Hong Kong is an autonomous territory located on the southern coast of China. Its proper name is Hong Kong Special Administrative Region of the People’s Republic of China. After 151 years of British rule, the territory was handed back to China in 1997.
Hong Kong covers a total area of 2,754 sq km. With a population of 7.2 million people, it is one of the most densely populated countries in the world.
The territory’s official languages are English and Chinese and the legal system is based on English Common Law.
The Hong Kong dollar is one of the world’s most traded currencies. The Hong Kong market economy is ranked as the freest economy in the world and GDP per capita is within the world’s top 10.
The Companies Ordinance, Cap 662, as amended.
Any legal business activity is permissible. Certain operations, such as banking and insurance, require specific licensing. The company may not solicit funds from or sell its shares to the public.
Companies Registry normally takes around one week to process the incorporation. Shelf companies can be used if an older company is required or if there is an urgent need for immediate use.
Hong Kong law does not allow a company registered in Hong Kong to continue in another jurisdiction, nor is it possible for a foreign company to become registered and continue in Hong Kong.
The company’s memorandum and articles of association and records of its directors, secretary, registered office address, registered mortgages and charges are held by the Companies Registry. This information is accessible by the public.
Directors are allowed to submit a correspondence address to the Registry, in addition to their residential address. In this case, only their correspondence address will be publicly available, while their residential address will remain confidential. Note that the correspondence address must be a street address and not a post office box.
While information about the shareholders is kept by the Companies Registry, this information is not made public.
The company’s name can be in English, Chinese or both languages. It must end in “Limited” or “PLC” or the Chinese equivalents of these terms to indicate its limited liability status.
Any proposed name which would be offensive or whose use would constitute a criminal offence or be contrary to the public interest will be rejected. Similarly, the company’s name may not imply any connection with the Central People’s Government, the government of the Hong Kong Special Administrative Region or any department of either government.
Specifically, the name may not contain any of the words “Department”, “Government”, “Commission”, “Bureau”, “Federation”, “Council” or “Authority”.
The share capital may be denominated in any currency and a minimum of one share must be issued upon incorporation.
Bearer shares are not allowed.
The company must have at least one shareholder, who can be a natural person or another company.
The use of nominee shareholders is possible.
At least one director must be appointed, who can be a natural person or body corporate. The directors may reside in any country.
Shareholders’ and directors’ meetings can be held anywhere, either physically or using electronic means.
The shareholders are required to hold an annual general meeting (AGM) every calendar year, unless the company elects not to have an AGM. The first AGM must take place within 18 months from the date of incorporation. Subsequent AGMs must be held within 9 months from the end of the company’s financial year.
Companies with only one shareholder are not required to hold an AGM.
A registered office must be maintained in Hong Kong, where the company’s statutory records are normally kept. These comprise the registers of members, directors and charges and the minutes of the directors’ and shareholders’ meetings.
It is possible for these records to be kept at an alternative location but always within Hong Kong.
The registered office is also the company’s official address, where notices from the tax authorities, the Companies Registry and other government departments are received.
A suitably qualified company secretary, located within Hong Kong, must be appointed. The secretary may be a natural person or a company.
It is not possible for the same person to act as sole director and secretary.
Hong Kong companies are obliged to prepare annual financial statements. These must be audited by a local auditor.
The company must submit an annual return to the Companies Registry. Unless the company is a private limited company, a copy of its financial statements must also be filed with the Companies Registry, in which case they will be available to the public.
A tax return is filed with the Inland Revenue. This must be accompanied by a the company’s audited financial statements.
An annual business registration fee is payable to the Inland Revenue, which varies each year. For the 2023/2024 fiscal year this has been set at HK$2,150.
Hong Kong companies are subject to Profits Tax on their net profit. A two-tier tax system applies. The first HK$2 million of taxable profit is taxed at 8.25% and any profits above HK$2 million are taxed at 16.5%. However, in cases where the same person or company controls more than 50% of the shares of multiple companies, only one company will be entitled to the reduced tax rate of 8.25%.
It should be noted, however, that Hong Kong has adopted a territorial taxation system. This means that if the company’s income is entirely generated outside Hong Kong, it will not be subject to tax in Hong Kong.
With effect from 1 January 2023, this exemption may not apply to foreign passive income which is received in Hong Kong. A Hong Kong company which is a member of a multinational enterprise group (which is very widely defined) may be subject to Profits Tax on interest, dividend or royalty income if this is remitted to Hong Kong.
Dividends and interest paid by a Hong Kong company to a non-resident of Hong Kong are not subject to any form of withholding tax. Royalties paid to a non-resident of Hong Kong are subject to withholding tax at rates ranging between 2.75% and 16.5%, subject to relief under an applicable double tax treaty.
Individuals who have an employment contract with a Hong Kong company will be subject to Salaries Tax in Hong Kong on their total remuneration unless their visits to Hong Kong do not exceed 60 days in a fiscal year, in which case the income is exempt of Salaries Tax.
Individuals with employment contracts with foreign companies will be subject to Salaries Tax on a time apportionment basis once they spend more than 60 days in Hong Kong in a fiscal year.
Directors of a company which is managed and controlled in Hong Kong will be subject to Salaries Tax on any director fees they receive, regardless of the time, if any, which they spend in Hong Kong.
There is no VAT in Hong Kong.
The fiscal year in Hong Kong runs from 1 April to 31 March.
Hong Kong has signed several double tax treaties with other jurisdictions, however conditions apply before a Hong Kong company is eligible for any benefits under these treaties.