The Pros & Cons of Starting a Business in Hong Kong
Hong Kong is often ranked as one of the best jurisdictions in the world to open and operate a business. Over the decades, the Special Administrative Region has attracted entrepreneurs from around the world with the promise of fewer government regulations and lower business and personal taxes. However, while Hong Kong has developed an ‘entrepreneur-friendly’ reputation, the reality is that opening a business isn’t without its challenges.
In this guide, we will examine a few of the pros and the cons of registering and running an organisation in the Special Administrative Region of Hong Kong.
Cons of Starting Business Operations in Hong Kong
Con #1 - Opening a Bank Account
While opening a business in Hong Kong is a relatively simple and straightforward process, the opposite can be said for opening a business bank account. Not only does applying to open an account with a traditional bank take a frustrating amount of time, but it’s also costly and there is no guarantee that the bank will approve your application.
To further complicate the process, Hong Kong’s traditional banks require all directors of the company to be physically present when opening a bank account. Moreover, they require applicants to prove the legitimacy of their business, which requires extensive paperwork that commonly includes a resolution by the board of directors, establishment documents, a corporate chart, as well as a proper traditional business plan and substantial initial deposit.
Opening a bank account is the most time-consuming aspect of starting a business in Hong Kong which explains the demand for simpler online banking alternatives. Here at Currenxie, we offer an entire financial ecosystem to entrepreneurs who want to open a business in Hong Kong, or anywhere else in the world. Our Currenxie Global Account gives you access to bank account numbers, payments, and foreign exchange - everything your business needs to go global.
Con #2 - Cost of Rent
While running a business online is relatively affordable, if you require a physical presence for your business in Hong Kong, you may have to dig deep into your pockets as property prices in the SAR have been the most expensive in the world for seven years running. Commercial rental prices in Central, for example, are 57% higher than Tokyo — and retail prices in Causeway Bay are more expensive than New York’s 5th Avenue.
Pro #1 - Ease of Business Registration
One of the main reasons entrepreneurs look to Hong Kong to kickstart their companies is its straightforward, inexpensive and fairly quick business registration process.
To find out more about registering a business in the jurisdiction, visit our guide to opening an eCommerce business in Hong Kong.
Pro #2 - Simple Tax System
Hong Kong’s tax rate is considered a major selling point. The business tax rate in Hong Kong is 8.25% for the first HK$2 million of assessable profits and 16.5% on all additional profits. Personal tax rates are also considered some of the lowest in the world, ranging from 2% to 17%. Additionally, due to the state’s single-tier tax system, businesses only need to pay tax on profits derived within Hong Kong’s borders.
It’s also worth noting that Hong Kong has no sales tax, no value-added tax, no capital gains tax and no withholding tax, making it even more attractive to aspiring entrepreneurs and small business owners. There are also numerous tax incentives available to businesses to help further decrease how much they pay in taxes.
Pro #3 - Company Directors and Shareholders
The requirements for company directors and shareholders are also straightforward and simple to understand. Each business must appoint at least one director. The director must be an actual person (i.e. not a company), at least 18 years of age, and must not be bankrupt or have any history of malpractice. Directors can be of any nationality and residency, and are not required to be shareholders.
Every registered business in Hong Kong must also appoint at least one (but no more than fifty) shareholder. Shareholders must be over the age of 18. There are no residency, nationality, or residency requirements.
Final Thoughts on the Pros and the Cons of Opening a Business in Hong Kong
Hong Kong has long been a haven for entrepreneurs, and will likely continue to be for years to come. Here at Currenxie, we look forward to helping business owners around Hong Kong and the world with our simple, and straightforward business banking solutions.
Head to our home page to get started: www.currenxie.com.