taxation only on income from within the jurisdiction and the complete absence of taxes on capital gains, withholding, interest, sales or VAT. The establishment of an office in Hong Kong does not of itself render a company liable to profits tax where that office is not generating profits from within the territory. Indeed Hong Kong has been a favourite choice for regional headquarters, for this reason. The total number of overseas and Mainland Chinese companies running business operations in Hong Kong was 8,225 in 2017, an increase of 3% on 2016 , according to the Census and Statistics Department survey. Invest Hong Kong is the Hong Kong government department responsible for foreign direct investment and supporting Mainland, Taiwanese and overseas businesses setting up or expanding in Hong Kong. The ‘Annual Survey of Companies in Hong Kong Representing Parent Companies Located outside Hong Kong’ aims to elucidate the profile of those businesses and their views on the business environment in Hong Kong. Of the total number of companies, 1,413 are regional headquarters (RHQs), 2,339 are regional offices (ROs) and 4,473 are local offices (LOs). Director-General of Investment Promotion, Simon Galpin, said that the survey had shown “the highest increase in the number of LOs. We work with these companies to help them set up and expand their business and to, hopefully, fulfil their potential as the RHQs and ROs of tomorrow.”
In terms of sectors, finance and banking demonstrated the most robust growth and, it was said, reinforced Hong Kong’s status as a world-leading international financial centre With regard to country of origin, more than half of the parent companies came from four countries. Japan with 1,378 companies, the USA with 1,313, Mainland China with 1,264 and the UK with 675. Galpin added “we are seeing greater numbers of overseas companies setting up in Hong Kong as a base from which to expand into the Mainland and beyond. The same is also true of Mainland companies that use Hong Kong as a springboard from which to go global. This phenomenon highlights the strategic importance of Hong Kong to access business opportunities in the Mainland as well as offer geographical proximity to north and south-east Asian markets.” When choosing to set up RHQs, ROs or LOs, the top five factors in Hong Kong rated as most important were its simple tax system and low tax rate, free flow of information, corruption-free government, absence of exchange controls, and political stability and security. Evidently, the rapid opening up of mainland China, and Hong Kong’s special relationship with the mainland, have increased the attractions of Hong Kong as a regional base from which to operate.
Hong Kong Companies
Secretary for Financial Services and the Treasury, Professor K C Chan, announced in mid- January 2011 that, having been gazetted on January 14, 2011, the Companies Bill was due for its first Legislative Council for its first reading on 26 January. Professor Chan said: “The Companies Bill is an important piece of legislation for fostering Hong Kong’s status as a major international business and financial centre. The gazetting of the bill marks a major milestone in our work to modernize company law.” “The Companies Bill aims to achieve four main objectives, namely, enhancing corporate governance, ensuring better regulation, facilitating business and modernizing the law,” he added. “Rewriting the Companies Ordinance (CO) allows us to leverage the developments regarding company law in other comparable jurisdictions and enhance our competitiveness.
The rewrite of the CO started in mid-2006, and three public consultations were conducted to gauge views on a number of complex subjects. In the course of the rewrite exercise, the Financial Services and the Treasury Bureau benefited from the advice of the Standing Committee on Company Law Reform as well as four advisory groups and a joint government/Hong Kong Institute of Certified Public Accountants working group, which was set up to advice on specific areas of the rewrite. Some of the measures introduced by the Bill to enhance corporate governance include: improving the accountability of directors so as to enhance transparency and accountability, and clarifying the directors’ duty of care, skill and diligence; emphasizing shareholder engagement in the decision-making process; improving the disclosure of company information; and strengthening auditors’ rights. In addition, better regulation will be ensured by means of the accuracy of information on the public register, an improvement to the registration of charges scheme, and a strengthening of the enforcement regime through the Registrar. There will be easier reporting for small- and medium-sized enterprises (SMEs), while SMEs will also be able to prepare simplified financial and directors’ reports.
Types of Company
In Hong Kong businesses normally trade as either limited companies, limited partnerships or sole proprietorships. Being a common law jurisdiction the concept of a trust is readily understood and widely used. The tight secrecy, minimal corporate disclosure and loose administrative requirements which characterize some island offshore common law jurisdictions and make these territories attractive locations in which to base commercial operations have no counterpart in Hong Kong, whose company and trust law are virtually identical to their British equivalents.
To found a business company in Hong Kong, it is necessary to register with the Business Registration Office of the Inland Revenue Department within one month of the commencement of business. The registration fee for a one-year certificate is normally HK$2,450 (made up of a HK$2,000 fee and a HK$450 levy), but a special concession was introduced in 2008 waiving the fee for business registration certificates with a commencement date in 2008-09. This waiver was reintroduced from 1 August 2009 for a further two-year period (ending 31 July 2011). Businesses who registered from 1 April 2009 until 31 July, 2009 had to pay the full HK$2,450 fee/levy. In general the minimum capital requirements for a business corporation are very low or non-existent and all legal business forms are open for foreign participation.
Normally, a Certificate of Incorporation of a company limited by shares will be issued in 4 working days. It is also possible to purchase a shelf company, i.e. an already incorporated private company, through an accounting or law firm or through a secretarial company. Further time is required (about 3-4 weeks) if the name of the shelf company is to be changed.
In January 2009, a new Receipt and Despatch Centre, operated by the Business Registration Office of the Hong Kong Inland Revenue Department, opened to provide a ‘one-stop’ service for company incorporation and business registration in the territory. The facility, aims to make the procedure for business registration applications by a company much more convenient. With the opening of the new centre, a company can immediately submit an application for business registration after obtaining a Certificate of Incorporation from the CR. The company may collect its Business Registration Certificate at the centre the next working day or opt to receive it by post. Notifications of changes of business registration particulars can also be filed with the centre.
With effect from 21 February 2011, Hong Kong’s Companies Registry and the Inland Revenue Department (IRD) jointly launched a new regime of one-stop Company and business registration, together with a one-stop notification of change of company particulars. Under the new regime, the Registry will process the simultaneous business registration applications and notify IRD of changes of the relevant company particulars. A new electronic incorporation service and a 24-hour e-Registry portal, enabling companies be incorporated online, anywhere in the world, was launched in March 2011.