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Hong Kong

Hong Kong, a vibrant city and global financial hub, beckons entrepreneurs with its strategic location, conducive business environment, and robust infrastructure.

Hong Kong

Hong Kong company formation, types of companies and taxes

Perched on the southern coast of China, Hong Kong serves as a gateway between the East and West. This Special Administrative Region is known for its impressive skyline, bustling harbor, and profound Chinese roots seamlessly intertwined with a colonial legacy. While it attracts tourists with its urban attractions and culinary delights, for the business world, it signifies a plethora of opportunities. Its free-market policies, minimal government intervention, and an efficient legal system make it a magnet for investors and entrepreneurs looking to establish and expand their ventures.

Jurisdiction Hong Kong
Language Cantonese (90%)
English (4.3%)
Mandarin (1.9%)
Other Chinese dialects (2%)
Other languages (1.8%)
Time in Hong Kong GMT+8.
Population Approximately 7.5 million (Source: World Bank, 2021)
Currency HKD (Hong Kong Dollar)
Tax regime 16.5% for corporations and 15% for unincorporated businesses
VAT Not provided
Overage salary HKD 20,000 per month (Source: Census and Statistics Department, Hong Kong SAR, 2021)
Types of incorporations Limited Liability Company
Foreign Company Office
Sole Proprietorship

Why opening a company in Hong Kong?

Setting up a company in Hong Kong is attractive for several reasons. Its strategic location in the heart of Asia, coupled with a simplified tax regime and pro-business environment, provides an ideal platform for both startups and established businesses. Entrepreneurs dealing in international trade, finance, and services may find Hong Kong particularly advantageous due to its robust infrastructure, transparent legal system, and the availability of skilled professionals.


Opening a company in Hong Kong comes with numerous benefits:

Advantages Details
Strategic Location As the gateway to Mainland China and situated in the heart of Asia, Hong Kong offers unparalleled access to some of the fastest-growing markets in the world. Its modern port facilities and logistics infrastructure make trading seamless.
Pro-business Environment With an emphasis on free-market policies and minimal bureaucratic red tape, Hong Kong consistently ranks as one of the world’s freest economies. This encourages entrepreneurship, innovation, and rapid business growth.
Skilled Workforce Benefiting from a robust education system and being a magnet for international talent, Hong Kong boasts a highly skilled and multilingual workforce. Professionals from various industries around the world converge here, enriching the talent pool.
Robust Legal System Founded on British Common Law, Hong Kong’s judicial system is transparent, predictable, and independent. Intellectual property rights are rigorously enforced, providing confidence to businesses, especially those in innovation and creative sectors.


While the advantages are numerous, there are some considerations to account for:

Disadvantages Details
Fluctuating Property Prices The real estate market in Hong Kong is notoriously volatile, with commercial rental rates among the highest in the world. This poses challenges in terms of long-term operational planning and can significantly impact overhead costs.
Cultural and Language Barriers Despite its international veneer, local customs and language can be barriers. Western businesses may need to invest time and resources to understand the nuances of the local culture, ensuring their offerings resonate with local tastes and preferences.
High Operational Costs While the tax regime is favorable, the actual operational costs, such as rents, salaries, and utilities, can be significantly high. This can be challenging for startups and SMEs with tighter budgets.
Tightening Regulatory Environment While still business-friendly, recent years have seen a gradual tightening in regulatory oversight, especially in sectors like finance and real estate. This might entail additional compliance and operational costs for businesses in certain sectors.

Most popular sectors to set up a company in Hong Kong

The finance sector dominates in Hong Kong, making it a hotspot for banking, investment, and fintech ventures. Additionally, trading, logistics, and tourism also remain robust sectors. The IT industry, especially e-commerce, has seen a recent surge, thanks to the region’s digital infrastructure and proximity to manufacturing hubs in Mainland China.

Fiscal system in Hong Kong

Hong Kong’s fiscal system is characterized by low taxes, a lack of double taxation, and a simplified tax regime, attracting numerous international businesses.


