Guide for Entrepreneurs To Start a Hong Kong Business in 2023
Opting for a business field comes with its advantages and disadvantages. However, starting out with an elaborate plan will keep your company ahead.
Hong Kong furnishes you with lots of business opportunities in a progressive environment. However, planning and market research is essential to safeguard your business. This guide will help you navigate through understanding the business environment, recent policies and benefits of starting a business in Hong Kong.
What Makes Hong Kong’s Business Environment Unique?
Hong Kong is a leading destination for businesses and is known as the world’s most liberal business economy. The statistical data of the Hong Kong registry shows that almost 1,375,172 companies were set up as of 2021.
But what is so special about Hong Kong to make it one of the world’s leading zones for business? To illustrate this better, let’s look at some of the distinctive differences Hong Kong has to offer.
Hong Kong is located at the heart of Asia. Because of its geographic location and well-established transportation system, businesses in Hong Kong have a unique advantage for capturing opportunities in nearby Asian countries.
Easy Business Setup
One feature that has attracted a large number of foreign entrepreneurs to invest in Hong Kong is the procedure of setting up a business here. The authorities of Hong Kong have made it simple and straightforward. Establishing a business in Hong Kong is also relatively inexpensive compared with other economic zones.
Tax benefits are another advantage of starting a business in Hong Kong for foreign investors and entrepreneurs. Because of its unique tax system, Hong Kong is considered a tax haven. The tax system of Hong Kong is based on territorial principles.
Favorable Tax System
Furthermore, entrepreneurs are attracted to Hong Kong due to its favorable tax system. The only direct tax on business is the Profits Tax.
The meaning of the name Hong Kong is a fragrant harbour. Hong Kong has a rich history of being a farming spot. However, it later became a colony for the British. In 1997, the British handed over Hong Kong back to the Republic of China. The administrative region of the country includes Hong Kong, Kowloon, The New Territories, and other small underlying islands.
The population of Hong Kong is over 7 million. It is among the richest cities in the world. According to a study, Hong Kong has the most Rolls-Royces per person in comparison to other countries of the world.
Hong Kong is one of the greatest economies of all time due to its tax laws and trading. It has a free market economy that helps business owners worldwide to have a very comfortable lifestyle.
There are various options for investment and business opportunities in Hong Kong. For example, you can invest in travel agencies, call center agencies, manufacturing businesses, consultancy, furniture making, and many more.
Govt Policies and Initiatives
The Government of Hong Kong provides support for businesses. Favorable policies, including government funding schemes, are offered to new businesses in Hong Kong.
Notable Banking Facilities
You will need clarification when choosing your bank and getting started because Hong Kong has a long list of reputable banks with extraordinary services they provide to startup business owners.
Ease in Selling Share
Hong Kong goes easy when it comes to selling shares. There are various options like Exchange-Traded Funds (ETFs) and stock exchange trading where you can sell your shares.
Hong Kong has one of the most talented workforces in which almost half its population are well-educated. The work culture often encourages hard-work and growth.
Hong Kong Budget 2022-2023 Overview
When thinking about investing in any foreign country, the first and foremost question that comes to mind is the performance of that country’s economy. If you are interested in forming your own business in Hong Kong per se, it is advisable to take notes of the economy and policies around the yearly budget.
It is not a surprise that the whole world faced backdrops in every economic sector due to the recent pandemic. But in 2022, almost every part of the world is working towards enhancing its economy. The same goes for Hong Kong with its reformed budget.
The finance secretary of Hong Kong, Paul Chan, presented the budget for 2022. Despite the backdrops caused by COVID-19, various measures have been introduced to the new budget. Funds of HKD 64 billion have been added to Covid relief plan. The government plans to offer funds to support the following:
- Citizens and SMEs (Small and Medium-sized Enterprises)
- In support of the economy
- Future economic development either by id-term plan or long-term plans.
Foreign investors interested in setting up businesses in Hong Kong will be more likely to do so now with the new budget in place. Below is how the recent budget can assist businesses in Hong Kong.
Recent Budget Reforms in Hong Kong
In 2021, Hong Kong’s economy grew by 6.4%. This was recognized as a positive outcome after two years. Here are a few reforms included in the budget for businesses.
