- Hong Kong is home to several international schools which follow a curriculum identical to those in their home country. Given the impetus to evolve into a knowledge based economy, great emphasis is placed on education in Hong Kong and it provides nine years of free compulsory education for its citizens.
- Hong Kong offers world class private and public health services and expert medical practitioners. The health-care environment is clean, efficient, safe and affordable.
- There are several recreational activities to indulge in and Hong Kong boasts of a vibrant and exciting Nightlife and is often quoted as the ‘city that never sleeps.’
- Hong Kong is said to have one of the lowest crime rates in the world and is often cited as a safe place to live in.
| Ranking Category | Hong Kong's Rank | Source |
| World's easiest place to settle in | 19 | HSBC: Expat Explorer Survey 2019 |
| World's most expensive city for expats | 1 | Mercer: Cost of Living Ranking 2019 |
| World's most expensive city for rental accommodation | 1 | Deutsche Bank Research: Mapping the World's Prices 2019 |
| World's best place for security and safety | 4 (1 in Asia-Pacific) | Legatum Institute: Legatum Prosperity Index 2019 |
Use our range of Hong Kong company formation and incorporation guides to help you understand more about the rules and regulations of the market you will be entering.
We also have answered common questions in our Hong Kong Company Formation FAQs.
Register your new Hong Kong company now
We help you make the most of your business ambitions with incorporation and corporate bank accounting opening services that make establishment quick and straight-forward.