The cornerstone of Hong Kong’s tax system is its territorial source principle. This means that only income sourced in Hong Kong is subject to taxation. Foreign-sourced income, even if remitted to Hong Kong, is exempted. The corporate tax rate stands at 16.5% for profits sourced within the region. Moreover, there is no capital gains tax, withholding tax on dividends and interest, or inheritance tax, making the tax regime particularly favorable for businesses. Personal income tax, or Salaries Tax, is charged at progressive rates on net chargeable income or at a standard rate on net income, whichever is lower. The absence of sales tax or VAT further enhances its appeal as a business-friendly environment. Regular audits and the adherence to international tax standards ensure transparency and compliance.

VAT in Hong Kong

Hong Kong does not levy any Value Added Tax (VAT) or Goods and Services Tax (GST).

CFC Rules

Hong Kong does not have Controlled Foreign Company (CFC) rules. This means businesses do not face additional tax implications for income derived from foreign subsidiaries.


Local director

In Hong Kong, there’s no requirement for companies to appoint a director who is a resident or citizen of Hong Kong. However, at least one director must be a natural person.

Local secretary

A company incorporated in Hong Kong is required to appoint a company secretary. If the secretary is an individual, they should ordinarily reside in Hong Kong. If the secretary is a body corporate, its registered office or place of business should be in Hong Kong.

Annual return

Companies in Hong Kong are required to file an annual return with the Companies Registry. This is a statutory requirement and must be done within 42 days of the company’s anniversary date of incorporation.

Audited accounts

All Hong Kong companies, unless exempted, are required to have their accounts audited by a Certified Public Accountant (CPA) in Hong Kong. The audited accounts are essential for the annual tax filing.

Company types in Hong Kong

Limited Liability Company

Type Designations Minimum Share Capital Taxes
Limited Liability Company Limited, Ltd., Co. Ltd. HKD 1 16.5% of assessable profits

Embarking upon a commercial venture in Hong Kong often introduces entrepreneurs to a variety of incorporation options, among which the Limited Liability Company (LLC) is decidedly prominent. This format is notably attractive for its fusion of comprehensive asset protection and a distinct, yet flexible managerial structure.

The LLC, distinguishes itself through its capacity to safeguard personal assets against business-related liabilities, thereby enabling stakeholders to undertake calculated risks without jeopardizing personal holdings. Given this, the model caters ideally to entrepreneurs, established corporations looking to develop subsidiaries, and foreign entities desiring a local footprint with a degree of financial insulation.

The confluence of Hong Kong’s established legal system, robust economic framework, and the LLC’s protective shield, invariably conjures a formidable allure for businesses of varied scales and industries. Moreover, Hong Kong, with its strategic geographical locale, presents numerous opportunities for businesses to navigate, penetrate, and capitalize upon pan-Asian markets.

The intricate blend of protective financial structures, minimized liability, and astute governance embodied by LLCs effectively scaffolds business pursuits, leveraging Hong Kong’s vibrant commercial arenas and comprehensive international trade networks.


Type Designations Minimum Share Capital Taxes
Partnership N/A No minimum requirement 15% of assessable profits (personal taxation rate)

A partnership in Hong Kong operates on the pivotal fulcrum of shared responsibility and collective oversight, thereby aligning itself with entities that inherently thrive on collaborative synergy. This business type, devoid of minimum capital requisites and bound by the collaborative spirit of mutual enterprise, perpetuates an environment conducive for small to medium-sized entities, professional cohorts, and familial business pursuits to blossom.

The essence of a partnership, entwining shared liability and consensual administration, naturally appeals to entities where trust and common objectives are paramount. Small enterprises, joint professional practices (such as legal or medical consortiums), and ventures where personal involvement in management is pivotal often veer towards this incorporation type.

