Hong Kong has been for a long time one of the world’s most open economies, a win-win experience for many players in the East-West trade and relations. Even though there is a great difference in view regarding the new escalations and the possible scenarios of the tensions in Hong Kong, it is going to eventually survive the current period of global uncertainties, recession, coronavirus, geopolitical disagreements. While it is too early to discuss how exactly it is going to resolve all the challenges, let us trust its resourcefulness and potential to remain the welcoming gateway in Asia.
When planning to start a new, or expand an existing business, many entrepreneurs are trying to find such an ideal place in which they could have ample opportunities to optimize all business processes, arrange a top-notch office, recruit qualified staff, have access to the state support, enjoy legal protection under the local laws, and just be in a comfortable and safe environment.
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In most cases, our clients seeking the advice of our experts are interested in the following:
- reasonable taxation
- simple and clear requirements for financial reports
- a reliable system of state protection and support for businesses
- no corruption
- a stable and efficient banking system, freedom of capital movements
- a low crime rate in the country
- advanced healthcare
- high-quality education
- efficient and reliable infrastructure
- favorable geographical position.
If you look for such places on the world map, you’ll realize that the real choice is not big. There are regions meeting some of your requirements, but very few can satisfy all your criteria.
But of all options, as it turns out, there is one very special place – Hong Kong.
One country, two systems
Hong Kong is located on the coast of the South China Sea in South-East Asia. Its official name is the Hong Kong Special Administrative Region of the People’s Republic of China (HKSAR). But it is often referred to as ‘the city’ close to mainland China.
This former British colony (from 1842 till 1997) was returned to China according to the treaty specifying the Hong Kong’s political and economic freedoms to manage its affairs based on the “One Country, Two Systems” principle.
The Sino-British Joint Declaration of 1984 and the Hong Kong’s Basic Law (Constitution) grant it a high degree of autonomy, including executive, legislative, and independent judicial powers for 50 years (until 2047), Including:
- a democratic multiparty system of government;
- English international law;
- Economic and political freedoms of citizens.
As China was actively developing its economy and position on the global market, Hong Kong’s economic and transport connection with the mainland was very significant for the Chinese renaissance. Hong Kong has attracted and is home to many multinational top brands. Chinese firms have raised vast amounts of offshore capital in Hong Kong.
Very soon it became the ‘commercial powerhouse of East Asia’.
The Connectivity concept has prompted China to undertake such successful projects as the construction of the high-speed railway to Hong Kong, and a thirty-six-kilometer (twenty-two-mile) bridge.
Three years ago, the ambitious Greater Bay Area project (GBA) was initiated to integrate Hong Kong and cities in neighboring Guangdong Province with a population of over 70 mln people. The idea is to create a cluster, which could rival the San Francisco Bay or Tokyo Bay regions in technological innovations and business development.
This plan is linked to the national Belt and Road Initiative offering a lot of benefits and trade-offs to start-ups, homebuyers, research and high-tech projects, cultural and creative Industries, permanent residents.
In its turn, Hong Kong relies heavily on the mainland, because China is the main market for the Hong Kong exports. China has been the main facilitator of the stability needed for Hong Kong’s continued status as a global financial hub.
Hong Kong’s economic boom went hand-in-hand with the advancement of welfare and new confidence in its population.
Hong Kong retained its rights and privileges of a fully self-governing territory. Eventually, more and more residents see themselves as Hong Kongers rather than Chinese, and as plans for Hong Kong after 2047 are unclear, some experts rephrase its basic principle into “One Country Two Futures”.
The city’s resilience
Since the handover, Hong Kong survived several critical events, including the Umbrella Revolution in 2014 and other politically and economically challenging tests.
The year 2019 was very difficult for the region due to anti-government protests and the Sino-American trade war.
In 2020, Hong Kong’s economy, just like the rest of the world, has been severely hit by the impacts of the coronavirus pandemic. But there are several reasons to believe that Hong Kong will retain its unique strengths and overcome all the current geopolitical, economic, and pandemic challenges.
The lessons of previous SARS outbreaks and political challenges were well learned in Hong Kong. Given the current situation of the COVID-19 pandemic and the general downturn of the world economy, experts recognize that Hong Kong has done relatively well in its timely and efficient response:
- Hong Kong population uses face masks and other PPEs whenever required
- Hong Kong has undertaken well-orchestrated multiple public health measures, border control, social distancing, high-volume testing, contact racing activities
- Hong Kong features a relatively low number of confirmed cases.
