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  2. A Guide for Opening an Offshore Company in Hong Kong for Entrepreneurs

A Guide for Opening an Offshore Company in Hong Kong for Entrepreneurs

A Guide for Opening an Offshore Company in Hong Kong for Entrepreneurs

Offshore companies carry out their business activities outside the national boundaries of their stakeholders’ countries of residence. In Hong Kong, offshore companies don’t pay corporate tax as long as all their income source is from outside of Hong Kong.

If you are thinking of registering an offshore company in Hong Kong, we can assist you with the process, no matter where you are in the world. You don’t even have to be physically in Hong Kong to do this. Drop us a chat any time you have any questions while you are reading this guide.

What we will cover

What is an offshore company in Hong Kong?

The main characteristics and features of offshore companies are:

Exempt from Taxes

In most countries, offshore companies are exempt from taxes. Hong Kong is an attractive place to form an offshore company because profits earned outside of Hong Kong are not taxed.

Business activities happen outside the country

Offshore companies are usually prohibited from trading in the countries they are registered in. You may want to keep this limitation in mind as there could be local commercial opportunities at the time you incorporate or they could develop in the future.

Degree of Anonymity

Basic company information (including shareholders, directors, secretary, and company address) will be registered and filed with Company Registry. The Company Registry makes this information public.

If an offshore company in Hong Kong wishes to make company information confidential, it can do so by appointing nominees as the shareholder and director. The nominees’ information will be made public.

This can be accomplished with the help of a third party service provider or appropriate accounting firm.

Fast and easy to incorporate

In Hong Kong, it usually takes between 4 to 7 days to set up an offshore company. The company can be registered and incorporated online.

When should entrepreneurs consider opening an offshore company?

You are expanding your business and there is an increase in investment or shareholders. Many investors, especially institutional investors, prefer to invest through an offshore company.

Other entrepreneurs also consider opening an offshore company for these purposes:

  • as a holding company
  • for import and export between other countries
  • for online or tech businesses
  • for international business
  • tax planning and relief
  • for estate planning
  • for enhanced privacy
  • development of intellectual property
  • to get higher return on investment in stocks, commodities, forex, and international securities

Here are some examples of situations where businesses would want to consider setting up an offshore company in Hong Kong.

For international business

Tony operates a cement company in Brazil. He wants to export to other countries to grow his business, but run into some problems to create an international corporation.

Tax planning and relief for an online business

Lisa runs a website-building freelance business in France as a self-employed person. She has outgrown her self-employed status. As a self-employed person, she would be paying flat rate tax of about 33% on her revenue, including on business and personal taxes. Proceeding as a self-employed freelancer in this business would kill Lisa’s business. Lisa looks around to see which country with low corporate taxes, would enable her to incorporate a company offshore. She also wanted a place with a stable and trusted government with a good reputation in international business as she was getting more international clients.

Benefits of setting up a Hong Kong offshore company

Hong Kong is a financial offshore hub at the end of the day, China is still very dependent on Hong Kong for trade, FDI, equity and debt capital, and foreign exchange.

If you’re thinking of setting up an offshore company these may be some plus points to doing so in Hong Kong:

  1. Set up is easy

    Launching a business in Hong Kong is simple, secure, and free from unnecessary red-tape. Hong Kong allows foreign ownership and for company shares to be 100% foreign-owned. Special authorizations before setting up the Hong Kong company setting are not required. In addition, companies only need one shareholder and one director, who can also be the sole shareholder.

  2. No taxes

    The tax system is simple and favors offshore company setup. Furthermore, foreign-sourced income is exempt from tax in Hong Kong and there are no foreign exchange controls in Hong Kong. Thus, a Hong Kong offshore company that derives income from abroad is not taxable in Hong Kong. This is one the biggest advantages of Hong Kong Incorporation.

  3. Access to China and the rest of East Asia, and Southeast Asia

    According to the National Bureau of Statistics of China, approximately two-thirds of all the FDI into China came via Hong Kong. In 2018 Hong Kong exported $25.3 billion to China, which was Hong Kong’s #1 destination and accounted for 20% of all of its exports.

    In terms of capital flows, over the last decade approximately 80% of the IPOs outside Mainland China have been issued in Hong Kong.

  4. English as second official language

    Due to the region’s history as a British colony, English is an official language in Hong Kong. This has one major benefit for the majority of expatriates: street signs, as well as official documents, are always written in both Chinese and English.

  5. Low Share Capital

    The minimum paid up share capital is 1 HKD. The minimum number of shares is one to form an offshore company.

    The recommended paid up share capital is USD 1,000 or its equivalent in any foreign currency.

  6. Fast Registration

    In Hong Kong, it is quick and easy to set up an offshore company. Incorporation takes between 4-7 days and can all be done online.

  7. Limited Liability

    The company’s shareholders will have limited liability protection up to their share capital contributions.

  8. Good base for firms and businesses

    Hong Kong has a well-developed financial infrastructure, regulatory structure, reliable online banking system, free (but still safe) transfer of money, low tax rate and sound legal system.

Who can set up an offshore company in Hong Kong?

Good news: Yes, foreigners are eligible to open and own 100% of an offshore company in Hong Kong.