Hong Kong’s regulatory milieu accords partnerships a unique position, allowing the intertwining of personal expertise and joint managerial acumen to steer the business. The taxation structure, applying personal tax rates to partnership profits, also perpetuates a somewhat simpler financial management approach for smaller enterprises or those unburdened by extensive capital investments.

The decision to embark upon a partnership route in Hong Kong invariably involves a contemplation of shared aspirations, matched by an appreciation for collective risk and reward, underpinned by the territory’s stable economic and regulatory environment.

Foreign Company Office

Type Designations Minimum Share Capital Taxes
Foreign Company Office FCO, Ltd., Limited No minimum requirement Profits Tax: 16.5% (onshore)

The Foreign Company Office, often abbreviated to FCO, offers an appealing avenue for international businesses desiring a foothold in the bustling financial center that is Hong Kong. Established corporations that seek to penetrate the Asian market frequently opt for this model of incorporation due to the global recognition and significant fiscal incentives that the region proffers.

Expanding a business into Hong Kong through an FCO can be beneficial for its strategic, operational, and financial prospects. It facilitates a comprehensive engagement with local and international markets while harnessing the robust, free economy Hong Kong is renowned for.

Advantages such as a low taxation environment, straightforward business regulations, and a politically stable landscape combine to make the establishment of a Foreign Company Office a palpable option for entities striving for internationalization and enhanced global reach. The choice of this incorporation type often emanates from the desire to juxtapose a well-established corporate identity with the multifaceted opportunities inherent within the Hong Kong market.

Sole Proprietorship

Type Designations Minimum Share Capital Taxes
Sole Proprietorship None None Profits Tax: 15%

The Sole Proprietorship is a frequent choice among individual entrepreneurs who seek a straightforward and personal approach to conducting business in Hong Kong. Engaging in a sole proprietorship allows for direct control and decision-making, offering complete authority over the business operations and assets to the owner. This type of incorporation is often chosen by small-scale entrepreneurs, freelancers, and consultants, as it provides an uncomplicated and cost-effective pathway to enter the business arena.

One significant advantage of a sole proprietorship is its simplicity and ease of setup. There are fewer administrative hurdles, and the owner enjoys unhindered decision-making capabilities. These attributes make it a feasible option for individuals who prefer an undiluted approach to managing their business activities, without the need to navigate through complex organizational structures or dilute their control through shared ownership.

However, it’s worth noting that in a sole proprietorship, personal and business assets are not distinctly separated. Thus, the owner bears unlimited liability, intertwining personal assets with the business’s financial liabilities, which can be a point of consideration for prospective entrepreneurs. This might be suitable for ventures with a lower risk profile and those that do not require substantial capital outlay in their initial stages.

This incorporation type represents a blend of personalized control and relatively uncomplicated operational management, suitable for those who wish to solely navigate their business through the prolific economic landscape of Hong Kong.

Why rely on Ukincorporation.co.uk?

Ukincorporation.co.uk is a GR Morgan Formations company for entrepreneurs who wish to take their business abroad or develop a new business.

With over 10 years in the market, the GR Morgan Formations team offers its expertise in international taxation. In addition to setting up companies in the UK and other jurisdictions, it offers a range of services, from a virtual office in London to administration and accounting services, to opening a bank account.

Common Questions

What makes Hong Kong an attractive destination for entrepreneurs?

Hong Kong is renowned for its strategic location as the gateway to Mainland China and its position in the heart of Asia. It boasts a pro-business environment with minimal bureaucratic hurdles and is consistently ranked among the world’s freest economies. Additionally, its robust legal system, which is transparent and based on British Common Law, ensures that businesses can operate with confidence. Add to that a competitive tax regime and a skilled, diverse workforce, and it’s evident why entrepreneurs from around the globe consider Hong Kong as a prime business hub.

Are there challenges to setting up a business in Hong Kong?