Hong Kong has become a magnet for people and capital, because of its role as a gateway between China and the rest of the world.
To safeguard its attractive status for international business, the government decided to pay HK$10,000 to each adult permanent resident as part of an economic stimulus package aimed at helping businesses affected by the recent protests and the pandemic.
Over the years of its economic growth, Hong Kong has accumulated 430 billion US dollars in foreign exchange reserves. Therefore, it can afford to allocate a total of 286.4 billion US dollars, or about 10% of GDP in 2019, to different measures in support of economic, welfare, and political stability.
The main measures include:
- Financial support to private companies by compensating up to 50% of their payroll expenses during the six-month-period of the pandemic. This measure is expected to save up to 1.5 million jobs.
- A solid fund will support some sectors (such as aviation and tourism) that have been most severely affected by the pandemic.
- There are other measures of strong financial support to small and medium-sized businesses, accounting for about half of all employment in Hong Kong. The government intends to create 30 thousand jobs during the next two years and increase the rental discount for state property tenants from 50% to 75%.
- Besides, each permanent resident of Hong Kong will receive a one-time allowance worth 1,290 US dollars. The authorities expect residents to spend billions of these Hong Kong dollars locally, which will give a huge boost to the local economy.
Hong Kong is geared to play a key role in China’s One Belt and One Way initiative and the Greater Bay Area project (GBA) as an offshore destination and the RMB offshore asset market player expanding its product range.
The gold reserves of Hong Kong are worth hundreds of billions of US dollars securing its capacity to manage the current threats and difficulties.
The recent news from Hong Kong has disturbed overseas politicians, as they fear that its autonomy is being challenged by the upcoming national security legislation of China.
China defends its decision as a measure to safeguard the stability of Hong Kong which has been torn by unrest since last year.
Hong Kong is an important financial hub in Asia and home to over 2200 internationally-competitive EU firms and over 1500 US companies. Considering the 20-year-relationship with the West and the status of Hong Kong as the EU’s 20th largest trading partner in goods and the EU’s 8th trading partner in Asia, Hong Kong’s uniqueness as an Asian international financial hub has all chances to be maintained.
Doing business in Hong Kong
- Benign taxation
Companies pay only one tax, which is the Profit tax (sales minus costs). The tax is calculated at two rates (8.25% and 16.5%), depending on the net income. The lower tax rate is levied from net earnings below HKD 2,000,000 (260,000 USD). If the profits are above that amount, the higher rate applies (levied only on the part exceeding HKD 2,000,000).
Partnerships and sole proprietorships are subject to the two-tier taxes at 7.5 and 15 %.
Individuals pay the 2 to 17% income tax.
The Property tax is at 15%.
If a company confirms in its financial statements and audit report that all activities were carried out outside of Hong Kong, it can be fully exempt from the net income tax.
The following types of taxes are not payable in Hong Kong: sales tax or VAT, withholding tax. capital gains tax, tax on dividends, estate tax.
Besides, Hong Kong has a free port status, which means easy customs procedures and free trade policy.
- Financial reports once a year
The company’s activity is to be reported annually in its statement about its accounts. The company can ask its in-house staff competent in the Hong Kong accounting procedures to compile this report. Otherwise, it can hire a local accountant or outsource an accounting company.
The audit is performed by an independent Certified Public Accountant. Oftentimes, the auditor may act also as the company’s tax representative, whose responsibility includes preparation and submission of tax returns, including the income tax. A standard set of documents is required for such reports:
- the bank statements
- incoming and outgoing invoices
- consignment notes (of the trading company)
- documents confirming other revenues and expenses of the company.
- Business-friendly legislation
The Parliament and Government of Hong Kong promote and implement the legislative framework which is most favorable for business development.
Various consulting bodies are established under auspices of the government, which help small and medium-sized enterprises start up faster and gain momentum for further development.
The role of the state is particularly prominent nowadays, during the overall economic recession in the world due to the COVID-19 pandemic. In these difficult times, businesses are granted partial exemption from taxes and various types of financial assistance are offered. This is manifested both in the government guarantees for loans of up to HKD 4,000,000 (just over USD 500,000), and direct assistance to companies. To help companies save jobs during the forthcoming 6 months, the government has offered many companies additional funds covering up to 50% of their payroll budgets.