You can even open your company without travelling to Hong Kong (e-registration and paper registration are both allowed). However, the government requires your company to have a registered physical address for your office, and a company secretary based in Hong Kong.

You don’t actually need to rent a physical office or hire a full-time company secretary. At Osome can provide this service to you for HK$5000 per year.

The difference between opening a company onshore vs offshore

If you are considering between setting up an offshore company and an onshore company in Hong Kong, we’ve put side by side the requirements for registering both these types of companies below. The main differences are highlighted.

Offshore Company Onshore Company
Directors
Number of Directors Min. 1, Max. Unlimited Min. 1, Max. Unlimited
Natural Person? Yes Yes
Companies as directors? Yes Yes
Must be a resident of Hong Kong? No No
Hong Kong national requirement? No No
Shareholders
Number of Shareholders Min. 1, Max. 50 Min. 1, Max. 50
Natural Person? Yes Yes
Companies as shareholders? Yes Yes
Must be a resident of Hong Kong? No No
Hong Kong national requirement? No No
100% foreign shareholding? Yes Yes
Sole director as shareholder? Yes Yes
Company Secretary
Resident company secretary required? Yes Yes
Local individual as secretary? Yes Yes
Corporate resident as secretary? Yes Yes
Professional qualification required? No No
Registered Address
Local physical address needed? Yes Yes
Rent a local office? Yes Yes
Share Capital
Minimum amount requirement? No No
Bearer shares allowed? No No
Taxation
Legally tax exempt in Hong Kong? Yes No
Tax rate on income from or arising in Hong Kong? 16.50% 16.50%
Corporate income tax on trading income? 0% 16.50%
Business Activities
Trade with local customers? No Yes
Do business within Hong Kong? No Yes
Hire local staff in Hong Kong? No Yes
Allowed to own shares in Hong Kong companies? No Yes
Apply for immigration visa? Yes Yes
Open a local corporate bank account? Yes Yes
Open overseas bank account? Yes Yes

Documents needed to set up an offshore company

Depending on the complexity of your company structure, these are the documents you might need to open an offshore company in Hong Kong:

  1. Copy of your passport;
  2. Copy of an official document as proof of residence dated less than three months;
  3. Personal bank account statement for the last month or recent bank reference letter;
  4. Hong Kong Incorporation application form;
  5. Hong Kong offshore company’s Articles;
  6. Copy  Hong Kong identity card for Hong Kong resident shareholders or directors; and
  7. Copy of parent company registration documents for corporate shareholders.

Steps to get your Hong Kong offshore company up and running

Here are the steps and estimated duration it takes to complete setting up your offshore company in Hong Kong.

Duration (when applicable) Step

Step 1:

Choose a company name and get it approved with the Companies Registry.

1 day

Step 2:

Hire a licensed agency and submit all the necessary documents for company incorporation.

4 - 7 days

Step 3:

Company gets incorporated

(Steps 2 & 3 take 4-7 days)

Step 4:

File documents (appointment notification of directors and secretary; consent to act as director; registered address notification; other documents requested) with the Companies Registry.

Step 5:

Open a corporate bank account. Most banks require you to be physically present at the time of opening the account. Find out in more detail how to open a business bank account in Hong Kong.

Step 6:

Register with the Inland Revenue Department and obtain a Business Registration Certificate.

Within 1 month

Step 7:

Apply for Business Licenses if you plan to conduct business operations in Hong Kong and if your business activity requires a business license.

Step 8:

File income tax returns. An agency could also offer you accounting and auditing services.

An estimated total cost of registering and maintaining a company in Hong Kong

Assuming that you decide to hire a licensed agency and that you need a company secretary and an office address, these are the things you’ll need to prepare to pay for.
Keep in mind that we’re always up for a chat if you need help to start a company and get your papers in order with our Company Secretary services online. Below are the costs for a package with Osome.

Items Estimated Cost / Year

Registration

Corporate Secretary

Registered Office Address

Business Registration Certificate

5000 HKD

Starting from the second year, you’ll need to pay these annually to maintain your company:

Items Estimated Cost / Year

Compliance Kit:

Corporate Secretary

Registered Office Address

Business Registration Certificate

5000 HKD

Renewing the business certificate is simple: your agency will collect a fee, handle all the paperwork and send the new business certificate to you.

Within 18 months of incorporation (and then every following year), you’ll have to fill out an income tax return and pay for the accounting and auditing fee.

This expense will vary depending on the number of transactions (the more transactions you have, the more you will pay). The auditing fee is also a function of some secondary factors, such as company turnover and others.

Here is an estimate of the accounting and auditing fee:

  • around 8,800 HKD per year (if you have no more than 60 transactions)
  • around 12,000 HKD per year (if you have between 60 and 120 transactions)
  • around 17,700 HKD per year (if you have between 120 and 240 transactions).

For more details about starting up a company in Hong Kong, you could refer here: A First Time Entrepreneur’s Guide to Starting a Company in Hong Kong

We hope that this guide has shed some light on setting up a company in Hong Kong for you. We can register your Hong Kong company and open a business account remotely for you from wherever you are in the world.

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