Hong Kong is among top priorities in my consideration list of best countries to incorporate an offshore company. Below are 9 reasons why you should opt for Hong Kong!
1. Economic and Political Environment
Hong Kong is one of the world’s freest economies. From my perspective, if I want to set up an offshore company to expand my business, undoubtedly the place where I decide to incorporate should open various doors of opportunities.
Hong Kong was a perfect fit for that perspective of mine. Its open economy and free
trade urged me to establish a new business venture in the jurisdiction.
Some interesting facts about this premier location: Hong Kong’s economic freedom is scored over 89, placing its economy the 2nd freest in the 2020 Index of Economic Freedom. In addition, Hong Kong is standing at number 3 in the list of easiest places to do business, according to the World Bank’s Doing Business 2020 Report.
You can expect a free trade, free market and free business environment when doing business in Hong Kong. There is no legal limitation on inward or outward investments, foreign ownership restriction or big matters of headache with foreign exchange controls in Hong Kong. This jurisdiction is also a well-recognized financial hub to business people.
2. Favorable Tax Rates
Whether you establish your business entity in Hong Kong or anywhere, I believe how the tax regime of that particular jurisdiction works on your entity is relatively a top-concerning question.
Fortunately, Hong Kong offers favorable tax rates that many start-ups and entrepreneurs can be seeking. When it comes to the tax regime, Hong Kong’s tax system is low and straightforward. Note that only Hong Kong-source earnings are taxed in this country. The government set out one of the most competitive profit tax rates for businesses, which is 16.5 percent on incorporated businesses. Remarkably, offshore tax exemption is available to benefit offshore seekers.
For instance, your company had $10 million of profits. Under Hong Kong tax system (two-tiered profit tax scheme), the first $2 million of your profits earned would be levied at the rate of 8.25%, while the remainder of $8 million would be attached to the rate of 16.5%.
Key notes on Hong Kong tax rates for businesses can be quickly summarized as below:
· Corporate tax rates: 16.5%; 8.25%
· Capital gains tax rates: 0%
· Withholding tax: 0% (except the case of royalties to Hong Kong non-residents)
· VAT/Sale tax: 0%
In addition to low tax rates, Hong Kong also provides business owners with foreign tax relief as well as preferential tax regime on specific activities/sectors for doing business in Hong Kong. The expense deduction program for R&D business sectors, or concessionary tax relief is a typical example.
3. An International Gateway
Hong Kong is located in the heart of Asia, linking the West and the East. This facilitates the chance of growing your business in the commercial hub of the world. Hong Kong especially has its proximity to China, making it a gateway for your business to access Mainland China’s potential markets.
4. Various Types of Business Entity
In reality, there are numerous types of business structures you can choose to incorporate in Hong Kong: a private limited company (which is the most popular type for start-ups and SMEs), sole proprietorship or partnership.
Whether you choose a private limited company or other kind, please take a careful examination before making a final decision on which is the best suited form of business to your demand.
5. Business Incorporation
The flexibility in setting up a company in Hong Kong makes me give a plus to Hong Kong. The business incorporation is simple and straightforward. With trusted incorporation service providers, you can open a limited company in Hong Kong just within 24 hours!
6. Transparent Regulations
Hong Kong is a reputed jurisdiction, and one of the reasons is its transparent system of law. Hong Kong legislation is distinct from China. In particular, the law system in this jurisdiction is quite consistent in terms of requirements for incorporating a business entity.
7. Incorporation Cost
The next reason for your business incorporation in Hong Kong is its cost. In fact, the payment of business registration in Hong Kong is more affordable than that in Singapore. But the opposite exists when it comes to the compliance cost (I mean post-incorporation duties). This is because the annual audit requirement takes place for every entity in Hong Kong, whilst Singaporean qualified companies can get an exemption from this amount.
One tip to help you save money and resources if deciding to open a company in Hong Kong is to choose a Hong Kong-based trusted service provider to free you from hassles of procedure complexity!
8. Sophisticated Banking System
The banking sector is of vital significance in the economic growth of Hong Kong. The banking facilities and services in Hong Kong are well equipped under a regulated and sound system. Hong Kong is considered as the world’s largest banking mecca with the majority of strongest overseas banking institutions to be present in this jurisdiction.
The revised Hong Kong Financial Service Report (July 2020) stated:
“At end May 2020, there were 163 licensed banks, 17 restricted license banks and 13 deposit-taking companies in Hong Kong, together with 42 local representative offices of overseas banking institutions. These institutions come from 34 economies and include 78 of the world’s largest 100 banks”.
9. Labor Force
Hong Kong ranked seventh in respect of labor market efficiency based on the 2019 Global Competitiveness Report. In Hong Kong, your business can get the opportunity to have access to a high-quality workforce. Most employees in Hong Kong is English proficient as they normally use English in daily conversations along with their mother tongue language which is Cantonese or Mandarin.
To sum up, there are many reasons why you should set up a company in Hong Kong. Whether you choose Hong Kong, Singapore or any offshore location to start your business venture, it is well advised that you should engage a professional expert or service provider to help you.
However, if you’re forming a company in the United States, the procedure is much different. In fact, in every single state, LLC formation procedure varies. That is why, in the USA, people go to LLC service providers to set up their company.