Setting Up an Offshore Company in Hong Kong

Hong Kong is a US$10 trillion financial hub located in Asia. For decades, Hong Kong has been lauded as the economic gateway to China for investors and Multinational Corporations (MNCs). As China continues to grow and contributes a larger share of world GDP each year, many are attracted to do business with China. What better way is there to do business with China than to set up an offshore company in Hong Kong? 

China’s share of world GDP since 2012. Infographic from Statista.

Hong Kong is located to the south of mainland China (Refer to Figure 1.) and was a British territory for 150 years before the British handed the island over to China in 1997. Hong Kong has been an autonomous region under an agreement that is set to expire after fifty years in 2047. 

Figure 1. Location of Hong Kong

This article will walk you through the process and some considerations for setting up an offshore company in Hong Kong:

  • Is it prudent to set up an offshore company in Hong Kong now?
  • What are some MNCs in Hong Kong?
  • What are the benefits of setting up an offshore company in Hong Kong?
  • Are there any drawbacks to setting up an offshore company in Hong Kong?
  • How do you set up an offshore company in Hong Kong? Are there any requirements?

Is it prudent to set up an offshore company in Hong Kong now?

A year since the Hong Kong protests began, China’s National People’s Congress Standing Committee unanimously voted to pass the National Security Law in Hong Kong. The legislation “bans secession, subversion, terrorism, and collusion with a foreign country or external elements to endanger national security.” 

Despite these developments, some businesses have expressed their relief at the resumption of law and order in Hong Kong. The stock market in Hong Kong has also rallied and achieved record performance in the days since the National Security Law came into force. The stock market hints that Hong Kong’s status as a financial hub may not be eroded as critics feared. 

The Greater Bay Area is China’s urbanisation masterplan that consists of nine Chinese cities in Guangdong province (Guangzhou, Shenzhen, Zhuhai, Foshan, Dongguan, Zhongshan, Jiangmen, Huizhou, and Zhaoqing) and two special administrative territories (Hong Kong and Macau) and each has been planned with their own unique vision. 

As part of this plan, Hong Kong is envisioned as the Financial Hub of the Greater Bay Area. In 2017, Hong Kong together with Shenzhen, and Guangzhou had contributed 12% of GDP or US$1.5 trillion (HK$11.77 trillion) to the Chinese economy. Hong is also the world’s largest green bond market for mainland issuers and global investors. In 2018, the green bonds issued were valued at more than US$11 billion, tripled that of 2017.

Map of Greater Bay Area. Infographic from Desfran’s research article

Writing in The New York Times, Alexandra Stevenson reports that:

“… in the business world, many expect Hong Kong to remain a deeply profitable place for commerce, a perception bolstered by billions of dollars in new stock offerings and property deals made by Chinese companies in the past few weeks alone. Some business leaders and bankers even endorse Beijing’s argument that the new law will help Hong Kong’s status as a business hub by helping the police crackdown on sometimes violent anti-government protests.”

Alexandra Stevenson in The New York Times

Overall, business sentiments in Hong Kong appear optimistic about the economic outlook, and the setting up of an offshore company in Hong Kong would still be relevant, feasible, and practical. 

MNCs in Hong Kong

1. Shangri-La Hotels and Resorts

Headquartered in Hong Kong, Shangri-La manages over eighty hotels in major cities such as London, Paris, Singapore, Istanbul, and Toronto. Shangri-La is founded by Malaysian tycoon Robert Kuok whose net worth is estimated at US$10.7 billion.

2. Estée Lauder

Estée Lauder first set up its offshore presence in Hong Kong in 1961. Today, the company’s regional headquarters is based in Hong Kong.

3. Esprit Holdings

J.P Morgan is an American investment bank that has been ranked as the largest in America, with US$2.74 trillion in assets. J.P. Morgan has been in Hong Kong for over ninety years.

4. J.P. Morgan

J.P Morgan is an American investment bank that has been ranked as the largest in America with US$2.74 trillion in assets. J.P. Morgan has been in Hong Kong for over ninety years.

