Foreign Company Registration in Hong Kong – The Basics
What is corporate registration in Hong Kong? Branch offices in Hong Kong are an extension of a company’s headquarters, and it’s now one of the most popular business structures for foreign corporations to set up. There are several benefits of company registration in Hong Kong, making it a preferred location for setting up a new business.
One benefit of foreign company registration in Hong Kong is that it requires minimal legal requirements. Unlike international company registration, all needed for a Chinese branch office is a signed agreement between the parent corporation and the local branch office. This agreement will cover all transactions between the parent company and the branch office, including any management changes.
The only requirement for a foreign company to set up a branch office is to have its address. It is not required to obtain a PO Box or anything else for this purpose. Another benefit is that a Chinese court may not have any power to decide on disputes concerning the choice of a name for the company. For instance, the title’s will must comply with the rules of the Cantonese Language Act, which states that the foreign company must use its mother tongue for its business name, regardless of the language used by its customers. Companies that choose to register in Hong Kong have fulfilled these conditions, making it more straightforward for them to comply with local rules.
Another benefit of incorporating in Hong Kong is that foreign companies need not comply with the Basic Law, the Basic Order of Commercial Affairs, or the Law of the State Compensation Administration when engaging in business in the city. They still need to register in the Companies Registry, though. The law requires such companies to submit their business name, capital, and shareholders to the appropriate office to collect annual fees. Registration is mandatory, though, for all foreign companies doing business in the city. In addition, they need to file a yearly return to the Office of Public and International Public Relations to fulfil their obligations under the Basic Law and the State Contracts for Offshore Transactions.
The third benefit is that foreign companies do not need to hire a local representative office to open a branch office or any other forms of representation in the city. In addition, registration of a business in Hong Kong does not require any such representation from a foreign company.
Fourth, registering a foreign company in Hong Kong also allows the parent company to handle its trade in more than one country. It can operate through subsidiary offices in various countries, each having its own set of rules and regulations. A company established in Hong Kong can have branch offices in China, Japan, the United Kingdom, Australia,etc. The same holds for a foreign company that has agreed with another firm to provide it with trade facilities.
Fifth, a foreign company enjoys several benefits under the Basic Law and the Corporations Ordinance. These include exemption from paying the tax on its income from the country of operation. In addition, it enjoys a tax credit on its revenue from the country where its principal business office is situated. And lastly, it enjoys freedom from all import and export duties that the Basic Law places on its activities in the mother country.
There are two basic compliance requirements that foreign companies need to meet when establishing their headquarters in Hong Kong – the formalities of registration and the payment of the registration fees. First, foreign companies are obliged to register with the Office of the Secretary of State. In addition, it must pay the annual registration fee. The latter cost has been increased to encourage foreign businesses to establish their headquarters in Hong Kong, thus enhancing its economy.