Despite that there are no specific laws that encourage the formation of an offshore company in Hong Kong, the country is still seen as one of the most attractive places to form an offshore company in. Among some of the reasons are Hong Kong has low taxes, no foreign controls, political, economic, and legal stability. Most people set up offshore companies in Hong Kong for the reasons such as doing offshore banking activities, international trades, investment activities, and to protect their assets. In today’s article, we are going to talk about the options, company formation requirements, procedures, and timeline to set up an offshore company in Hong Kong.
In a nutshell, the advantages of Hong Kong as an attractive place to form an offshore company are the ease of setting up, has very good tax benefits, political stability, and many people trust the country.
Hong Kong is one of the easiest places in the world for doing business. Moreover, setting an offshore company in Hong Kong is simple, direct, and easy without having to worry about the bureaucracy or red tape. Hong Kong also has a policy for foreign owners to own up to 100% of the company. Hong Kong Government and authorities do not require any special authorizations to form the offshore company.
Hong Kong also has one of the lowest tax rates in the world because of its simple tax system that favours offshore companies located there. The corporate tax rate for Hong Kong is only 16.5% per annum. In addition, there is no capital gains tax, no value added tax, no goods and services tax, no estate duties, no taxes on dividends, and no taxes on interests. The company’s foreign income from out of Hong Kong is also not taxable because there are no foreign controls in the country. Therefore, an offshore company in Hong Kong is free to do business with any country in the world without worrying about tax liabilities.
Though Hong Kong is part of China now as a Special Administrative Region, the country still retains its existing systems in politics, economics and judicial. With the British legal framework acting as the background, the rule of law is precedent over China’s legal system. This helped Hong Kong to have one of the best bureaucracy in Asian region according to results of a recent study did by the Political and Economic Risk Consultancy (PERC).
Furthermore, an offshore company formation in Hong Kong is not viewed negatively or with suspicion because the country is actually not a tax haven but a country with low taxes according to Organisation for Economic Co-operation and Development (OCED). Hong Kong also follows the international standard on tax information and exchange.
There are two ways to incorporate an offshore company in Hong Kong. The first way is to register a new Hong Kong company and the second way is to purchase a Hong Kong shelf company.
Registering for a new Hong Kong company is simple and the procedure will usually take about 1 week. This option is for those business owners that want to incorporate the company with a specific name.
The second option, purchasing a Hong Kong shelf company, is for business owners that want to incorporate their offshore company as quickly as possible. It is for business owners that do not mind the company’s name and do not have the time to wait for the completion of the new company’s incorporation. A Hong Kong shelf company is a company that was already incorporated in Hong Kong some time ago with the objective to sell it in the near future. In essence, a shelf company is a legally registered paper company with no assets or liabilities. After the person purchases the shelf company, he or she can change the name, change the registered address, increase the company’s share capital, and appoint a director, shareholder, and a company secretary. Businesses that typically choose this option are those that need do business immediately such as apply for tender or entering into new business deals and therefore, they require a Hong Kong company registration number as soon as possible. Besides that, shelf companies that are few months to few years old are able to convey the message that they are already around for a period of time. As a result of enjoying these benefits, the cost of purchasing a Hong Kong shelf company is usually more expensive when compared to incorporating a new Hong Kong company.
Hong Kong New Offshore Company Requirements
First of all, Hong Kong Companies Registry needs to approve your proposed name before the incorporation happens. There is a minimum requirement of one director but the company can have unlimited number of directors. A natural person, Hong Kong Resident, non-Hong Kong resident, or a company can qualify as a director
Secondly, there is a minimum requirement of one shareholder and a maximum requirement of 50 shareholders. A natural person, Hong Kong Resident, non-Hong Kong resident or a company can qualify as a shareholder. Nominee shareholders and a director can act as a shareholder. A local or a foreign owner can also fully own the company up to 100%
Thirdly, it is compulsory to appoint a company secretary that is either a local individual or corporate resident. There is no requirement for professional qualifications but a director or shareholder cannot act as the company secretary.
A local physical address, not PO Box, is also needed as the Hong Kong offshore company’s registered address. In terms of share capital, deposit the amount into the company’s bank account and the company is not allowed to use bearer shares.
In terms of corporate taxes, the company is only taxed 16.5% per annum on the income that derived from Hong Kong. For more information, kindly refer to Hong Kong Corporate Tax guide.
Lastly, it is mandatory for all companies in Hong Kong including the offshore ones to follow the compliance requirements including doing an annual audit on company accounts, informing any changes in the company to the Companies Registry or its members, filling annual returns with the Companies Registry, filling tax returns with Inland Revenue Department, arrange time General Annual Meetings (AGMs) maintaining company and accounting records, providing other business documents, renewing the company’s business registration, and etc. For more specific details, kindly refer to Annual Compliance and Filing Requirements for Hong Kong Companies.
As mentioned above, the first step is to get the Companies Registry to approve the offshore company’s name. After that, submit relevant documents such as Hong Kong incorporation application form and Hong Kong offshore company’s articles. Foreign directors and shareholders need to provide a copy of passport with foreign residential proof and bank reference letter. Local Hong Kong directors and shareholders only need to provide a copy of their identity cards. A copy of company registration is also required for corporate shareholders. It takes around 4 to 7 working days to process the application and to incorporate the offshore company. For more details, kindly refer to Hong Kong Setup Guide.
After the offshore company’s incorporation, the company have to comply with some of the formalities listed below:
- File documents including Appointment notification of directors and secretary, consent to act as director, registered address notification, and other required documents with the Companies Registry within 14 days
- Open a corporate bank account and bear in mind that most banks require the physical presence of the owner
- Register with Inland Revenue Department within 1 month from the date of the company’s incorporation
- Apply for business licenses if required