Benefits of setting up an offshore company in Hong Kong

1. Low Taxes

Corporate income generated in Hong Kong is taxed at a rate of 16.5%, one of the lowest in the world. Foreign companies may be pleased to know that income repatriated from abroad into offshore companies in Hong Kong are not subject to corporate taxes.

Every company wants to protect its bottom line and increase its profits and dividends for shareholders. With its low taxes, Hong Kong is regarded as a business-friendly tax haven by many. 

2. Foreign companies are welcomed

Even if your company is 100% foreign-owned without any shareholders from Hong Kong, the city still welcomes you to set up an offshore company. Therefore, you do not have to worry about your company lacking investors from Hong Kong.

3. Financial Hub’s Resilience

Despite prolonged street protests, the Global Financial Centres Index continues to rank Hong Kong as the sixth-largest financial hub in the world. 

CEO Henry Fernandez of American finance company MSCI argues that critics have often spoken of “the demise and the relevance of Hong Kong” and yet, “Hong Kong comes back stronger, more resilient, and reinvents itself” each time. 

In March 2019, the European Union removed Hong Kong from its watchlist of non-cooperative tax jurisdictions

This robust image that Hong Kong has cultivated has been affirmed by international organisations, including the Organisation for Economic Cooperation and Development (OECD). This positive image has spillover effects for offshore companies in Hong Kong as an office in Hong Kong will bolster the firm’s credibility to its clients.

4. Language

The second official language of Hong Kong is English, with 46% of Hong Kong people speaking the language. Even if you do not speak Mandarin, language should not be a barrier to doing business or setting up an offshore company in Hong Kong. 

Drawbacks to setting up an offshore company in Hong Kong?

1. Uncertain political future

Events in Hong Kong continue to unfold after a long year of protests. It is unclear how the National Security Law will be enforced and what it would mean for foreign businesses that operate in Hong Kong. 

Even though the future of Hong Kong may seem uncertain, analysts are still optimistic about Hong Kong, advising investors to continue to do business and carry out banking activities in the city. 

2. High costs

According to Mercer’s 2020 Cost of Living Survey, Hong Kong was ranked as the most expensive city for expatriates. In setting up an offshore company in Hong Kong, firms will have to decide whether it is viable to operate an offshore company in Hong Kong. Although Hong Kong is an attractive destination for businesses, its high costs may not be a suitable option for everyone. 

How do you set up an offshore company in Hong Kong? Are there any requirements?

The following documents are required by Hong Kong authorities for foreigners to set up an offshore company in Hong Kong:

  • Apply and register for a company name
  • Hong Kong Incorporation application form 
  • Proof of residence
  • Recommendation letter from the bank
  • Photocopy of passport for identification purposes
  • Photocopy of parent company’s registration documents

Registration for an offshore company in Hong Kong can be completed online and is usually approved within a few working days. Foreign companies will only require one shareholder and one company secretary to apply. 

Summary

This article has answered the following questions concerning setting up an offshore company in Hong Kong:

  • Is it prudent to set up an offshore company in Hong Kong now?
  • What are some MNCs in Hong Kong?
  • What are the benefits of setting up an offshore company in Hong Kong?
  • Are there any drawbacks to setting up an offshore company in Hong Kong?
  • How do you set up an offshore company in Hong Kong? Are there any requirements?

With low corporate taxes, a strong image as a financial hub, and English as its official language, Hong Kong is a prime location to set up an offshore company. However, Hong Kong is not always the most appropriate or logical option for all businesses.

Therefore, businesses are encouraged to engage expert consultants such as the team at Desfran for professional advice regarding offshore services. Led by one of the world’s leading management teams, our experts draw on their wealth of knowledge to offer comprehensive management advice. We are aware of the latest developments and trends in the financial markets and are equipped to guide you to expand your business. 

Request for a consultation with Desfran today. 

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