Last year I set up a Limited for my online business in Hong Kong. At that time I couldn’t find any reliable or nearly complete guide on this topic. And no website discussed the most common questions for people like you and me who run an online business and don’t live in Hong Kong.
So I thought it’s time for a detailed step-by-step guide on how to set up your internet business in Hong Kong, how to maintain it in the subsequent years and how much everything costs.
The main reason why so many online entrepreneurs or digital nomads want to set up their business in Hong Kong is simply due to tax reasons. Yes it is true, you will not need to pay corporate tax for all revenues generated outside of Hong Kong.
However, the set up and maintenance costs for a Limited in Hong Kong may be cheaper than in your home country, but slightly more expensive than in other popular offshore countries like the Seychelles or British Virgin Islands.
1. Why Hong Kong?
For me it is the great mix of financial incentives, ease of administration (in my case through an agency), stability of the Hong Kong economy and financial market and trustworthiness for anyone you are doing business with.
So yes, the maintenance fees may be higher in Hong Kong than in some offshore places, but that’s fine for me since I prefer my money being deposited into a much more safe Hong Kong bank account that handles all currencies I need. Also, let’s say you just successfully finished a proposal call for a new SEO client and send him the invoice, it just creates much more trustworthiness and seriousness to your business with a Hong Kong address instead of one in some tropical island in the pacific ocean.
I will go into the step by step guide of the business set up process in just a moment, but before that the most important things in the overview:
- The set up of a Hong Kong Limited costs between 14,000-16,000 HKD. That’s about the same amount you can expect in the subsequent years for the maintenance.
- Requirements: At least 1 director & 1 shareholder (can be the same person), 1 company secretary, a minimum deposit of 1 HKD (most banks will ask for more though, see below) as well as a business address in Hong Kong (yes, this can be also a Virtual Office, see below).
- You do not need a Hong Kong Citizenship, Business Visa or Work Permit in order to set up and run a Hong Kong Limited. In other words: You can come here on a tourist visa and open your business (that’s what I did).
- There are 2 ways of forming a company in HK: Setting up a new company or purchasing a ready-made company (called a shelf company). The main difference is that you can choose your own name if you start a whole new company (that’s what I did). It’s just a few hundred HKD more expensive.
- The setup process takes about 10 working days for an all-new company and about 2 working days for a ready-made company.
- You need to renew your Business License on a yearly basis, do an Annual Audit as well as submit the Profit Tax Return (I’m using an agency to do that for me).
- The corporate tax for profits in Hong Kong is currently 16.5%.
- Only income derived directly from Hong Kong is subject to tax.
Do you need to come to Hong Kong personally for the set up?
Yes, you will need to go there in order to open your business bank account. In my case I picked up my company documents at my agency in the morning and then I went to HSBC and OCBC for my appointments with the banker. Why two banks? Just in case one of the applications would be denied – which does happen in some cases, especially at HSBC.
2. Formation of the Hong Kong Limited
The company formation in Hong Kong is quite easy, straight forward and quick. Especially if you are using a renowned local agency. I have been using Bridges since the beginning and extremely satisfied with their service and prices. Whenever I have questions (even before I made the decision to set up with them) they are always quick, helpful and right on the point with their replies.
Of course you can also do it without an agency and save a few hundred dollars every year, but then you would have to do everything by yourself including accounting, auditing, profit tax return, renewal of company registration in subsequent years etc. That would take up so much time that I simply prefer it being handled by an agency.
The Incorporation Process in 10 Steps:
- You choose the type for your company: All-new or ready-made. Again, ready-made means you would buy a shelf company which is a few days quicker to set up but you do not get to choose a name. Much more common is that you start a new one, then the next step would be:
- You choose a name for your company. That’s the first thing your agency asks you as they need to check if the name is available and not already taken. You can also check it yourself here.
- You choose a business address option for your company. If you have an online business like me and don’t need a physical office space or meeting room for clients (your agency can provide that though) you would go for a virtual office.
