How to start a business in Hong Kong. A subsidiary (private limited company) or a branch of foreign company?
Setting up a company in Hong Kong is very straightforward. The procedure is transparent and simple.
Set up entity in Hong Kong
Forms of foreign investment
The most commonly used business vehicles for foreign companies to establish a business presence and do business in Hong Kong are:
1. Subsidiary (private limited companies) incorporated in Hong Kong (private or public via listing on the stock exchange of Hongkong).
2. Branch of foreign company
A foreign incorporated company can set up a subsidiary in Hong Kong in the form of a private limited company controlled by its foreign parent company. This is an attractive option for foreign companies wishing to conduct business in Hong Kong through a separate legal identity.
A foreign branch operates as an extension of the foreign company and therefore does not have a separate legal personality. Therefore, the foreign company is still responsible for the actions of the Hong Kong branch. In most cases, a branch office is subject to the same legal and tax regime as a company incorporated in Hong Kong.
A foreign company intending to set up a branch must apply to the Companies Registry for registration as a non-Hong Kong company and apply to the Inland Revenue Department for business registration. The foreign branch must designate at least one Hong Kong resident who is entitled to receive legal notices served on the foreign company.
Setting up a branch usually takes more time than setting up a subsidiary. An online application to form a subsidiary (limited company) can take as little as 24 hours, while it takes around 14 days to register a branch (foreign company as a non-Hong Kong company in Hong Kong).
A branch is taxed in the same way as a subsidiary (corporation). Applicable profits tax rate: 8.25% for the first HK$2 million of taxable profits of the subsidiary, and 16.5% for the rest of the taxable profits.
Branches are advantageous if foreign companies wish to cease their activities in Hong Kong quickly, as they can be closed quickly by simply notifying the Companies Registry of their closure.
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The procedures for setting up a new private limited company and registering a branch of a foreign company in Hong Kong are simple and straightforward. Contact us.