5 Reasons Why You Should Form a Company in Hong Kong

Ivan Widjaya·May 7, 2014

Whether you are going to open a branch office or set up a new business, Hong Kong is one of the best places to do so.

Hong Kong is well-known as the go-to place for setting up an offshore company. The country is one of the leaders in business and finance, which means that it is a great jurisdiction for business incorporation and a fertile ground for businesses targeting the Asian market. Along with the fact that Hong Kong is politically stable, it is also a great place to secure your wealth.

Hong Kong downtown — photo credit: Steve Webel

In this article, ICO Services, one of the leading offshore company formation and banking service providers, will guide you by hand to show you why Hong Kong is the right jurisdiction to incorporate your business.

Table of Contents

1. Forming an offshore company in Hong Kong is affordable and easy

DIY is not recommended, although it’s possible. For the expertise and experience, I recommend you to use the service of a reputable offshore company formation service provider.

In general, setting up an offshore company would cost you about USD400 – USD1,000 for company setup, depending on the reputation and level of service. Please note that there are recurring monthly or yearly fees to keep your company registration, along with additional services, such as address, phone numbers and company secretary fees. The offered services varies from one service provider to another – so be sure you don’t decide based on price.

To give you a real life example, ICO Services offers the Hong Kong offshore company formation service at EUR790, with an annual fee of EUR540 to keep your company registration, including government fee, registered address and company secretary.

The whole registration process will take you about 5 to 7 days. Please note that for opening an offshore bank account, you need to personally present in Hong Kong. The process itself takes only 1 day.

2. Hong Kong’s favorable tax system

You might find it interesting to know that Hong Kong-registered companies are non-taxable if their business transactions are made outside of Hong Kong. If you are doing business with clients/suppliers residing in Hong Kong, there will be 16.5% tax applied.

If you are not doing any business whatsoever with anyone in Hong Kong, you may be eligible for “offshore” status. Again, depending on the level of service, the company formation service provider will help you in claiming the status.

You can find more information here: http://www.icoservices.com/hong-kong-tax-system.html

Downtown Hong Kong at night — photo credit: Steve Webel

3. Go global with solid reputation

Belize is beautiful, but it’s nowhere near Hong Kong in term of reputation as first-class finance/business center, with high profile banks and offices.

Indeed, both are popular jurisdictions for offshore company formation, but I would personally choose the one that will give my company an extra boost in term of global trust and reputation. In this case, Hong Kong wins, unanimously.

Moreover, Hong Kong is not generally perceived as tax haven. Setting up a company in a jurisdiction that is popular as a tax haven could negatively impact your company’s reputation.

4. You can deduct more tax as write-offs

Even if you have to pay taxes due to your business operations in Hong Kong, you won’t pay much anyway, as Hong Kong tax authorities are more lenient toward write-offs.

So, yes… your dinner with a client or business travel expenses can be written-off rather easily. Just make sure you don’t do too many write-off requests.

5. China

If you sell to China, setting up a company in Hong Kong is probably the best thing you can do as a business owner. The short distance going from/to China means that logistics won’t cost you much – business travel is relatively cheap and transporting goods won’t burn a hole in your pocket.

Here’s an interesting fact: Hong Kong is a special administrative area of China, which means that you can conduct business in China with zero tax.

Takeaway

Hong Kong’s stable political environment, reputable finance/business center and favorable tax system make it a strong candidate for offshore company formation.

Although everything seems favorable, you need to do your due diligence. Do your research, talk with those who have set up a company in HongKong, and consult with your service provider to help you decide.

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