- You decide how many directors and shareholders your company will have and who it will be. The minimum requirement is one and it can be the same person. You will also need to set the registered capital (for accounting purposes) which has to be at least 1 HKD. And finally you will need to confirm who will be your company secretary – if you use an agency like Bridges that will be included in their package.
- After confirming all that your agency will send you the incorporation form that you will need to print, fill out and sign. You can just scan it and send it back to them.
- You will also need to send them a copy of your passport as well as an address proof. An apartment rental, utility or phone bill is sufficient here (it doesn’t need to be an official confirmation of domicile).
- You will need to make the payment for them to start with the incorporation process.
- Your agency will send you the government paperwork (7 different documents). You will need to print it out, sign it, scan it and send them via email to check. Then send it to them via courier.
- After 8-10 days (or 2 days if you chose the ready-made company) they will send you both the confirmation that your business has been incorporated and that your company kit is ready for pick up as well as the virtual office welcome email with all important information including your business assigned address.
At the same time your agency will inform you of the appointment with the banker(s), usually at HSBC and OCBC. Then you can book your flight.
- You fly to Hong Kong, pick up your company kit at the agency, meet the banker to open your bank account and have an awesome time up on Victoria Peak in the afternoon and a beer or two in Wan Chai at night to celebrate the fact that you’re now a business owner in Hong Kong!
How much does it cost to set up a Hong Kong Limited?
It depends on if you use an agency like me or if you do it all by yourself. If you use an agency, this is what you can expect for the full package and fees for the first year (prices from Bridges):
- HK Company Incorporation Package – 7,400 HKD
- Company Secretary Service – 2,500 HKD
- Virtual Office Annual Fee (Silver Plus Plan) – 5,400 HKD
- 1 Month Security Deposit for Virtual Office – 450 HKD
- Petty Cash for Miscellaneous Expenses – 500 HKD
That’s about 15,000 HKD in total. If you are interested in using Bridges like me, then I can introduce you to them (Email: [email protected]).
For this recommendation you will save 500 HKD and I will receive 500 HKD as a commission. Sound like a win-win situation?
On top of that you should calculate the costs for your trip to Hong Kong. Especially the hotels tend to be quite pricey in comparison to other Asian cities. I found quite a good deal at the Rainbow Hotel (no affiliate link) in Jordan for about 75 USD a night for a very neat and modern but obviously not that spacious room. The hotel is a five minute walk from the Subway station with lots of malls, bars and the popular night market on Temple Street close by.
Additional costs during the first year would occur if you hire someone for the accounting (again Bridges or other agencies offer these services, see Part 3 about the company maintenance below).
How long does the setup process take?
As already mentioned, once you have submitted all documents and signed forms to your agency it takes up to 10 days for a new company to be incorporated, for a shelf company it’s just about 2 days.
In my case, from the first email I sent to Bridges inquiring the price and process to the finish of the incorporation process it took just 9 days.
New Company or Shelf Company?
A shelf company is an established company with no assets and liabilities which is available for sale. It’s suitable for those people who don’t care about the company name (which can still be changed in the future) and who are under time pressure.
The other advantage of a shelf company apart from the shorter setup time is the fact that the company is older which can be positive when dealing with potential prospects or customers. However, the disadvantage is that you will need to do the annual audit earlier compared to a new company – which is due only after 18 months from the date of incorporation.
Long story short: If you can wait a week longer for the setup process to be finished, go for a new company so you can choose your name right away and have more freedom of time until you need to deal with the accounting part.
3. Opening of the Bank Account
It’s not compulsory that you have your business bank account in Hong Kong, but it makes things easier not only when dealing with clients but also in terms of accounting. Popular alternatives include Singapore, Shanghai and Bangkok.
HSBC is the most popular choice for foreigners who start a new business in Hong Kong. It’s the biggest bank in Hong Kong and they have branches and ATMs all over the world. However, their application process is also among the most difficult ones, and they have tightened their regulations during the last few years. Means more and more applications get denied.
The most popular alternative to HSBC is OCBC Wing Hang which is among the biggest banks not only in HK but in all of Asia. When I set up my business with Bridges last year, they arranged appointments with both banks – just in case one of them denied my application.
