Pros and Cons When You Register Company Offshore in Hong Kong

Advantages and Disadvantages That Come Along Your Way When You Register Company Offshore in Hong Kong

Foreigners can register their own company in Hong Kong. Today, we talk about the benefits and disadvantages that come along your way when you register company offshore in the state.

Well, when we look at the ratio of advantages and disadvantages, the former heavily outweighs the latter. However, as an investor, it is your right to know about both sides of the coin.

 

Advantages of Opening a Company in Hong Kong

First, let us contrast the benefits of registering an offshore company in Hong Kong:

The Sound Economic and Political Environment

The World Bank recognized Hong Kong as fourth on its ease of doing business index in 2018. Also, Hong Kong was placed second in the IMD World Competitiveness ranking in 2019. Well, you can check any significant business ranking in the world, and you will see Hong Kong at the top 10 most of the time.

The economic system is one of the best in the world. The taxes are low (which we talk below) and the government has been bringing many incentives to help both local and Foreign Investors. Additionally, people recognize Hong Kong as one of the freest economies in the world. If you have a good idea, the place has every rule in place that can help you achieve your goal.
Forget bureaucracy – Hong Kong has one of the lowest corruption rates in the world.

Ease of Registration of Business

There are really only two steps for you to register company offshore in Hong Kong:

1. Get Your Entrepreneur Visa
2. Register Your Business

Gaining an entrepreneur visa is a straightforward process when we compare it to other jurisdictions in the world. All you need to do is visit a nearby Chinese embassy or download some registration forms. You need to prove to the authorities that your business can bring a significant change to the Hong Kong economy; for example, create employment opportunities to a lot of locals. After that, you need to present your financial information to provide evidence that you have sufficient money to fund your idea. If yes, you can get your visa, and there are no questions asked.

However, remember that there are some other requirements, like knowing a person in Hong Kong (sponsor), having a clean police record and being at least 18 years old.

Registering your business in Hong Kong is a piece of cake, especially when you can get help from 3E Accounting. All you need to do is call us, and we will register your business for you. You don’t even need to move an inch from your sofa.

Strategic Location and Free Trade Agreements

The ‘gifted’ placement in the Globe of the Chinese administrative region is yet another reason to register company offshore in Hong Kong.
Hong Kong is the proximity to mainland China. Importing things from other countries directly to China is more expensive than doing it first in Hong Kong and then to China. Thanks for the incentives and Free Trade Agreements that Hong Kong has with other economies. Moreover, Hong Kong has an FTA with China itself, due to which most of the companies can export from Hong Kong to China with zero tariff.

Due to reasons like this, many Chinese companies have bought stocks in Hong Kong. Also, you can see a lot of scope in the trading business.

World-class Infrastructures

Well, we don’t need to stress it a lot. Hong Kong is one of the most developed places in the world when we are talking about modern infrastructures. It has every advanced innovation – including an efficient IT and communication system, local and international transportation, world-class health and education system, etc. All these infrastructures will help your business; that is a given. Anyway, it will also an advantage if you are, by any means thinking of moving to Hong Kong while running your business.

Tax Haven

See, the good things never end. When you register company offshore in Hong Kong, you operate in a business environment that has one of the lowest tax rates in the world.

The corporate tax rate is only 16.5%. Additionally, the state has a single-tier tax system, meaning that you need to pay taxes only for the profit you derive within the borders. There are no capital gains tax, value-added tax (VAT), sales taxes, and withholding taxes. The personal tax rate is also low, which ranges from 2% to 17%.

Remember that there are various incentives which will decrease the total amount of your taxes even more.

Simple Company Registration Requirements

Well, we have already said that it is extremely easy to register company offshore in Hong Kong, and the requirements are also not too much. Foreigners can open a Private Limited Company in Hong Kong, and here are the criteria you need to meet:

• You can have only one director. The director doesn’t necessarily need to reside in Hong Kong.
• One shareholder is enough. You have a maximum of fifty.
• Good for you, 100% foreign ownership is allowed. So, forget about any such hassle of finding a local business partner like you would have to do in many other countries in the world.
• There is no minimum paid-up capital.
• You need a registered address. This must be a physical address and not a P.O. Box Number.
• You need to hire a resident secretary at your firm. However, keeping the inconvenience in mind, the Hong Kong government allows you to outsource your secretary. This means you can take help from a corporate service provider.

 

An Effective Alternative to China

China is a global powerhouse. However, the business rules in the mainland can be too complicated for foreigners. Due to this, many decide to erect their company building in Hong Kong. Anyway, remember that Hong Kong business entities are ‘officially’ not Chinese. So, you can’t hire Chinese nationals outside the state.

 

Disadvantages of Doing Business in Hong Kong

Frankly speaking, the disadvantages are almost non-existent in Hong Kong. However, here are some things you need to keep an eye on

Physical Presence is Needed While Opening Bank Account

According to Wikipedia, there were 154 licensed banks, 19 restricted license banks, and 17 deposit-taking companies in Hong Kong in 2018. So, you won’t have problems finding a banking solution. However, remember that most of these banks require you to be physically present in the state while opening an account.

Hong Kong is an Expensive Place to Reside and Live in

This is a given. It connects with the previous point of opening a bank account. Even if you are not planning to reside in Hong Kong while doing business, you need to travel to the place to at least open a Bank Account.

Read this report from the Economist Intelligence Unit; it says Hong Kong is the fourth most expensive city in the world to live in. The average rent in a One Bedroom apartment in the city center is about $2,200, so you can only guess the rest.

High Competition

Keep this in mind; you are not the first person to discover Hong Kong as a business haven. According to national reports, there are already more than a million registered companies in Hong Kong. So, while you register company offshore in Hong Kong, you should accept that there might already be people in your sector, so you need to work very hard. Only the ones who can manage the risk can sustain in the city.