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Hong Kong provides foreign business owners with a great opportunity to establish their company as a financial center. They can optimize financial operations and save on taxes by routing payments through this global financial hub.
In this article, we will explore the top reasons when foreign business owners should set up a company in Hong Kong.
Reason #1 Attractive taxation system
Hong Kong’s tax regime serves as a critical factor that makes it an appealing destination for foreign businesses. Holding companies, regional headquarters, startups, investment firms, and private equity firms of various types can leverage Hong Kong’s tax advantages.
Foreign businesses can take advantage of the following tax benefits in Hong Kong.
Territorial taxation
The territorial taxation principle presents a favorable scenario for foreign business owners. In Hong Kong, the principle of territorial taxation means that only income generated from within Hong Kong is subject to taxation. Income generated outside of Hong Kong is usually not subject to tax.
No value-added tax (VAT)
Hong Kong does not have a value-added tax (VAT) system. Therefore, by setting up a company in Hong Kong, foreign business owners can route their payments through the city, avoiding VAT charges and complex compliance procedures.
In comparison, various countries around the world have VAT systems in place, which can impose additional financial burdens on businesses. The United Kingdom has a VAT rate of 20%, while Germany applies a standard VAT rate of 19%. Hong Kong’s 0% VAT provides a distinct advantage for foreign business owners.
No tax on capital gains
Establishing a company in Hong Kong is a suitable choice for seeking tax-free profits from investments. Hong Kong’s exemption from capital gains tax allows individuals and businesses to sell assets like stocks, bonds, and real estate without incurring tax obligations on their gains.
This tax exemption encourages investment and entrepreneurship as foreign business owners can enjoy tax-free profits from their investments.
No withholding tax on dividends and interest
Hong Kong does not apply withholding tax on dividends and interest paid to non-resident individuals and companies. This means that foreign business owners can earn profits without facing additional taxes.
Double taxation avoidance agreements (DTAs)
Hong Kong has an extensive network of DTAs with over 40 countries. These agreements cover a range of categories to ensure that businesses operating internationally are not subject to double taxation on the same income.
Here are the categories of tax treaties covered by Hong Kong’s current DTAs, along with the corresponding countries:
| Categories | Countries |
| Comprehensive DTAs | Belgium, Mainland China, Luxembourg, Vietnam and Thailand |
| Airline and Shipping Income DTAs | Sri Lanka and Singapore |
| Airline Income Only DTAs | Bangladesh, Belgium, Canada, Croatia, Denmark, Estonia, Ethiopia, Fiji, Finland, Germany, Iceland, Israel, Jordan, Kenya, Korea, Kuwait, Laos, Macau SAR, Mainland of China, Maldives, Mauritius, Mexico, Netherlands, New Zealand, Norway, Russian Federation, Seychelles, Sweden, Switzerland and the United Kingdom. |
| Shipping Income Only DTAs | Denmark, Faroes, Greenland, Iceland, Norway, Sweden, and the USA. |
| Tax Information Exchange DTAs | Bangladesh, Belgium, Canada, Croatia, Denmark, Estonia, Ethiopia, Fiji, Finland, Germany, Iceland, Israel, Jordan, Kenya, Korea, Kuwait, Laos, Macau SAR, Mainland of China, Maldives, Mauritius, Mexico, Netherlands, New Zealand, Norway, Russian Federation, Seychelles, Sweden, Switzerland, and the United Kingdom. |
Emerhub works closely with entrepreneurs and investors to help them tap into Hong Kong’s potential effectively. We provide valuable resources and guidance to assist in navigating the business landscape to set up a company in Hong Kong.
Reason#2 Stable international financial center
Establishing a company in Hong Kong is the optimal choice for foreign business owners who want to route international payments and seek a stable international financial center.
Hong Kong’s stability as an international financial center benefits a range of industries, including international banks, investment and asset management firms, insurance companies, wealth management and private banking services, fintech companies, and multinational corporations.
Strong banking system
Hong Kong’s banking system is highly regarded for its stability and resilience. The city’s banks are well-capitalized, well-regulated, and adherent to stringent risk management practices.
Hong Kong’s banking sector is consistently ranked among the top in the world and is important for foreign business owners looking to benefit from a secure and well-regulated financial environment. According to the 33rd edition of the Global Financial Centers Index (GFCI) Report published in March 2023, Hong Kong maintained its fourth place globally.
Financial market infrastructure
Hong Kong boasts an advanced financial market infrastructure, including efficient clearing and settlement systems. The Hong Kong Exchanges and Clearing Limited (HKEX), as one of the world’s leading stock exchanges, serves as a reliable platform for foreign business owners to facilitate their financial transactions.
According to a recent report by Brandirectory, the HKEX has ranked as the world’s second-most valuable Exchange brand in 2023. Hong Kong’s well-developed bond market provides a range of fixed-income instruments, including government and corporate bonds that can be utilized for financial management and payment routing strategies.
Reason#3 Quick setup and 100% foreign ownership
With a quick registration process, low company registration costs, and 100% foreign ownership, Hong Kong provides a conducive setting for companies to flourish.
Ease of company formation
Opening a Hong Kong Private Limited Company is suitable for small to medium-sized businesses (SMEs) and trading companies. In addition, the incorporation process at the Companies Registry (Hong Kong) is efficient.
Notably, there are no strict requirements for the minimum amount of share capital, offering flexibility to business owners.
Non-resident shareholders and directors
Hong Kong does not mandate shareholders to be residents of the city. Therefore, foreign business owners can hold shares in Hong Kong companies. The director of a private limited company serves as the sole shareholder.
Set up a company in Hong Kong with Emerhub
Emerhub has the knowledge and resources to support you to set up a company in Hong Kong. Our dedicated team is ready to assist you at every step of the way.
With Emerhub by your side, you can expect a smooth process that will have your business up and running in no time.
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