Other popular banks in Hong Kong include Hang Seng Bank, Standard Chartered Bank, Bank of China, Citibank and DBS. However, most of them require a physical office space, means a virtual office like you probably want it for your internet business is not sufficient. Just check before or ask your agency if you prefer one of these banks. HSBC and OCBC currently don’t have this policy and accept virtual offices.
The Bank Account Opening Appointment
The final step in the incorporation process is to meet with the banker to open your bank account. You will need to present your business concept and bring along the following documents:
- Recent 3 months original residential address proof in English
- Business Registration License (included in the company kit)
- Certificate of Incorporation (included in the company kit)
- Articles of Association (included in the company kit)
- NNC1 (included in the company kit)
- One set of certified true copy of company registration document (included in the company kit)
- Brief business plan
- Business proof (e.g. email conversation with a client or partner)
- Account opening fee (cheque or cash), e.g. 1,150 HKD at HSBC & 1,000 HKD at OCBC, your agency will let you know in the email confirming the appointment
The main part of the meeting with the banker is the presentation of your business plan. Don’t worry, you won’t need to prepare a fancy Power Point Presentation, but you should have a short business plan (5-7 pages will do) describing the most important things:
- State business background of all directors, shareholders and beneficial owners
- State occupation/duties of beneficial owners
- Nature of business of the company (e.g. goods/services involved)
- Reasons for setting up the account in Hong Kong
- Major types of transactions
- Countries of major buyers
- Anticipated level of activity
The most important part of the business plan as well as of the conversation with the banker apart from explaining the business objective (what are you actually doing online?) is to give a reason why you would like to set up in Hong Kong as well as describing the financial forecast.
Reason for setting up in Hong Kong? Don’t argue with tax reasons alone, you might even want to leave it out completely. Tell them instead that you favor the stable financial and economic situation in Hong Kong in comparison to the uncertain markets back in your home country. And that you had other friends who also set up in Hong Kong and have been very satisfied. That’s not even a lie, you know at least one person who has a business in Hong Kong: I.
Financial forecast? Obviously the banks want to see stable and regular income from clients or partners. Make sure you explain that both in the business plan as well in person in front of the banker with full persuasion. It extremely helps if you can bring along some income statements from your online activities, like a few printed screenshots from PayPal worked great for me.
My meetings with the bankers took almost two hours both at HSBC and OCBC. About half of that time you discuss your business concept and the other half is her or him explaining you their terms as well as taking all necessary copies and you signing several forms and pages.
The fees for the opening of the account, annual handling and transactions are obviously slightly different from bank to bank. But in order for you to get an idea, these are the current charges at HSBC:
- Account Opening Fee: 1,150 HKD
- Minimum Deposit: 50,000 HKD
- Handling Fee if Balance is less than the Minimum Deposit: 100 HKD/month
- International Transaction Fees: 115-265 HKD (detailed tariffs structure here)
- ATM Card: 50 HKD/year
- ATM Card Withdrawal Fee: Free (using HSBC ATMs), 15 / 25 HKD (using UnionPay / Plus, JETCO)
- Commission Charge for remittance from abroad: 0.2-0.5% per transaction
- PayPal: 4,4% for receiving money, free for sending money (like everywhere else)
Credit Card for your business account
Not every bank provides credit cards to new account holders. Like I asked the banker at OCBC Wing Hang and his reply was just „Not at this time, sir.“ The reason for that is because I didn’t have any credit record in Hong Kong at that time so I needed to wait until I completed my first annual audit and tax return to apply for one.
Things are different at HSBC where you can get a credit card right away, as long as you make a deposit of at least 50,000 HKD into your account. I don’t use my credit card very frequently though, because most of my online business related expenses are paid via PayPal (which is free).
