As a Special Administrative Region (SAR) of China, Hong Kong enjoys a highly active and cooperative business relationship with the mainland. It serves as a leading conduit for foreign investment and a primary offshore capital-raising center. As one of the world’s largest IPO markets, Hong Kong is expected to attract more Chinese companies to list amid tensions between the US and China.
Hong Kong’s geographic position enables businesses to easily tap into the various opportunities in the Guangdong-Hong Kong-Macao Greater Bay Area (GBA) and the mainland market. The GBA – now the world's largest and most populated bay area – strengthens Hong Kong’s geographical and economic ties with the mainland.
The Mainland and Hong Kong Closer Economic Partnership Agreement (CEPA) allows Hong Kong products and services easier access to the vast mainland market. CEPA goes beyond China’s WTO commitments, eliminating tariffs and allowing preferential access to some service sectors. Overseas companies can also benefit from CEPA by setting up production lines in Hong Kong to produce goods that meet CEPA rules of origin requirements.
In the financial sector, Hong Kong and Mainland China have enhanced their financial connectivity through initiatives like Shanghai-Hong Kong Stock Connect, Shenzhen-Hong Kong Stock Connect, Bond Connect, and the Mainland-Hong Kong Mutual Recognition of Funds arrangement. These initiatives strengthen Hong Kong’s status as an international financial hub under the GBA development plan.
Simple and Low Tax Regime
Hong Kong offers one of the most tax-friendly systems in the world, imposing only three kinds of direct taxes:
Profits tax (for incorporated bodies)
Salaries tax (for personal income)
Property tax (for income sources from Hong Kong property)
Hong Kong has no turnover taxes, including sales tax or value-added tax, making it a favorable location for profit shifting and re-invoicing. The city adopts a territorial basis of taxation, meaning only income sourced from Hong Kong is taxable. There is no distinction between residents and non-residents, allowing residents to receive profits from abroad without incurring tax in Hong Kong.
Tax Type | Rate |
Profits Tax (First HK$2M) | 8.25% |
Profits Tax (Above HK$2M) | 16.5% |
Unincorporated Businesses | 7.5% for first HK$2M, 15% above HK$2M |
Salaries Tax | 15% |
Property Tax | 15% |
One of the World’s Freest Economies
Hong Kong’s economic system is defined as a free-market economy characterized by minimal government intervention, low taxation, free port trade, and a highly internationalized and modernized financial market. The government’s policy is strictly non-interventionist, enabling Hong Kong to maintain a free and efficient business environment.
Hong Kong is well-perceived for its "free port" and straightforward customs clearance. The city has no tariffs on imported goods, no quotas, no dumping tax laws, and applies excise duties to only four commodities: hard alcohol, tobacco, oil, and methyl alcohol.
Government Support for Businesses
Hong Kong offers robust government support for businesses, fostering a favorable environment for entrepreneurship and economic growth. The government actively promotes business-friendly policies, including simplified business registration procedures, easy access to government services through the online platform "GovHK," and streamlined visa arrangements for skilled professionals.
Foreign investors have several options to conduct business, including:
A company incorporated in Hong Kong
A branch office of a foreign corporation
A representative office
Sole proprietorship
Partnership
The government agency InvestHK provides one-stop support services for companies looking to establish or expand their presence in Hong Kong, offering guidance on various aspects of business development, including incorporation, taxation, and regulations.
Developed Financial Services Landscape
Hong Kong has established itself as one of the world's leading international financial centers. Businesses in this sector can leverage several factors:
Prime Location: Strategic location for businesses looking to tap into the vast markets of mainland China and the broader Asia-Pacific region.
Robust Financial Infrastructure: Highly developed and sophisticated financial infrastructure with premium banking, insurance, and asset management services.
Currency Stability: The Hong Kong Dollar (HK$) is known for its stability and can be freely converted, maintained through a linked exchange rate system with the U.S. dollar.
Strong Financial Regulations: Prudent regulations adhering to international standards, managed by institutions like the Securities and Futures Commission (SFC) and the Hong Kong Monetary Authority (HKMA).
Global Connectivity: Well-connected to international markets and a central hub for foreign exchange trading, trade finance, and cross-border investment between China and the rest of the world.
Financial Innovation: Embraces financial technology (FinTech) and innovation through initiatives like virtual banks and blockchain applications.
Belt and Road Initiative (BRI): Serves as a hub for financing and advising on projects spanning Asia and beyond.
Wealth Management: Significant growth in private wealth management services, catering to high-net-worth individuals and families.
Why relocate to Hong Kong
Hong Kong is an ideal place for business in Asia, offering a business-friendly environment, low taxes, rule of law, free economy, modern infrastructure, I&T capabilities, and robust intellectual property protection.
Proximity to China and Asia Markets: Ideal location enabling businesses to tap into opportunities in the Greater Bay Area and throughout the region.
Competitive Tax Regime: One of the most tax-friendly systems in the world with low profits tax.
Ease of Doing Business: Defined as a free-market economy characterized by minimal government intervention.
Network of DTAs: Mitigates the challenge of double taxation faced by global investors.
Leading Global Financial Services Center: Operates under effective and transparent regulations that align with international standards.
World-Class Infrastructure: Advanced business infrastructure with efficient public transport.
Highly Skilled Talent Pool: Equipped with skills and knowledge to drive businesses.
Improving Data Privacy Protection: Efforts to enhance data privacy protection within the jurisdiction.
Excellent Legal and Dispute Resolution: China’s only common law jurisdiction with well-established commercial case law.
Thriving Services Industry: One of the most services-oriented economies globally, accounting for over 90 percent of GDP in 2022.
Investing in Hong Kong offers a unique blend of stability, access, innovation, and opportunity in the heart of Asia, making it a preferred destination for seasoned and emerging investors seeking a prosperous and dynamic business environment.
Woodburn Accountants & Advisors is one of China’s most trusted business setup advisory firms.
Woodburn Accountants & Advisors is specialized in inbound investment to China and Hong Kong. We focus on eliminating the complexities of corporate services and compliance administration. We help clients with services ranging from trademark registration and company incorporation to the full outsourcing solution for accounting, tax, and human resource services. Our advisory services can be tailor-made based on the companies’ objectives, goals and needs which vary depending on the stage they are at on their journey.
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Schedule a 30-mins complimentary, no-obligation call to see how Woodburn can help you. Book a call with our Head of Business Advisory - Kristina Koehler-Coluccia.
Topics we can advise on include:
Company Registration
Cloud Accounting & Financial Reporting
Cloud Payroll Services
Tax & Audit Services
Recruitment
Employer-of-Record
Visa Application
Trademark Registration
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