Five reasons to open a company in Hong Kong

Hong Kong is one of the world's most dynamically developing economies and a financial hub for many companies. The economy is developed on the principles of free market, free trade and free enterprise and is open to both Hong Kong residents and non-residents.

There are no restrictions on domestic or foreign investment, foreign ownership, or currency control when setting up a trading organization in Hong Kong. Other factors such as a strong anti-corruption regime, legal system and large foreign exchange reserves also make Hong Kong a favorable jurisdiction for business.
Importing into Hong Kong is cheaper than shipping directly to China, and if your company complies with the China-Hong Kong Close Economic Partnership Agreement (CEPA), goods can be imported duty-free into China.

Setting up a company in Hong Kong is relatively easy compared to other countries. This entire process can be done without visiting Hong Kong. The registration process is almost the same for all legal entities, but there may be some differences.

Another reason to consider setting up a company in Hong Kong is that the foreigner is allowed 100% of his ownership. There are no restrictions on the nationality of directors or shareholders.

If you want to enter the China Mainland market, you can do so through a Hong Kong company. You can set up a Wholly Foreign Owned Enterprise (WFOE), Joint Venture (JV), or export products to China under CEPA.

WFOE
To sell goods to China, you can set up a wholly foreign company (WFOE). A WFOE is an organization owned by foreign individuals and legal entities. The benefits of starting this organization are:

• Initiation procedure: The procedure to establish his WFOE with the parent company in Hong Kong is faster because all the documents have already been prepared in Chinese and the Hong Kong Authorization Officer (CAAO) appointed by China will submit the documents within five working days. Also, Chinese local authorities are more familiar with the Hong Kong system than those of other jurisdictions.

• Restructuring: Corporate changes such as the appointment of new directors, increases in authorized capital, and share transfers can be registered in a matter of days, but registration of changes in China can take up to several months.

• Dispute resolution: If you need to resolve a dispute with a third party in China, you can go to the District Court in Hong Kong and obtain a judgment enforceable in China. The Hong Kong International Arbitration Center is also available for those who choose to arbitrate.

Joint Venture (JV)
A joint venture (JV) is a foreign-invested company established under a partnership between Chinese and foreign investors. Partners share profits, costs, losses and liabilities and jointly manage the joint venture. The company will allow foreign investors to benefit from low labor costs, low production costs, and a potentially large Chinese market share.

There are two types of joint ventures:

• Equity Joint Venture (EJV)

Equity Joint Ventures (EJVs) are a popular way to enter the Chinese market. This type of joint venture is a limited liability company in which profits and losses are shared between the partners according to their share of the stake.

At least 25% of the capital must be paid by the foreign partner, but this minimum percentage is not fixed for Chinese partners. Once registered, the joint venture will be treated as a Chinese legal entity and must comply with Chinese law.

• Cooperative Joint Venture (CJV)

A Cooperative Joint Venture (CJV) can be either a limited liability company or an unincorporated organization. Profit and loss are not distributed according to the investment ratio, but can be specified in the contract. There is no minimum share for foreign partners.

A joint venture has the following advantages:

Access to Chinese labor, manufacturing facilities, sales and distribution channels. In this way, bureaucratic issues may be avoided or reduced. Chinese partners can solve joint venture registration issues. Chinese partners may have business experience in China and knowledge of the local market. Access to the Chinese market.
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Hong Kong and China have signed the Closer Economic Partnership Agreement (CEPA), a free trade agreement to expand mutual market access and promote bilateral trade and investment measures between China and Hong Kong.

CEPA covers four areas:

• Trade in goods: Hong Kong goods that comply with the CEPA rules of origin may enjoy zero duty treatment when imported into China.
• Trade in Services: Companies and individuals engaged in the services sector in Hong Kong can operate and expand most of their business in mainland China.
• Investments: Hong Kong investors and investments are subject to the protection and simplification of investment procedures in China.
• Economic and Technological Cooperation: China and Hong Kong have agreed to improve their economy and technology in various fields.

The advantage of CEPA is that it provides an opportunity to sell Hong Kong goods and services in the Chinese market. In terms of services, Hong Kong companies enjoy free market access and preferential treatment on the mainland. Small businesses especially benefit from these benefits.

Hong Kong has numerous tax benefits, attracting many investors to set up a company in Hong Kong. Hong Kong operates her two-tiered income tax system, with corporations being taxed at 8.25% on her first HK$2 million and unincorporated companies being taxed at 7.5%.

Any remaining profits after the first HK$2 million will be taxed at the rate of 16.5% for corporations and at 15% for unincorporated companies. Furthermore, in Hong Kong he is not subject to VAT, GST, export tax, tax on capital gains or dividends.

Located in the heart of Asia, Hong Kong is the gateway to China, which boasts her second largest GDP in the world. Hong Kong is also just hours away from other major markets in Asia Pacific.

Hong Kong has a developed economy, a high standard of living and medical facilities, excellent infrastructure, and he is one of the busiest international airports.

Please get in touch with us at cn.shileconsulting@outlook.com and we will consult you on setting up a business in new regions.