Setting up a company in Hong Kong: the easy hour and the hard bank

The paperwork is genuinely quick. What slows Australians down is the bank, the ongoing compliance and whether their visa lets them work for their own company at all.

The short version

• A private company limited by shares costs HK$1,545 to incorporate online, plus the business registration fee, and certificates normally arrive in about an hour [1][3].
• You need at least one individual director, one shareholder, a registered office in Hong Kong and a company secretary based in Hong Kong [2].
• Profits tax is 8.25% on the first HK$2 million of assessable profits and 16.5% after that for corporations, on Hong Kong-sourced profits only [5].
• Opening the business bank account is usually the slowest step. Plan for weeks, not days.
• Your visa matters. Most employment visas tie you to an approved employer, so running your own company on the side may need Immigration's approval [7].

Before you incorporate: visa and Australian tax

Two questions come before the company name.

Can you work for it? If you're in Hong Kong on a General Employment Policy visa, you "shall only take such employment as approved by the Director of Immigration" [7]. Setting up a company you'll actively work in is a change that needs Immigration's say-so. To come to Hong Kong to run your own business, the route is entry for investment as an entrepreneur. You'll need a three-year business plan with financial forecasts, proof of enough money to run the business, and details of the local jobs you'll create. Approval is discretionary and initial stays are normally up to 36 months [8]. Dependant visa holders, often the trailing partner, can generally work, and many Australian partners start consultancies this way.

Where will you be taxed? If you remain an Australian tax resident, your worldwide income goes on your Australian return [9]. Owning a foreign company also brings in Australia's controlled foreign company rules, which can tax some of the company's passive income in your hands before you take it out. Australia and Hong Kong have no comprehensive tax treaty to sort out overlaps [10]. Get Australian advice before you incorporate, not after your first profitable year.

The incorporation itself

The Companies Registry handles incorporation, and business registration with the Inland Revenue Department happens at the same time [1].

What a private company needs

The secretary rule catches a lot of Australians. If you're the only director, you need someone else as secretary. Most small companies pay a licensed company secretarial provider, which usually also supplies the registered office address.

Step by step

1. Check the name. Run a free exact name search on the Companies Registry e-Services Portal, and search the trade mark register so you don't step on someone else's brand [1].
2. Prepare the documents. Form NNC1 for a company limited by shares, a copy of the articles of association (the Registry publishes samples) and the IRBR1 notice for business registration [1].
3. Lodge and pay. Lodge electronically or in hard copy at the Queensway Government Offices in Admiralty [1].
4. Collect your certificates. The Certificate of Incorporation and the Business Registration Certificate come together. Electronic applications for private companies are normally done in about an hour; paper ones take about four working days [1].
5. Sort the extra directors. Any first director who didn't consent in the incorporation form files Form NNC3 within 15 days [1]. Late filing is an offence.
6. Set up your registers. Members, directors and significant controllers registers. The significant controllers register records your beneficial owners, and law enforcement officers can ask to inspect it [6].
7. Check licences. Some trades need permits. The Trade and Industry Department is the starting point [1].

What it costs in government fees

On top of this you'll pay a company secretary and registered address service, and an auditor every year. Prices vary widely by provider, so get several quotes.

The bank account: why it's hard

Incorporating takes an hour. Opening a business account can take weeks, and some applications get knocked back.

Banks in Hong Kong are strict about anti-money-laundering checks, and a brand-new company with a foreign owner, no trading history and a serviced office address ticks many risk boxes. Expect to show:

• your certificates, articles and registers
• identity documents and proof of address for every director and significant controller
• a clear explanation of the business, its customers, suppliers and where money will come from and go to
• contracts, invoices or letters of intent if you have them
• evidence of a real connection to Hong Kong, such as staff, an office or local clients

Some banks want every director and controller to attend in person. Virtual banks and payment platforms licensed in Hong Kong are an option some small businesses use while they wait, though they come with their own limits.

Our tips: keep the ownership structure simple, have a one-page business summary ready, and apply to more than one bank. Keep your Australian business account if you have one, as covered in keeping Australian accounts while abroad.

Profits tax and the annual cycle

Hong Kong taxes profits that arise in or are derived from Hong Kong. Profits from abroad aren't taxed, even if you bring them into Hong Kong [5]. Whether a profit is offshore depends on where the business really happens, and the IRD looks hard at offshore claims.

Two-tiered rates, from 2018/19 onwards [5].

Like salaries tax, profits tax runs on a provisional system: you pay an estimate for the coming year along with the final bill for the year just gone [5]. Budget for that double hit in year two.

Each year, plan for these:

• Annual return to the Companies Registry within 42 days of each incorporation anniversary. Late fees climb steeply [3].
• Audited accounts. Hong Kong companies need their financial statements audited by a certified public accountant, even when they're tiny.
• Profits tax return when the IRD issues it, with the audited accounts attached.
• Business registration renewal every one or three years [4].
• Register updates whenever directors, shareholders or controllers change.

If you hire staff

Your company must enrol employees in the MPF and pay 5% of their relevant income, capped at HK$1,500 a month per employee. Our MPF guide explains the bands. If you pay yourself a salary as a director-employee, you're covered too. Your own salary is taxed under salaries tax, not profits tax; see our salaries tax guide.

When you leave Hong Kong

Companies don't pack up as easily as flats. If you're moving home, decide whether to keep the company running, deregister it (possible for solvent, inactive companies with no outstanding liabilities) or wind it up. Until it's closed, the secretary, registered office, audit and annual returns all keep costing money, and Australian tax on the company may follow you home.

Running a business here, or thinking about it? Join Cooee Hong Kong, our Facebook group for Australians in Hong Kong, and ask which banks and providers others have dealt with lately.

Sources

1. How to register a new company – Companies Registry
2. Incorporation FAQ (local companies) – Companies Registry
3. Major fees – Companies Registry
4. Business registration fee and levy table – Inland Revenue Department
5. Profits tax – Inland Revenue Department
6. Significant Controllers Register overview – Companies Registry
7. General Employment Policy – Immigration Department
8. Entry for investment as entrepreneurs – Immigration Department
9. Australian resident for tax purposes: foreign and worldwide income – Australian Taxation Office
10. Income tax treaties – The Treasury

Keep reading

• Salaries tax in Hong Kong: low rates, provisional tax and no treaty
• The MPF: Hong Kong's super and getting it out when you leave
• Moving to Hong Kong from Australia
• Sending money home without losing it to fees