New International Tax Standard
The Hong Kong government proposed the implementation of the international tax reform proposed by the OECD (Organisation for Economic Cooperation and Development). This reform aims that every international firm must pay fair taxes.
A proposal to implement the global minimum rate by mid-2022 was endorsed by 137 countries. The authorities in Hong Kong are planning to regulate a domestic minimum top-up tax on MNEs (multinational enterprises). This step is proposed to ensure that Hong Kong’s tax rate reaches the global minimum effective tax rate. In addition, Hong Kong will be able to generate HKD 15 billion in annual revenue from this.
Additional Tax Cuts
In the recent budget, the Hong Kong government plans to reduce the tax burden on its citizens by lowering the salaries tax, profit tax, and tax under personal assessment. However, if you are separately liable to pay salary or profit tax, you can enjoy the reduction proposed by the government.
Extended SME Loan Scheme
The existing scheme is a special 100% Loan Guarantee Scheme which you can get an extension till June 2023. Companies or firms are eligible to borrow HK 9 $million rather than HK$ 6 million. The repayment period for the interest issued on this loan is extended to 10 years. Only interest must be repaid, not the principal.
SME Tenants Cannot Be Penalised for Late Rent
It is a proposal that SME tenants are liable to repay the amount to property developers who can delay their payment for up to six months. This proposal needs the approval of the legislative council. Once they approve this proposal, no developer will be allowed to chase the tenants.
HKD 10 Billion for Hong Kong Tech Firms
Hong Kong’s growth portfolio is planning to invest HKD 10 billion to promote the growth of the tech field. This investment is applicable to both listed and non-listed tech firm start-ups in Hong Kong. Half of the investment will be used for strategic tech funds to help local start-ups, and the other will offer opportunities in the Hong Kong region.
What Are Some of the Important Tax Measures?
After learning about the steps the authorities are taking to encourage businesses. It’s vital to look at the key tax measures enforced in Hong Kong.
- Two-tier tax profit rates for the firms (8.25%/16.5%). For corporate businesses (7.5%/15%), this remains unchanged.
- A tax concession of 8.25% to promote maritime enterprises for establishment in Hong Kong.
Salaries Tax and Tax Under Personal Assessment
- The new budget proposes reduction in salaries and personal assessment tax for those affected by the pandemic. The reduction is 100 percent for the year 2021-2022.
- This benefits 2 million taxpayers.
- The government will face a decline in revenue by HK$13.1 billion.
Additional Measures To Support Enterprises
Here are a few more fiscal measures proposed to uplift the economic situation and support enterprises in Hong Kong.
- Extended the ongoing concession on 34 government groups of fees and charges. This will come into effect from the month of October.
- Non-domestic households will continue to avail of a concession of 75 percent of water and sewage charges.
Tips for Starting a Business in Hong Kong
Whenever you are ready to start a business in Hong Kong, the following information might help smoothen the process.
Select the Company Name and Register
The first and foremost step for setting up the business is to name your company or business. Once a name has been selected, the next step is to register the company with the Hong Kong authorities. Check your HK company name on our website.
Hire Third-Party Services
Third-party services are advisable for foreign investors to understand all the region’s rules and regulations. New businesses will also be able to manage all legal formalities, and any trouble that might negatively affect their reputation can be avoided.
Open a Bank Account
To establish a company in Hong Kong, you must open a bank account. The bank receipts and other required legal documents will also be much easier to submit when you register your company. Once you have a bank account, it will be easier for you to receive all types of special grants and concessions offered by the Hong Kong government.
Hire Talented Employees
If you want to earn profit and make your business successful in Hong Kong, hiring experienced staff and employees is beneficial. Their experience and skills will surely uplift your business endeavors.
File Annual Taxes
Upon registering your company in Hong Kong, you must file all taxes and legal tenders required by the government. This will help you in the smooth functioning of your business, and you can also avoid legal hurdles.
Start Your Company in Hong Kong Today With Startupr
Are you having trouble setting up your business in Hong Kong or understanding the paperwork? We at Startupr provide you with in-depth knowledge and help you to get a better start in business establishments in Hong Kong. Contact us today to get a consultation from our experienced elite professionals.