Establish a Limited Company in Hong Kong
An increasing number of foreign investors benefits from Hong Kong’s liberal market economy and from the favoring of tax for companies.
Hong Kong’s free market economy is located in the middle of the Socialist People’s Republic of China and attracts precisely because of this many companies from abroad in the seven million inhabitants metropolis. Of these seven million people, almost one million companies opt for the legal form of a Limited Company. The reasons for the popularity of Hong Kong Limited are very complex. In addition to that, the formation of a Limited Company in Hong Kong will be completely finished within a few weeks without a high administrative burden.
Facts worth knowing about Hong Kong and its way to the Special Administrative Region
Hong Kong’s status as a Special Administrative Region of China is attributable to the Opium Wars between Chinese and British in the 19th century. Approximately one hundred and fifty years ago entered the British for the first time China. In their luggage, the Europeans had opium, which they wanted to establish in China as well as trade relations with the Chinese. But in the empire the trade of intoxicants trade was prohibited, what ultimately led to two Opium Wars. Already in the first it come to a defeat of China and the occupation of Hong Kong by the British. The present world city became because of the defeat of China 1841 to a British colony. However, Hong Kong was able to develop itself economically only with the end of the second World War and with the foundation of the People’s Republic of China. Before that the Chinese metropolis stood in the shadows of Shanghai. After 1949, many Chinese fled to Hong Kong and also at this time many companies moved from Shanghai into the British colony Hong Kong. From then on, the economic boom began for the city. Only in the year 1997, Hong Kong was again officially handed over to China, but still enjoys a high degree of an autonomy.
Hong Kong: China’s economic engine in the world of international finance
Today Hong Kong is at the rank thirteenth international trading nation, was honored by the Fraser Institute for the freest business location and is, according to the World Trade Organisation the world’s tenth largest trading center for commodities. The secret behind the sustained economic success is perhaps only the high adaptability to the every time changing environment. At the start of colonization the area around Hong Kong made up only several fishing villages and now, some years later Hong Kong is a metropolis with seven million people. With the British the industry had found a place in Hong Kong, but already due to the brain drain in the late 1980s to China, it meant for Hong Kong again to rethink. Today is Hong Kong one of the most important cities and is the financial center in Asia. About 70 of the 100 largest, international credit and financial institutions have settled in Hong Kong. In addition to that Hong Kong’s stock exchange has established itself on the global financial parquet and is now one of the largest stock exchanges in the world. Moreover, they are focusing more on the service sector, what is now one of the driving economic engines of the city.
Limited Company in Hong Kong: A particularly attractive for foreign investors
The functioning economy of Hong Kong draws even after the acquisition of the PRC numerous companies into the city. The reasons for the continuing influx of companies from around the world are tax incentives, the optimum location for the trade with China and a transparent legal system. Moreover, the Chinese metropolis is known for a liberal behavior against foreign companies. Hong Kong offers altogether, three options for the self-employment for foreign companies. The first option is called presence, that means that companies may advertise their company, which residents abroad, without making any profit. The second option is to create a branch, which allows a full commercial. However, as the branch is not a legal and independent organization, of course it can not take an advantage from the tax benefits. The situation looks different with a Limited Company, this is at the same time the third and last option. This legal form requires a low capital stock and can make use of Hong Kong’s tax advantages and will be established within a few weeks. Therefore, almost one million foreign companies so far, have already opted for the legal form of a limited company, to gain a foothold in Hong Kong’s economy.
Hong Kong’s low tax rates for foreign companies
Compared to Germany, Hong Kong’s tax system is clearly structured and transparent. In addition to that, the Chinese special administrative region has the lowest tax rates in the Asian region and in the world ranking is Hong Kong on sixth place when Dubai and Doha is not included in the calculation, because in Dubai and Doha taxes do not even exist. There is no VAT and capital yield tax, as well as no sources taxation of dividends and also the city Hong Kong does not have a tax system for the global income tax. Only the profits, which are achieved from a company which is originating from overseas are taxable in Hong Kong. However, the tax rate in Hong Kong is less than 20 percent.
Not quite as simple as in Hong Kong is the financial system in Germany or other European countries like Great Britain or France. Numerous policies and not just a few exceptions let no doubt about the bureaucratic procedure in these various countries. If a Limited Company is a part of a German Ltd. or AG, the profits of the corporation tax should be exempted. Usually this also applies to the German trade tax. However, this rule only occurs when the Ltd. has more than 10 percent of the shares of the Limited Company in Hong Kong. This rule does not apply when it comes to private individuals or partnerships. Then the profits are subject from the German income tax. This is called half-income method. This means dividends from a Limited in Hong Kong will be taxed half. In addition to that, the German tax system stipulates that at least one board member has taken over the management of the enterprise in the Chinese metropolis, and it can be proved that this board member performs the leadership role in the foreign operation.
Requirements and conditions for the formation of a Limited Company
Of course Hong Kong also has specific requirements that must be met in order to set up a Limited Company in the metropolis. The conditions include a registered capital of one Hong Kong dollar. Furthermore, is required a director and a shareholder. They may be the same person and do not need to be resident in Hong Kong. By contrast, the secretary should live in Hong Kong. It is a kind of a contact person for authorities and a person who manages the documents of the company. As a rule, the authorities expect that the Secretary stays during business hours in the headquarter in Hong Kong. As every operation, requires a Limited Company in Hong Kong a name. This can be freely selected, but its must be seen that this is a Limited. The abbreviation Ltd. is also permitted. You should also note that there are certain expressions and words which are not registrable. The name of the Hong Kong company is allowed in both languages, English and in Chinese, since both languages are official languages in the Chinese special administrative region.