Some anti-corruption measures (such as the Prevention of Bribery Ordinance (POBO), independent services (such as the Independent Commission Against Corruption (ICAC) of Hong Kong), and initiatives have been introduced in Hong Kong. This has made it possible to eradicate corruption.
If you set up and run your business in Hong Kong, you just need to follow the existing guidelines that apply to your activities. Whenever you need advice you can contact the relevant government department for information support. There are also a lot of resources on government websites. The step-by-step guidelines are very straightforwardly and clearly outlined there. The system is arranged in such a profound way that there is no need in any workarounds to resolve your pressing issues. Everything is done strictly according to established procedures and guidelines.
Should you need advice and support of our experts specialized in the Hong Kong legislation, taxation and accounting, please write your questions to email@example.com
- Banking services
Many banks in Hong Kong are branches of the largest international banks of Europe, the Americas, Asia. The overwhelming majority of banks enjoy the highest credit rating according to international rating agencies. They rely on high-performance management systems that have been recognized for decades, and even centuries as efficient.
The banking system in Hong Kong is considered one of the most sustainable in the world. In the meanwhile, the Government of Hong Kong guarantees reimbursement of up to HKD 500,000 (approximately USD 65,000) per each account in the event of bankruptcy of the bank.
In the absence of currency control, and with the existing effective banking regulations, payments can be transferred and received smoothly, effortlessly and timely.
In Hong Kong, most payments are instantly processed. All bank accounts are multi-currency ones: you can receive, save and transfer funds in 10 – 15 currencies without any need to exchange into the local currency (Hong Kong dollar, which is linked to the U.S. dollar).
Instead of or before opening a bank account, you may open a digital corporate account in the Hong Kong payment system. You can file an online application, and within a few days you will get your account with the corporate number and the SWIFT. The account can be opened for both low risk and high risk businesses, small companies or corporations. Until the end of summer there is a special offer – the discount fee for opening such account. Please refer to our experts for details by writing to firstname.lastname@example.org.
Why is this offer recommended? The point is, it is more difficult to open a bank account in Hong Kong compared to some other countries. It is especially challenging for a young company: opening the account can take months, and without any guarantee of success.
No wonder, such solutions a “open a company in Hong Kong +an account abroad” have become popular, because for a company registered in Hong Kong there is no problem to open an account abroad.
But in some situation a company might need an account specifically in Hong Kong. That is why we recommend to open a corporate account in the Hong Kong payment system, which has its own SWIFT and can satisfy all your needs. Let us mention just some of its benefits:
- You can set up your account in the payment system remotely and very fast
- The payment system processes transactions in USD, EUR, GBP, RUR
- The payment system issues MasterCard and Visa cards
- Any company, irrespective of its type, can open the account in the payment system.
There are other benefits too. For more details, you are welcome to refer to our experts.
- Public safety
As the Hong Kong population is a high-income, well-educated, culturally advanced community, there is almost no street crime in Hong Kong. Hong Kong SAR is considered one of the safest places in the world. Everyone is free to walk around the city at any time of the day or night without running the risk of becoming a crime victim. Things lost in any public place usually remain where they were dropped until you return to pick them up. One can frequently see people on the subway with bags or backpacks blankly open, with all the good stuff inside, yet no one caring about their safety, and nobody around trying to squeeze inside and steal something. There is no pickpocketing at all. It feels good to know that there is such a safe place in the world.
- Excellent health service
There is a wide range of quality medical services in Hong Kong provided by public hospitals, outpatient clinics, Chinese medicine centers, private GPs, and specialist doctors. Treatment at a public clinic is quite affordable. Private clinics are reasonably more expensive and offer higher-level care. Qualification of specialists in both public, and private medical establishments is quite high.
There is a Voluntary Health Insurance Scheme (VHIS). Other health insurance plans are quite varied – from elementary to quite comprehensive ones, covering practically any healthcare need.
Besides, there is the Elderly Health Care Voucher Scheme (HCVS) supporting eligible elders, the medical fee waiving mechanism available to the most vulnerable groups under the Comprehensive Social Security Assistance Scheme, and some other programs covering expenses of certain categories of residents in need.
Thanks to the coordinated measures and efforts of medical professionals and the Government, Hong Kong is successfully coping with the Coronavirus epidemic.
At the moment, the epidemic situation is favorable for students to return to schools where anti-epidemic measures are in place.
