Hong Kong is a leading international business hub, strategically located and known for its pro-business environment and world-class infrastructure, that has seen a steady increase in foreign businesses looking to establish a base to access Asian markets. This article will provide guidance for UK businesses looking to establish a subsidiary in Hong Kong.
Advantages to Having a Subsidiary Company in Hong Kong
- It’s the Gateway to Asia: Hong Kong’s central location provides close access to the vast and growing markets of mainland China and Southeast Asia.
- Doing Business is Easy: Hong Kong offers a well-regulated and stable environment, consistently placing among the top 10 places to do business according to the World Bank.
- International Financial Hub: Gain access to a wide range of banking and financial services designed to cater to international businesses.
- English Proficiency: With English as one of the official languages, there are few other places in Asia easier for citizens of the UK to broadly communicate with.
The UK has a tiered tax system that taxes the entirety of your income depending on your income amount ranging from 19% to 25%, with marginal relief in the middle to smooth out the jump between the 2 tiers.
Meanwhile, Hong Kong only taxes profits generated within the territory at a rate of 8.25% on assessable profits of the first HK$2,000,000, and 16.5% on any remaining assessable profits over the first HK$2,000,000, making it the simpler system of the two. However, the UK imposes a blanket tax on all foreign-sourced income of its citizens, including profits and dividends from foreign-based entities.
Hong Kong and the UK do have a double taxation treaty in effect, allowing UK citizens to effectively mitigate any taxes paid in Hong Kong.
Despite the global tax, Hong Kong’s close proximity to growing Asian markets have the potential to more than make up for the tax.
| Aspect | Hong Kong | United Kingdom |
| Tax Base | Profits arising in or derived from Hong Kong | Global tax on all income sources |
| Tax Rates | 8.25% on first HKD 2 million of profits, 16.5% on profits above HKD 2 million | 19% on incomes below £50,000, marginal tax increases of +1.5% for every £50,000 between 19% and 25%, 25% on incomes above £250,000. |
| Territorial Taxation | Yes, only profits generated in Hong Kong are taxed | No, worldwide taxation on global profits |
Required Information to Incorporate
An Appropriate Company Name
Applicants must select a unique English and/or Chinese name for their company to register into the Companies Registry. To assist, The Companies Registry offers an online search for availability on their website.
Directors and Shareholders ID and Address Proof
Applicants must submit the Articles of Association detailing the company’s directors and shareholders, complete with passport identification and address proof. Like the UK, none of the directors or shareholders of a Hong Kong company are required to have local residency.
Registered Office Address
Every Hong Kong company must have a registered office address in Hong Kong. Virtual office services are commonly used by subsidiaries with foreign owners, and often come packaged with company secretarial and annual return services.
Capital Requirements
Like the UK, Hong Kong has no minimum share capital requirements for private limited companies, making it highly accessible and cost-effective to start a business.
Incorporation Procedures
Hong Kong’s incorporation process is as quick as the UK’s, typically taking between 1-3 business days, and can be completed remotely, forgoing the need for applicants to travel to Hong Kong. Documents can be submitted online on the Company Registry’s website or by courier.
Documents to be Submitted
Applicants need to fill in the Form NNC1 (application for incorporation) and the company’s Articles of Association along with passport information and address proof of the directors and shareholders for KYC compliance.
Parent companies may also need to provide certified copies of their parent company’s incorporation documents to establish their subsidiary in Hong Kong.
Companies Registry Submission and Approval
On submission, the Companies Registry will review the application. If the documents are compliant, they will then issue a Certificate of Incorporation.
Business Registration Certificate
Following incorporation, a Business Registration Certificate is automatically issued by the Inland Revenue Department, allowing the subsidiary to begin conducting business.
Appointing a Company Secretary
Unlike the UK, Hong Kong still mandates a company secretary, who must be a Hong Kong resident or a registered corporate service provider, but cannot also be a director. This company secretary will act as the liaison between the subsidiary and the government, forwarding any government correspondence to the parent company anywhere in the world.
Minimum Cost to Incorporate
Hong Kong has a higher minimum cost to incorporate compared to the UK, including a business registration fee that is not necessary in the UK. For simplicity, we focused on the absolute minimum costs necessary to incorporate a company, and left out company secretarial fees, business address fees, and annual return fees, focusing on the minimum cost necessary to incorporate a company.
| Hong Kong (£ GBP) | UK (£ GBP) | |
| Company Registration Fee | £149 | £50 |
| Business Registration Fee | £212 (1-year) | N/A |
| Total | £371 | £50 |
The UK does not require companies to renew their business registration annually, which costs about £216 in Hong Kong.
Opening a Business Bank Account
Opening a corporate bank account in Hong Kong will require the applicant company to submit incorporation documents, a proof of business address, identification of directors and shareholders, and details about their nature of the business when opening a bank account.
The bank will also implement stringent Know Your Customer (KYC) and anti-money laundering checks to ensure new businesses are in compliance with international standards, and may ask for a detailed business plan, details about the source of funds and ultimate beneficial owners for newly incorporated subsidiary companies. These measures typically take traditional banks a minimum of two weeks to open an account, almost double the time needed in the UK.
Startups are also more likely to face challenges trying to open bank accounts with traditional banks without a history to convince with. To meet these challenges, digital banks in Hong Kong have adopted fully digital onboarding procedures and easier approval, including using video call interviews to save applicants in remote places the time and effort to open an account. Digital banks in Hong Kong can also significantly cut down the time needed to ready an account to 1-3 business days, and could serve as a quick alternative for new subsidiary companies and foreign startups.
Annual Returns
Like the UK, every Hong Kong company must file an annual Confirmation Statement, called the Annual Return in Hong Kong, with the Companies Registry. This includes audited financial statements and profits tax returns to the Inland Revenue Department. Unlike the UK, only company secretaries can file a company’s annual return. Hong Kong also allows a filing window of up to 42 days from delivery compared to the UK’s 14 days, but will serve comparatively high penalties for late filings of annual returns, reaching upwards of £336.
Conclusion
Just as the UK is considered one of the easiest places in Europe to incorporate a company, Hong Kong’s business-friendly environment, straightforward incorporation, and double tax treaty provides a solid platform for English subsidiary companies to grow. If you have more questions not answered here, drop us a message, and help you decide if starting a subsidiary company in Hong Kong is right for you.
