Frequently Asked Questions
We hope you will find this FAQ helpful. Please note that these answers questions are for general reference purpose only and more detailed advice from qualified professional should be sought if necessary. Should you require for further assistance, kindly contact us anytime and see how we can assist you.
Setting up a Hong Kong Company
What are the available legal structures ?
To set up a business entity in Hong Kong, you can register a Sole Proprietorship or a Limited Company. Owner(s) of a Sole Proprietor are subject to unlimited personal liability, therefore for better protection, we usually recommend incorporating a Limited Company when conducting business transactions.
How to incorporate a Limited Company in Hong Kong ?
First method : Shelf companies
Shelf companies: Shelf companies are companies that have already been incorporated and available for client’s purchase. These shelf companies are also new companies and have never been used before – they are incorporated only to allow for immediate use by clients and the company name can be changed later. Acquiring a shelf company and completing the initial post-incorporation procedures normally take around 3 working days. Shelf companies usually come with a share capital of HK$10,000.
Second method : All-new companies
Alternatively you can incorporate an all-new company from scratch. In this regard client needs to provide the proposed company name and after checking the availability with the Hong Kong Companies Registry’s record, an all-new company can be incorporated. Client can designate the amount of share capital and share structure, and tailor-make the Articles of Association and other details. Incorporating an all-new company and completing the initial post-incorporation procedures normally take around 10 working days.
How to name my company ?
Name of a Hong Kong limited company must be in English, in Chinese or in both English and Chinese. It generally ends with the words “Limited” or “有限公司”. It cannot be too similar to any other company name that is currently in use by another Hong Kong limited company. Names containing certain phrases such as “Trust” or “Chamber of Commerce” etc. require special approval.
Upon the commencement of the new Companies Ordinance on 3 March 2014, it adopts a mandatory system of no-par for all Hong Kong companies. This is in line with the international trend. There is no minimum price for issuance of shares, no “authorised share capital” concept, though a company may state the maximum number of shares that it may issue in its Articles of Association.
A company is able to increase its share capital without allotment of new shares (provided that the funds or assets are from its members), captialise its profits issuing without new shares, and issue bonus shares without transferring any amount to the capital account.
Is it mandatory for the company to have a registered address in Hong Kong ?
Every Hong Kong company requires a registered address in Hong Kong. If in the initial stage after incorporation client does not rent their own office, at Harris Corporate Solutions Limited, we can provide our office as the registered address for client in Hong Kong and our registered address comes with parcel and mail forwarding service. This can reduce the cost compared to renting client’s own office.
The board of directors is the highest management body of a limited company. All private limited company in Hong Kong require at least one natural person toserve as director and he/she can be any person over the age of 18 (subject to a few exceptions, e.g., persons under a bankruptcy order). Corporations from any countries may act as director, but sole corporate director is not permitted. Corporations can only be directors for a private limited company not being a member of a group containing a public company. A copy of the valid passport and their residential address proof of each director is required upon incorporating a company.
Shareholders are the owners of a limited company. All private limited companies in Hong Kong require at least one shareholder and he/she can be any person over the age of 18 or corporations from any countries. A copy of the valid passport and a residential proof of each shareholder is required upon incorporating a company.
What is the company secretary ?
Every limited company in Hong Kong requires a Company Secretary, and the role of the Company Secretary is to ensure the compliance requirements under the statutes are properly complied with. The Company Secretary should be an individual normally resides in Hong Kong or a company having a registered office or place of business in Hong Kong. Through our affiliate company Harris Secretaries Limited we can provide complete Company Secretarial services for your company.
Bank account opening in Hong Kong
Hong Kong is a free economy with no foreign exchange control, and funds can be remitted in and out of the territory basically without restriction. Client can open individual or corporate bank accounts at various banks in Hong Kong. Common choices including HSBC, DBS Bank (Hong Kong) Limited, China Construction Bank, Standard Chartered Bank, Citibank N.A. and Hang Seng Bank. Banks in Hong Kong often provide full internet banking platform allowing client to conduct banking transactions fully online. We can also assist clients to open their bank accounts through our offices in Guangzhou, Shanghai and Beijing in China.