The cautious reopening of some public places in the forthcoming weeks is also discussed by the authorities, but large gatherings are not allowed yet, festivals go virtual.
The city’s disease dashboard as of 4 June 2020, features 1,098 confirmed cases, with 4 related deaths and only 48 hospitalized patients. This is a strikingly low tally of infections, yet the COVID-19 prevention and control regulations have not been lifted yet.
All inbound travelers arriving in Hong Kong are subject to the 14-day isolation and other health quarantine arrangements.
Hong Kong has previously faced various epidemics, so there is a lot of practical experience of countering the virus outbreaks.
- Excellent education
Hong Kong offers various excellent options for secondary and higher education, both at municipal, and private schools. Several local universities are ranked high among the most prestigious in the world. There are about 20 higher education institutions in Hong Kong. The tuition fees and other expenses of students depend on their prestige.
- Superb infrastructure
Hong Kong is proud of its reliable and efficient world-class transport and communications infrastructure.
It is one of the most accessible regions in the world, and it is very easy to travel inside Hong Kong, between the islands, and to China. Hong Kong is a busy multimodal transport hub, home to a container port, 3 modern airports, Hong Kong High-Speed Rail Station for commuter and long-distance high-speed trains.
The government encourages use of the public transport system: the subway, city buses, taxis, and sea ferries (important both for trade, and daily life). Some islands are connected by tunnels and bridges. The road network, the variety of modes of transportation, and public transport operating 24 hours a day is a way to reduce traffic jams. Therefore, many Hong Kongers do not have private cars.
- Favorable location
Hong Kong is ideally located from the geographical point of view. You can get from Hong Kong to several Asian countries (for example, Vietnam, Singapore, Malaysia, Indonesia, Thailand, the Philippines, Taiwan, South Korea, Japan, and China) in 1-4 hours by plane. Besides, you can travel to/from various cities in China by the high-speed railway lines.
To sum up, when you set up a company in Hong Kong, you get great opportunities and good prospects for business and life.
Taking into account the current situation, with Hong Kong’s lockdown measures due to the coronavirus epidemic, you can first register the company remotely and open an account in another country remotely as well.
When the borders re-open, our experts will be happy to help you open an account or you in one of the banks of Hong Kong. They will help you check your portfolio of documents and arrange a meeting at the bank to sign the necessary forms.
If you have any questions about your company incorporation in Hong Kong, as well as questions about immigration procedures, our specialists are at your service.
Incorporating a company in Hong Kong in 2020: who to turn to for assistance?
To develop a successful business in Hong Kong, you need to follow the rules, procedures, and guidelines stipulated by the government. Taxation, reporting requirements, company registration, other key issues, are clearly outlined for residents and foreigners in the official web resources. You can take over to register your business on your own or decide to use the professional services of agents. A specialized consulting firm will advise you on the details and advantages of developing trade, e-commerce, IT services, other business activities in Hong Kong. There are many opportunities to use the support offered to startups in many industries in Hong Kong. The state support is really a great asset in the first stages of your company lifecycle. Our experts will help you find answers to all your concerns and questions. You can write to email@example.com. We promise to answer promptly.
Registration of a company in Hong Kong: what advantages are available to foreigners?
The English language is commonly used in Hong Kong. Application forms for registration of businesses can be submitted in either Chinese or English. The Registry’s mobile application system allows you to obtain the Certificate of Incorporation remotely, from anywhere in the world. The feedback to your application is very prompt. To register a company in Hong Kong, you will need to have a local secretary on staff. Instead of hiring the secretary, you can outsource a specialized company registered in Hong Kong. Foreigners registering their companies in Hong Kong normally find their staff very quickly, and the quality of personnel is very high.
Residency in Hong Kong: is it necessary to move to Hong Kong to start your company?
It is not necessary to become a Hong Kong resident to register and develop your business. On the other hand, for the sake of successful business management, many entrepreneurs choose to apply for residency and move to Hong Kong. Hong Kong offers a long-term investment and work visa. It is initially issued for one year and then is usually extended for every 2 years. After 7 years of residence, you can apply for a residence permit. To be eligible for the residence permit, the owners of a newly established firm in Hong Kong is required to submit a clear business plan and the financial statement proving sufficient resources for the duration of the visa. On June 1, 2020, the American Chamber of Commerce president Suzanne Clark expressed her opinion that the world should not write off Hong Kong’s potential for a bright future yet. Her optimistic forecast is worth your attention.