Background

Hong Kong (香港; “Fragrant Harbour”), officially known as Hong Kong Special Administrative Region of the People’s Republic of China, is a city on the southern coast of China at the Pearl River Estuary and the South China Sea. Hong Kong is well known for its expansive skyline, deep natural harbour and extreme population density

Towards the late 1970s, Hong Kong became established as a major entrepôt between the world and China. The city has developed into a major global trade hub and financial centre, and is regarded as a world city and one of the eight Alpha+ cities. It ranked fifth on the 2014 Global Cities Index after New York City, London, Tokyo and Paris. The city has one of the highest per capita incomes in the world, and the most severe income inequality among the advanced economies. It has a high Human Development Index and is ranked highly in the Global Competitiveness Report. Hong Kong is the third most important financial centre after New York and London. The service economy, characterized by low taxation and free trade, has been regarded as one of the world’s most laissez-faire economic policies, and the currency, the Hong Kong dollar, is the 13th most traded currency in the world.

Benefits

In short, some of the benefits of a Hong Kong corporations are:

  • Location
  • Infrastructure
  • Culture
  • Policy and Taxation
  • Current Business Boom
  • Ease of Company Incorporation

Location

As two thirds of the global middle class will soon be from Asia; entrepreneurs from all over the world are taking interest in the continent, and being in the heart of Asia, Hong Kong is often a first choice. Hong Kong is within four hours flight from all of Asia’s key regional markets.

Strategically-located in close proximity to China, Hong Kong also plays a vital role in accessing the Chinese market. Indeed, Hong Kong has taken various measures to position itself as a gateway to China with developments like the Shenzhen-Hong Kong Innovation Circle that encourages Chinese enterprises to undertake scientific research in Hong Kong. More obviously, Hong Kong’s location being one hour’s drive from the Pearl River Delta, the world’s largest manufacturing region, gives Hong Kong access to the 450 million people consumer market in

Southern China alone.
With Hong Kong’s Closer Economic Partnership Arrangement (CEPA) with China, it is undoubtedly the most business friendly economy from which to take advantage of Asia’s future opportunities.

Transport

Companies that incorporate in Hong Kong have access to its developed air, rail, road and sea links that are both modern and efficient. Hong Kong’s international airport is the busiest in all of Asia and the Pacific, handling almost 50 million passengers annually and hosting direct flights to over 150 international destinations. Transit between the city and the airport is convenient via the Airport Express, which takes a total of 23 minutes to Central. Furthermore, general commuting within Hong Kong is judged to be the best in the world by Forbes Magazine as taxis are affordable and public transport is well developed.

From a commercial perspective, Hong Kong’s international cargo air port is the world’s busiest and the Hong Kong international container port is the world’s 3rd busiest. Over 100 international shipping lines operate from Hong Kong, connecting to over 5,000 destinations worldwide. A new rail link is in the process of development, named the Guangzhou-Shenzhen-Hong Kong Express Rail Link, and it will halve current journey times between Hong Kong and Guangzhou. Furthermore, Wuhan will be five hours from Hong Kong and Shanghai will be eight.

Culture

Hong Kong’s history as a British colony and its current Chinese influences provide a bi-culture of two of the most dominant world economies today. The British influence within a Chinese culture is a significant business advantage, facilitating international entrepreneurs’ understanding of the biggest Asian market, whilst avoiding dramatic culture shocks. Hong Kong is also home to a large expatriate community of about 350,000 people and 29 million international tourists annually allowing for a diverse population throughout the year.
English and Chinese are the official languages in Hong Kong, and in the work place, English is the common language of business with most contracts written in English.

The overall culture of the Hong Kong people is business-oriented and highly competitive. This culture is supported not only by the people but through the government, as the HK Trade Development Council supports SMEs in their international ventures, and immigration policies are structured to attract professionals, talents and investors globally, to maintain Hong Kong’s competitiveness.

Policy and Taxes

In light of the fore stated business culture prevalent in Hong Kong, there is a logically business-friendly tax and legal infrastructure.

Hong Kong is ranked as the world’s freest economy by the Heritage Organization’s 2009 Index of Economic Freedom and is also the 12th least corrupt country in the world (Transparency International – Corruption Perceptions Index 2008). As a whole, Hong Kong is a secure, efficient and reliable jurisdiction to conduct international business.

Companies that incorporate in Hong Kong also benefit from its low and simple tax system. With corporate taxes limited to a maximum of 16.5% and income tax peaking at 15%, despite having few established double tax treaties, Hong Kong has the 3rd lowest tax misery in the world, as rated by Forbes’ Tax Misery Index. Furthermore, in spite of Hong Kong’s recent agreements to commit to OECD tax principles, their client confidentiality guidelines remain strong.

Hong Kong people also benefit from having no sales tax, capital gains tax or dividends tax and ultimately, despite providing such significant tax benefits, Hong Kong is not perceived to be an international tax haven.

Current Business Boom

As the world’s 2nd most competitive economy (IMD’s 2009 World Competitiveness Yearbook) and the 2nd largest recipient of foreign direct investment (FDI) (United Nations Conference on Trade and Development – UNCTAD) places Hong Kong as one of the most important business centers in Asia. The government plays a key role in Hong Kong’s competitiveness, and has implemented strong measures to encourage not only the world’s biggest economies, but also more businesses from emerging markets to invest in HK.

Incidentally, Hong Kong holds impressive awards and rankings such as being the most business efficient, the 2nd most government efficient and the 3rd most economically efficient in the world (IMD World Competitiveness Yearnook). Hong Kong also ranks as having the 2nd lowest business costs and risks in the world (Milken Institute’s Opacity Index). For these reasons it is not surprising that Hong Kong is the number one location for regional operations in Asia, with 1,252 regional headquarters and 2,328 regional offices.

Hong Kong is also a major and global financial powerhouse. In 2006 the Hong Kong Stock Exchange raised US$32 billion, amounting to 15% of total global capital raised, and higher than the capital raised in the London Stock Exchange and the New York Stock Exchange that same year. Hong Kong ranks as 3rd in the Global Financial Centres Index (GFCI), after London and New York, and is therefore the financial capital of Asia.

Hong Kong also has a major presence in the technology field, being the premier digital city and telecommunications hub of Asia. The government is continuously promoting high valued, original and high technology activities to leverage on its strong services and manufacturing sectors from the Pearl River Delta. The Hong Kong Science and Technology Parks (HKSTP), a state-of-the-art research and technology infrastructure, and Cyberport, a US$2 billion project for enterprise and professional development, further support Hong Kong’s leading role in IT.

Company Incorporation

Incorporating a business in Hong Kong is not only a wise business decision but also simple and cost-effective. Hong Kong proudly ranks as the 4th easiest place to do business by the World Bank’s Doing Business Survey (2009) and it can take as little as 2 weeks to legally incorporate a Hong Kong company.

Global corporate bank accounts are readily available and there is no requirement to rent a physical office to complete formation, virtual offices are also permissible. The main requirements for Hong Kong company formation are to have at least one company director, who can be from anywhere in the world, and a Hong Kong resident company secretary (the director and secretary cannot, however, be the same person). Although annual audited financial statements are a requirement for HK businesses, quarterly reports are not necessary, thus maintaining the security of Hong Kong business whilst being user-friendly.

With a minimum issued capital requirement of one share at HK$1, Hong Kong company incorporation is indeed a viable option for almost any entrepreneur.

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