How to open a corporate account
For opening a corporate bank account, client generally needs to come to Hong Kong in person for the initial opening. The original passport and a residential address proof are required for all directors and shareholders. For residential address proof, any documents such as personal bank statements, credit card statements, telephone bills or utilities bills that bears the holders’ name and personal address, issued within 3 months are accepted.
Every private limited company must within 42 days after its most recent anniversary of its date of incorporation submit an annual return (Form NAR1) to the Companies Registry. This annual return includes basic information regarding the company such as its registered address, directors’ information and capital structure etc.
Annual General Meeting
A limited company should hold its first Annual General Meeting (“AGM”) within 18 months after its incorporation. In subsequent years, AGM should be held once in every calendar year. Unless exempted, companies are required to hold an AGM within 9 months (for private companies) after the end of their accounting reference period. Companies may dispense with the holding of AGMs by unanimous shareholders’ consent.
Renewal of business registration
The Business Registration Office will issue a Business Registration Certificate and Demand Note to every company annually. Currently, the levy for business registration is HK$250 per year as the Hong Kong Government has waived the fee of HK$2,000 out of a total of HK$2,250 from 1 April 2016.
Profits Tax Return
The IRD will issue the first Profits Tax Return (Form B.I.R.51) 18 months after the company has been incorporated. From this date, the company will be allowed a 3-month extension for submitting the relevant documents. For proper submission, audited financial statements and Profits Tax Computations have to be submitted together with the Profits Tax Return. In subsequent years, Profits Tax Return will be issued on an annual basis during April every year and the deadline of filing depends on the accounting year end date of the company.
Employers' Return ?
The Inland Revenue Department (“IRD”) will issue an Employer’s Return of Remuneration and Pensions (Form I.R. 56A and I.R.56B) to every limited company in Hong Kong during April every year. The company has the obligation to provide the details of each employee including their names, place of residence and full amount of remuneration to the IRD by filling in this Return and submitting it to the IRD within one month.
Accounting and records retention
Every company in Hong Kong should maintain sufficient accounting records regarding their income and expenditure to enable its taxable profits to be readily determined. In practice, all documents related to the business operations of the company including bank statements, sales and purchase invoices, receipts and invoices for expenses and all contracts signed by the company should be properly kept. Proper management account including balance sheet, profits and loss account and general ledger should be prepared on an annual basis in accordance with Hong Kong Accounting Standards or International Accounting Standards.
All companies also need to prepare audited financial statements on an annual basis. The audited financial statements should be prepared by a Certified Public Accountant in Hong Kong.
The accounting records of a company need to be retained for at least 7 calendar years.
Hong Kong taxation
Profits tax is levied on all corporations or company that engage in trade or business in Hong Kong. Currently a flat rate of 16.5% (2015/16) is chargeable on the taxable profits of a company during its year of assessment. Profit is taxable only if it arising in or derived from Hong Kong. Therefore, if the business is outside Hong Kong, theoretically it can be exempted from Hong Kong profits tax. Using a company that engages in trading business as an example: in order for the profits of a trading company to be exempted from Hong Kong profits tax, the followings are some general criteria:
– No purchase is made in Hong Kong (i.e. no Hong Kong supplier)
– No sale is made in Hong Kong (i.e. no Hong Kong customer)
– Management and control outside Hong Kong (i.e. no office in Hong Kong)
In order for a Hong Kong company to have its profits exempted from profits tax, application has to be made to the IRD and the IRD will examine every case in details. A Hong Kong company applying for profits tax exemption will need to provide the necessary supporting documents and explanations requested by the IRD. Once a claim is successful, it is normally perpetual unless circumstances change (such as changes in the legislation or operations of the company).
Stamp duty is tax levied on transfer of shares, properties and other instruments or documents. The rates for different instruments and documents vary and are stipulated in the Stamp Duty Ordinance. There is no tax on capital gain, dividend income, bank interest income or any income derived from overseas.
Income tax is chargeable on individual’s salaries and incomes received from employment or pension during a year of assessment. Generally if a person resides in Hong Kong for less than 60 days and all his services are rendered outside Hong Kong, his/ her income is generally exempted. However please note that remuneration received by directors of a Hong Kong company is general taxable. Income tax is charged on a progressive rate and the standard tax rate is currently 15% (2015/16).