Watch the video:
4. Maintenance of the Hong Kong Limited
After you have completed the setup process you will not have any monthly duties. Means no monthly tax declarations and the like. The maintenance of your Hong Kong Limited is on a yearly basis and consists of:
- Business Registration Renewal – 600 HKD
- Company Secretary Service – 2,500 HKD
- Virtual Office Rental – 5,400 HKD (see Pricing Table of Bridges)
- Accounting – 6,00 HKD (<10 Monthly Entries, see Pricing Table of Bridges)
- Auditing – 7,000 HKD (<1,000,000 HKD Annual Turnover, see Pricing Table of Bridges)
- Employers Tax Return – 500 HKD
- Government Fee Annual Return – 105 HKD
The above prices are all from Bridges and make a total of about 22,000 HKD per year. Of course you can save some money by doing the accounting yourself (Waveapps is one of the most popular applications), but I prefer the All-in-one solution and want to focus 100% on my business.
Additional costs include (as required):
- Secretary scans your post mail and sends to you via email – 5 HKD per page
(will be deducted from your Petty Cash which is refilled on demand)
- International Courier Services via FedEx – see Pricing Table of Bridges
- Rental of Conference Meeting Room – 600 HKD/hour
- Translation, Transcription, Interpretation Services – upon request
I just use the first one on this list which is really convenient: I currently only receive letters from the bank (transaction advices, account statements) and my secretary scans all pages and sends them to me via email literally within a couple of hours after it has arrived. Then it’s stored in my mailbox and ready for me to pick up any time.
When to submit your first Audit Report & Tax Return?
You will receive your first Profit Tax Return in about 18 months after the date of incorporation. Then you have 3 months to prepare your audit report to submit together.
There are 2 financial cut-off dates – you can choose either 31 December, which matches up with the date of most overseas companies, or 31 March, which is the HK Government’s fiscal cut-off date. I chose the 31 December simply because it gives me a clearer image of my performance on a calendar yearly basis.
Do you need to go to Hong Kong again during the subsequent years?
If you hire an agency to do your auditing and tax return for you, then there’s no need to fly to Hong Kong again. All necessary signatures can be made simply by them sending you emails, you print it out, sign it and send it back via courier.
However, it’s kind of weird to have a business in some place and then not going there at all. At least for me. I do like to visit Hong Kong at least once a year, not only because I love the city and it always has new things to explore, but also to meet up with my agency to have a quick personal chat about the situation, especially from the accounting side. Also, if you apply for a new ATM or Credit Card you will have to pick it up in person, too.
For every payment you receive you must create an invoice for the auditing. Yes, that’s not only for clients you invoice but also for affiliate payments you receive. Just create the invoice, it doesn’t mean that you actually need to send them the invoice but it’s just for the accounting and auditing purposes.
Every invoice should include the following:
- Invoice number (e.g. 0001)
- Invoice date
- Description of products or services provided
- Quantity of products or services provided (if it’s an SEO client that would mean the duration of your service, usually 1 month)
- Total invoice value
You can find my personal invoice template here (Word Document). Feel free to use it for your own business.
I keep all my invoices and bank statements in a Google Docs folder that my accountant from Bridges has access to. Simple and efficient.
After about 18 months from the incorporation date the IRD (Inland Revenue Department) will send you three types of tax returns:
- Profit Tax Return (every year begin of April)
- Employers Tax Return (every year begin of April)
- Personal Tax Return (every year begin of May)
If you don’t have any employees for your company (freelancers from the likes of Fiverr or Upwork obviously don’t count as employees, as long as they are not Hong Kong citizens) then you only need to do the profit tax return and employers tax return. In the latter one you would state all director salaries, means all the money you have paid yourself during the fiscal year from 1st of April to 31st of March.
Profit Tax Return:
After you have received the profit tax return form you have 3 months to fill it out and send it back to the IRD, along with the audit report in HK SME-Format.
Every company that has been established within 18 months has to file the profit tax return – no matter if they have generated any profits or not. Only if you haven’t started your business operations yet (which is probably not the case – why would you set up in the first place?), then you could state „business not yet commenced“ in the tax return and you don’t need to submit an audit report.