Absolutely. While there are numerous advantages, entrepreneurs also face challenges. The operational costs, including rents, salaries, and utilities, can be quite high. Moreover, the market is intensely competitive, demanding businesses to continuously innovate and offer unique value propositions. Navigating the cultural and language nuances can also be intricate, requiring businesses to adapt and localize their strategies. Lastly, the evolving political landscape and potential regulatory changes can introduce elements of uncertainty.

How does the tax system in Hong Kong favor businesses?

Hong Kong offers a notably business-friendly tax regime. There is no VAT, capital gains tax, or inheritance tax. The corporate tax rate is also low, allowing businesses to retain a significant portion of their profits. Additionally, there are no restrictions on capital inflows and outflows, which facilitates businesses dealing with international transactions. This competitive tax environment is designed to attract and foster business growth.

Is the real estate market in Hong Kong conducive for businesses?

The real estate market in Hong Kong is a double-edged sword. On one hand, its prime locations offer businesses prestigious addresses and access to a world-class infrastructure. On the other hand, Hong Kong’s real estate is notoriously expensive, with commercial rental rates among the highest globally. The market is also volatile, making long-term planning challenging. New businesses, in particular, need to factor in these high overhead costs and possibly consider alternative solutions like shared office spaces.

What sectors are most promising for setting up a company in Hong Kong?

Several sectors hold promise in Hong Kong, thanks to its diverse economy. Finance and banking remain dominant, given Hong Kong’s status as a global financial hub. The tech and innovation sectors are growing, with the government actively promoting and investing in start-ups and tech businesses. Other sectors like trading, logistics, tourism, and professional services also offer considerable opportunities, benefiting from Hong Kong’s strategic location and infrastructure.

How does Hong Kong's legal system support businesses?

Hong Kong’s legal system is a blend of English common law and local regulations. Its judiciary is independent, and the rule of law is strictly adhered to, which ensures a level playing field for businesses. Intellectual property rights are strongly protected, and there are clear legal avenues for dispute resolution. The transparent legal framework helps in building investor confidence and encourages international enterprises to set up their operations in the region.

Can foreign entities wholly own a company in Hong Kong?

Yes, Hong Kong permits 100% foreign ownership of companies, meaning that international entrepreneurs can hold all shares in a Hong Kong-based company without any local partnership. This provision makes it immensely straightforward and appealing for foreign investors to set up and control their businesses.

Are there any incentives for startups in Hong Kong?

Absolutely. The Hong Kong government actively promotes startups and innovation. Through initiatives like the Cyberport and the Hong Kong Science and Technology Parks, they provide infrastructural, financial, and advisory support to budding enterprises. Moreover, there are various funding schemes and incubation programs tailored to assist startups at different growth stages. Not to mention, the city’s numerous events, workshops, and networking opportunities make it a vibrant ecosystem for startups.

How does Hong Kong's proximity to Mainland China benefit businesses?

Hong Kong’s strategic location as the gateway to Mainland China offers businesses unparalleled access to the Chinese market. With the ‘One Country, Two Systems’ principle, Hong Kong acts as a bridge between the East and the West. Companies based in Hong Kong can leverage the Closer Economic Partnership Arrangement (CEPA) to gain preferential access to Mainland China, opening up vast opportunities in trade, manufacturing, and services.

What challenges should businesses anticipate in the wake of recent political developments in Hong Kong?

The recent political developments have introduced some uncertainty into the business environment. Companies might face increased scrutiny and should be aware of the changing regulatory landscape. It’s vital to stay updated on new policies, maintain compliance, and perhaps diversify risks. There might also be public relations considerations, given the global attention on Hong Kong’s political scenario. Businesses should be prepared to navigate these complexities while upholding their corporate values.

How robust is Hong Kong's digital infrastructure for modern businesses?

Hong Kong boasts an impressive digital infrastructure, positioning itself as a major IT hub. With one of the world’s highest internet penetration rates and top-notch connectivity, businesses can rely on seamless digital operations. The city is also committed to fostering technological advancements, evident from its investments in smart city initiatives, digital payments, and AI-driven projects.

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