Company located in the Chinese Administrative Region
To be able to set up a Limited Company in the Chinese metropolis, is a headquarter required. Also the German law requires an evidence demonstrating of a company’s headquarters. But considering to the high costs of living in Hong Kong, suitable accommodations in an appropriate price range, especially for medium-sized companies, are not hat easy to find, because property prices in Hong Kong are far from adequate. Reason for the very high price is the small space. Already now live in Hong Kong about seven million people on just 1,100 square kilometers. The housing situation is already now maxed out to the utmost. This is one reason for the high property prices in the Chinese special administrative region. But the monetary policy of the past decades have caused a huge increase of the real estate level. In the past seven years the prices for real estate have increased by as much as 60 percent. This is also a reason why it is particularly for smaller companies to seek business premises outside the population center of Hong Kong.
Opening a Hong Kong business account
In addition to that, the opening of a bank account is required for the formation of a Limited Company in Hong Kong. Basically, the opening of a business account is not a problem, provided the holder is a client by a registered company. Foreign individuals will usually not obtain a bank account, provided they do not live in Hong Kong. In addition to that, Hong Kong has joined the OECD information exchange accord. All in all have already 100 countries joined to this accord, to confront the global problem of tax evasion. Excluded are accounts, which already existed before 31.12.2015 as well as accounts which have an account balance of not more than $ 250,000. At the same time, some bank companies in the Chinese metropolis have intensified their conditions for the opening of a business account. The amount of current account fees is connected with the offer of the relevant in Hong Kong based bank and is therefore different. The withdrawing of money with a bank card is, in the Chinese special administrative region the same as in other countries of the world, possible. Apart from two institutions in the Chinese financial city, everyone else uses the JETCO system. About 1,600 machines with this system in Hong Kong simplify your life considerably. Of course the account owner benefit from, because of the high number of machines enables a seamless way of withdraw cash in any part of China’s Special Administrative Region. In addition to that, MasterCard and Visa are accepted as a method of payment in Hong Kong. Because today often in the Chinese metropolis the people often pay with checks, it makes sense to look for a bank account, which also offers checkbooks.
Foundation of a Limited Company in Hong Kong: visa and entry requirements
Apart from a start-up capital, a bank account and a headquarter of the company, you will need a visa for the formation of a Limited Company in Hong Kong. In case of a Limited, particular the Director and the Secretary need an entry permit. In addition, skilled labor, family members and interns who build the new facility in the Chinese metropolis together, all these people also need a visa. However the entry requirements are associated with different criteria, particularly it depends inter alia on the length of stay and the purpose of entry. Hong Kong is in general very liberal, as regards the entry into the Special Administrative Region. The free access to the cosmopolitan city is, with a few exceptions, for all persons worldwide granted between two and four weeks. Of course there is a reason. Hong Kong is dependent on investors and tourists. Therefore, there is this generous entry system. For people who want to set up a Limited Company in Hong Kong and want to conduct as director the company, it is a duty to have a valid work permit. This however does not apply to outside directors. A distinctive feature of Hong Kong’s entry permits are investors visas, which are divided into two categories:
Investor visa „A“ :
Under an investor visa „A“ the immigration regulations of Hong Kong understands, investors who want to build a business in the Chinese special administrative region. But you have to demonstrate that the amount of the investments is from minimum 250,000 Hong Kong dollars up to maximum 300,000 Hong Kong dollar. In addition to that, for the investor visa „A“, you have to demonstrate premises, a business plan and any letters of recommendation.
Investor visa „B“ :
The investor visa „B“ is for investors, who want to secure their stay by cash investments. For that, the applicant must demonstrate a fortune of 6.5 million Hong Kong dollars and should made the investment already six months before the entry.
Run a business in Hong Kong successfully: Also take a look on the Codes of behaviour
Foreigners are therefore very welcome to the Chinese special administrative region – particularly if they contribute to Hong Kong’s economic growth. But as simple as the setting up of a Limited Company in Hong Kong is, the real challenge will still come. For the newly established Limited in the Chinese metropolis has to climb the success ladder now once. After all the newly established Limited in the Chinese metropolis has to climb the success ladder to the top now. However, to get the success in Hong Kong is a little bit different to many other countries of the world, because for the Chinese is personal contact very important. Therefore, it is something completely commonplace when other companies and maybe future business partners have a dinner together. Under no circumstance you should reject this invitation, because this is found to be offensive.
Especially for foreign investors may face contact in the business bring a positive corporate development. In addition to that, in the Hong Kong business community a neat appearance is granted, but for example it is not so common to say thank you or to say please. The Chinese people keep these formulas for superficial and unlike many other nations perceive people from China such things as a matter of course. However, this has nothing to do with arrogance, but on the three pillars, according to the way of live of the Chinese.
Conclusion:
Hong Kong is already a world economic center, in which foreign investors are welcome and a city, in which there are some options to start a business. Approximately one million companies have already now chosen to make up a Limited Company in Hong Kong, and the number is growing steadily. Even foreign investors can benefit from tax concessions, a transparent legal system and a free port. Moreover, makes Hong Kong it really easy for people from abroad to set up a Limited Company in the Chinese special administrative region. Low start-up capital and liberal entry requirements speak for the setting up of a business in a cosmopolitan metropolis.