If you miss the deadline of returning the profit tax form within 3 months, you can apply for an extension of 7.5 months at the IRD (in written form). If you miss this deadline again, your tax burden will be estimated. You then have 1 month to pay or file a dispute on that. If you miss that deadline again, your tax burden will be multiplied by 3 and you may have to pay a fine of up to 10,000 HKD.
Employers Tax Return:
The employers tax return consists of 1 page and must be send back within 1 month. There are 3 types of payments to the director: Salary, Director’s Fee and Commission.
- Director’s Salary: Paid to all employees of the company that have an employment contract. The salary is only subject to tax if the employee is based in HK or is invoicing HK clients.
- Director’s Fee & Commission: This is considered no salary, but a payment for the duties as a director. The director’s fee is subject to tax, no matter if the director is based in HK or not.
When it comes to bookkeeping, you can do it either yourself or hire someone to do it for you. However, the auditing part must be done by a Hong Kong Certified Public Accountant (CPA). You can either look for one yourself or again hire Bridges to do it for you. The audit report must include the following parts:
- Profit & Loss Account
- Balance Sheet
- Trial Balance
- General Ledger
- Copies of Company Documents including Company Registration, Certificate of Incorporation, Articles of Association, Bank Statements, Invoices & Contracts.
After your CPA has signed the audit report, it will be sent to the IRD along with the filled out Profit Tax Return. Then it takes 2-3 months until you get a notification of your tax burden.
If all your revenues are derived from outside of Hong Kong, then you can file an application for an „Offshore Exemption Claim“ along with your annual audit report and tax return submission at the IRD (Inland Revenue Department).
This process can take up to 2 years and costs at least 20,000 HKD, depending on how many documents the IRD requires from you to prove that all of your business activities are taking part outside of Hong Kong (including negotiations with potential business partners).
If your Offshore Exemption Claim is successful, all of your revenues are exempted from profit tax and you will also be exempted from the submission of an annual audit report in subsequent years.
In my case I don’t file one because I have one affiliate partner who is based in Hong Kong. And you never know, with more and more online businesses being based in Hong Kong, maybe you will have more clients and partners there in the future than you may expect right now.
Also, I’m thinking about taking up loans for real estate investments in the future – and the banks will almost always ask for tax assessments of the previous 3-5 years. Then it’s good to have them.
6. Liquidation of the Hong Kong Limited
If you run a business in Hong Kong that means you need to pay yearly fees for the renewal of the business license, secretary, office address and auditing. So if you shouldn’t use your HK company for whatever reason at some point in the future, it is best to just close it down.
I don’t have any experiences with the closing down process of a Hong Kong Limited yet, but I asked my agency for some information on this topic that I will describe here:
There are two types of liquidations of a HK Limited:
De-Registration and Winding-Up. The latter one is divided in Voluntary Winding-Up and Compulsory Winding-Up and only for those companies that have outstanding liabilities. Much more likely in your and my case, however, when running an online business is that you don’t have any outstanding liabilities. Then you would go this route:
The following requirements must be fulfilled in order to start the de-registration process:
- All directors and shareholders of the company agree to the de-registration
- No business activities have taken place within 3 months before the date of application of the de-registration
- The company has no outstanding liabilities
- The company has obtained a „Notice of No Objection“ from the IRD confirming that there are no outstanding tax declarations or payments.
The process of the deregistration takes up to 5 months. After the Companies Registry has checked and approved the documentation of the deregistration application, it will issue a Letter of Approval within 5 working days. Then it will publish a notice of proposed deregistration in the Gazette. If there comes no rejection within 3 months of publishing this notice, the Registry will publish a final notice in the Gazette declaring that the company has been deregistered.
The last step is then for you (or your agency) to apply for a Cancellation of Business Registration at the Business Registration Office of the IRD. This must be done in written within 1 month from the date of cessation of business.
Questions or Remarks?
In case you were still considering if you want to set up your business in Hong Kong then I hope you found this guide useful, and if you already have a Limited in HK then maybe you got some good value out of the maintenance part. If you have any questions or remarks please feel free to leave a comment below and I’ll help out as good as I can.