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- Subsidiary, Branch or Representative Office
Setting Up a Foreign Company in Hong Kong: Subsidiary, Branch or Representative Office?
- Modified: 12 November 2024
- 5 min read
- Foreigner's Guide, Incorporation
Emma Drummond
Business Writer
Emma’s spent 12 years in marketing and advertising in the banking and financial sector. She tries to keep her writing fresh and convincing. One thing she loves more than writing is her cat, Bumpy.
Subsidiary, branch or representative office? Here’s what to know when deciding what foreign company options in Hong Kong are best for you.
Thinking about establishing a presence in Hong Kong? If you’re wondering what company options are right for you or need clarity on what sets a subsidiary apart from a branch or representative office, read on! In this article we’ll unpack more about those business structures so you have a clear view of your options as a foreigner.
If you are looking for accounting help for your representative office, we provide round-the-clock convenient service with our experienced accountants. Talk to us to find out more about bookkeeping and company secretarial services too. Otherwise, read on to find out the different company options you can set up.
Benefits of Setting up a Business in Hong Kong
We’d say the benefits are that the process is easy and fast, but that’s expected in a place like Hong Kong which has earned a reputation as a hub of business excellence and opportunity. It’s a relatively cost-effective and simple process to register a business in Hong Kong but one of the biggest draws is the fact that 100% foreign ownership of companies is allowed here. Even as a foreigner, you can own 100% of your business and be the sole director and shareholder.
I’m a Foreigner. What Type of Business Can I Set Up in Hong Kong?
The short answer is that you can choose between three business structures; a subsidiary, a representative office or a branch office. The long answer is that each of those options are fundamentally set apart when it comes to their individual liabilities, tax and legal obligations. Take a closer look below or let us know if you’re looking for affordable accounting services to get you on your way.
Foreign Company Option 1: Subsidiary
You can set up a wholly-owned subsidiary company in Hong Kong (i.e. 100% foreign ownership). This business structure is often preferred for entrepreneurs or investors who are looking to start and run a business for the long-term in Hong Kong.
How to register a Subsidiary Company in Hong Kong
- Submit incorporation application to the Companies Registry (together with application for Business Registration Certificate)
- Once Companies Registry accepts your application, the Certificate of Incorporation and Business Registration Certificate will be issued to the company in one go
- Show proof of share capital(no specific limit or amount)
- Make sure you have these key persons in your application. They are positions that can be held by an individual or a cor: (positions that can be held by an individual or a body corporate)
- Local or foreign individual director
- Local company secretary
- They must be 2 different people
Tax obligations
A subsidiary is a private limited company incorporated in Hong Kong. The advantage of being an independent legal entity is being eligible for the same incentive and tax exemptions as other Hong Kong local companies. Along with those benefits is the legal obligation to file annual Tax Returns and audited accounts to the Inland Revenue Department.
Naming a subsidiary company
As long as it’s not already registered or in use, your subsidiary company name can be similar or different to an overseas parent company as long as the name has not been registered by other companies in Hong Kong
Foreign Company Option 2: Branch Office
Is your company already registered somewhere? Then a branch office could make the most sense for you. The main difference is that a branch office is not treated as a standalone legal entity in the way a subsidiary is. It is a formal business structure, though. Put it like this; if you opt for a branch office business structure, you will be legally registered but essentially remain an extension of the foreign parent company (aka a foreign entity).
Key decisions are directed to, and dictated by, the parent company, so a branch office operates with a loss less “independence” than a subsidiary in both of those regards. So who is accountable and responsible for the branch office’s debts and liabilities? The foreign parent company is. It’s why this particular company structure is considered to have streamlined taxes but shared risk.
How to incorporate a non-HK Company Branch office in Hong Kong
- Register with the Inland Revenue Department by submitting incorporation forms with certified corporate documents of the foreign company
- Approved and registered company name
- Authorised representative who is a resident of Hong Kong
- Established and registered place of business (i.e a physical address in Hong Kong)
Tax obligations for a Branch Office
Similar to a subsidiary, a branch office has the same legal and tax obligations as any other Hong Kong incorporated company. A Non-HK company is required to file Annual Return with certified audited financial statements of the foreign company (if applicable) to the Companies Registry and renewal application for the Business Registration Certificate every year.
Foreign Company Option 3: Representative Office
Want practical insights and exposure to the corporate landscape before committing to long-term investments or opening a fully-fledged office? Consider a representative office. If this piques your interest, consider the reality of the restrictions this business structure presents.
If you set up a representative office in Hong Kong the parent company is ultimately where the buck stops when it comes to liability. That’s because a representative office is not considered or treated as an individual legal entity - so no signing contracts, no making deals and no engaging in profit-yielding activities (aka anything linked to income or corporate tax such as trading, invoicing or raising credit).
Your influence and presence is limited to administrative tasks. You can employ local support staff, enter into contractual agreements (like a lease for a commercial property) and act as a liaison to arrange networking events or business meetings. Though not directly generating profit, a representative office plays a valuable role in promotion, market research and coordinating sales and business development.
Requirements to register a Representative Office:
- Register with the Inland Revenue Department
- Apply for a Business Registration Certificate (and have it renewed annually)
Tax obligations for a Representative Office
As a cost centre, this business structure has no legal standing so there are no compliance requirements to file tax returns, maintain accounts or register with the Companies Registry.
Comparison of Company Structures: What’s Best For My Business?
Here’s a snapshot of some key differences between foreign company structures to help you decide what’s best suited to your business.
Subsidiary | Branch office | Representative office | |
|---|---|---|---|
| Suited to | Local and foreign companies wanting to expand | Foreign companies wanting to expand | Foreign companies wanting to gain exposure & insight to business landscape |
| Ownership | Can be locally or 100% foreign owned | Can be locally or 100% foreign owned | N/A |
| Separate legal entity | Yes | No | No |
| Company name restrictions | Can be different or similar to parent company | Must be same as parent company | Must be same as parent company |
| Who’s liable | Limited to subsidiary | Parent company | Parent company |
| Tax rates & compliance obligations | As per local incorporated company (audited accounts, annual returns and tax returns) | As per local incorporated company (audited accounts, annual returns and tax returns | N/A |
| Key officer appointment | Local company secretary, director, shareholder | Local authorised representative | Local authorised representative |
| Timeframe for registration | 4 - 7 working days | 14 working days | 1 - 2 working days |
Get Started and Open a Company
We can help you register your company in Hong Kong, and help you with opening a business bank account too. We help you prepare all the documents, file them, and schedule a meeting with the bank.
Emma’s spent 12 years in marketing and advertising in the banking and financial sector. She tries to keep her writing fresh and convincing. One thing she loves more than writing is her cat, Bumpy.
