How to start a business in Hong Kong. A subsidiary (private limited company) or a branch of foreign company?
Setting up a company in Hong Kong is very straightforward. The procedure is transparent and simple.
Set up entity in Hong Kong
Forms of foreign investment
The most commonly used business vehicles for foreign companies to establish a business presence and do business in Hong Kong are:
1. Subsidiary (private limited companies) incorporated in Hong Kong (private or public via listing on the stock exchange of Hongkong).
2. Branch of foreign company
Subsidiary
A foreign incorporated company can set up a subsidiary in Hong Kong in the form of a private limited company controlled by its foreign parent company. This is an attractive option for foreign companies wishing to conduct business in Hong Kong through a separate legal identity.
Branch
A foreign branch operates as an extension of the foreign company and therefore does not have a separate legal personality. Therefore, the foreign company is still responsible for the actions of the Hong Kong branch. In most cases, a branch office is subject to the same legal and tax regime as a company incorporated in Hong Kong.
A foreign company intending to set up a branch must apply to the Companies Registry for registration as a non-Hong Kong company and apply to the Inland Revenue Department for business registration. The foreign branch must designate at least one Hong Kong resident who is entitled to receive legal notices served on the foreign company.
Setting up a branch usually takes more time than setting up a subsidiary. An online application to form a subsidiary (limited company) can take as little as 24 hours, while it takes around 14 days to register a branch (foreign company as a non-Hong Kong company in Hong Kong).
A branch is taxed in the same way as a subsidiary (corporation). Applicable profits tax rate: 8.25% for the first HK$2 million of taxable profits of the subsidiary, and 16.5% for the rest of the taxable profits.
Branches are advantageous if foreign companies wish to cease their activities in Hong Kong quickly, as they can be closed quickly by simply notifying the Companies Registry of their closure.
How Bestar can Help
Doing Business in Hong Kong - a Subsidiary or a Branch
Bestar can assist with both setting up a subsidiary and a branch in Hong Kong, each with its own advantages and considerations. Let's break down the key differences and how Bestar can help:
Subsidiary
Separate Legal Entity: A subsidiary is a separate legal entity from the parent company, meaning it has its own assets, liabilities, and can enter into contracts independently.
Limited Liability: Shareholders' liability is limited to their investment in the company.
Flexibility: A subsidiary offers more flexibility in terms of business operations and financial management.
Tax Benefits: May be eligible for certain tax benefits and incentives.
Bestar's Role:
Company Formation: Bestar can handle the entire company formation process, including name registration, drafting articles of association, and obtaining necessary licenses.
Tax and Accounting: They can assist with setting up accounting systems, preparing financial statements, and handling tax compliance.
Legal and Compliance: Bestar HK can provide guidance on legal and regulatory matters, ensuring compliance with Hong Kong laws.
Secretarial Services: They can offer company secretarial services, such as maintaining statutory records and filing annual returns.
Branch
Extension of Parent Company: A branch is not a separate legal entity but an extension of the parent company.
Unlimited Liability: The parent company is liable for the branch's debts and obligations.
Simpler Setup: Generally, setting up a branch is simpler and faster than a subsidiary.
Limited Autonomy: A branch has less autonomy compared to a subsidiary, as decisions often need to be approved by the parent company.
Bestar's Role:
Registration: Bestar can assist with registering the branch with the Hong Kong Companies Registry.
Compliance: We can help ensure compliance with Hong Kong's regulatory requirements.
Accounting and Tax: Bestar can provide accounting and tax services, including preparing financial statements and filing tax returns.
Secretarial Services: We can offer secretarial services, such as maintaining statutory records.
Which Option is Right for You?
The best option for your business depends on various factors, including:
Level of Control: If you want more control over your operations, a subsidiary might be a better choice.
Liability: If you want to limit your liability, a subsidiary is more suitable.
Speed of Setup: If you need to establish a presence quickly, a branch might be faster.
Tax Implications: Consider the tax implications of each option and consult with a tax advisor.
Bestar can provide expert advice and assistance to help you make the best decision for your business.
Connect with Us
The procedures for setting up a new private limited company and registering a branch of a foreign company in Hong Kong are simple and straightforward. Contact us.
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