How Can I Register A Branch Office In Hong Kong?

Any international company eager to start doing business in Hong Kong can do it there in a few ways.

One of the most common modes of business expansion that is widely used by different businesses is to open a company branch and it is the most popular method for a wide range of businesses.

The branch office in Hong Kong can be considered the most natural way to go into a new market and recreate the kind of business done by the parent company.

While it is true that a branch office in Hong Kong has a simpler registration procedure as compared to a subsidiary, below are the things that need to be considered for setting up a branch office in Hong Kong.

What Is A Branch Office?

Legally, a branch office is a part of a corporate entity and it is like a division of a company that has the right to further functions in one or more foreign jurisdictions.

Furthermore, as a part of this business ecosystem, it achieves the same effects through the variation in the physical environment. Therefore, in this case, if your company has a branch in Japan, you may choose to open a branch in Singapore as well.

On the other hand, one of the main differences between subsidiaries from branches is that subsidiaries are separate legal entity incorporated in another jurisdiction, which branches are not.

International businesses can enter a new market through their representative office, as well as through one of the other subsidiary companies or branch office presence.

A representative office allows the foreign company to stay away from executing any contracts in Hong Kong and focus on expanding its reach to the local market instead.

Why Should You Choose A Branch Office?

Often larger corporations intend to establish their presence in a niche new market and consequently prefer to create a branch office out of the many options they have.

These are some of the common reasons why they choose a branch office: 

• It takes time and a lot of effort to register a subsidiary than registering a branch.
• For some countries, minimum capital investment is a requirement for the registration of subsidiaries. 
• The parent company has more influence since the branch office is a representative of the company and has a direct link with it.
• It’s a wonderful way to try a new market and widen your range without strong commitment. 
• In many cases, the parent company’s registration documents are sufficient for the establishment of branch office in a foreign country.
• Local tax regulations and double taxation treaties may be beneficial in terms of relief from taxation are applicable to branches.
• Stamp duty is payable if a subsidiary company executes share transfers. Nevertheless, there is no requirement for the company’s branch operating in Hong Kong to pay any stamp duty fee on share transfers.
• Closing a branch office is easier than closing down a subsidiary.

Procedures To Follow When Establishing A Branch Office In Hong Kong

A foreign investor who wishes to set up a branch office in Hong Kong must apply to the Companies Registry for the status of a non-Hong Kong company.

Here’s what you need to do :

Name

An individual branch office is not a separate legal entity unit so it cannot have a new name.

A branch office needs a name that must be identical to the name on the parent company’s certificate of incorporation.

Companies Registry may reject a company name if it was already registered or gives a wrong notion. When you are about to apply, make sure that you have searched for the presence of the company name on the Companies Registry website.

Furthermore, it should be understood that a registrar’s company name at the Registrar doesn’t imply the ownership of a trademark or other legal property to the name by the main office or branch office. 

Officers

An overseas company should delegate at least one Hong Kong resident as the official representative who will receive legal notices on its behalf.

Companies can either choose an individual or a legal entity to be in this position.

Registered Address

The branch office must have its physical address in Hong Kong. This is also the office of the parent company’s Hong Kong affiliates. Having a PO box address is insufficient to meet the condition.

Usually, the local business addresses of non-Hong Kong companies are commonly registered using the addresses of a company providing professional services. They provide this service as a temporary solution before the branch office opens its actual business site. 

Appointment of Company Secretary

The foreign corporation is recommended to select a local company or someone who could perform the role of an acting company secretary of the branch to handle various statutory requirements.

Mandatory Documents of Foreign Parent Company

These are the mandatory documents lists needed to set up a branch office : 

• Copies of the parent company’s Memorandum and Articles of Association.
• Copy of the original incorporation certificate
• A business registration certificate
• Board member’s detail information
• Latest account statements

All documents included with the application, whether in English or in Chinese, must be certified.

What Are The Benefits Of Establishing A Hong Kong Branch Office?

These are some of the benefits of establishing a Hong Kong branch office : 

• No minimum capital requirement
• The registration process is simple.
• Branch offices stand a better chance of expanding their business operations while keeping the parent company’s brand name to carry on their business operations. 
• The parent company still assumes major responsibilities over the branch office management, the control over its operations will be in the hands of the head office. 
• No recurring maintenance cost as Hong Kong does not mandate a separate branch audit.
• Governance with limited conduct of the Hong Kong Companies Ordinance is all that is required.
• The Inland Revenue Department provides a favorable tax regime as only the profits gained in Hong Kong are taxable.
• A branch office can also take advantage of the double taxation avoidance agreements that Hong Kong has in place with over 40 countries.
• In branch office registration, no other records except the documents of the business company and its business registration certificate, are required.
• Shutting down a subsidiary requires simply informing regulatory authorities like the Companies Registry and the Inland Revenue Department about the transaction within 7 days from the date of cessation.

What Are The Compliance Duties Of A Hong Kong Branch Office?

A branch office has the same compliance requirements as local companies in Hong Kong.

Here are a few examples: 

• The foreign company must submit the Business Registration Certificate application form to the Inland Revenue Department not later than one month after the branch has successfully begun its operations. The certificate should be displayed in the branch offices.
• The branch should put the parent company’s name and place of incorporation on the letterhead.
• The parent company must notify the Companies Registry about the changes to the branch office structure. 
• This office should register itself at a local bank and open a bank account. Through business accounts under the company name, the branch is enabled to conduct business activities on behalf of the parent company.
• A branch office should file the annual account statement with the Companies Registry. A director, company secretary, or the person duly authorized to sign should put a signature on the accounts before submitting them. On the other hand, if the issue of account declarations by the parent company is not required by the country of its incorporation, then the same branch office is exempt from filing account statements in Hong Kong. A branch should also file tax returns with the Inland Revenue Department which is responsible for such matters.
• The branch must present to the Registrar of Charges all details relating to assets that have been secured or acquired within 1 month after the date of the charge creation or acquisition.
• A branch of the business should acquire a license if necessary. The parent company should acquire a business license if it will work in any of the following sectors. We have provided a list of sectors for you. You can click here to get that.
• Once the branch is closed, the parent institution will need to pay any outstanding taxes. An authorized representative of the branch can serve as the process agent for at most 11 months after the cessation of business to receive all official notices from authorities.

Establish A Hong Kong Branch Office With FastLane

Hong Kong plays the role of a perfect spot for most business entities that wish to be established in the Asia Pacific region.

In case you don’t want to incorporate an independent company right now, starting with a branch office set up in Hong Kong as your operating base is a good option.

You must carefully weigh this decision in the face of the business objective so that the sole business goal may be achieved.

Whether this is your first branch or you are considering expanding your business from one office, you are likely to face some challenges. Contact FastLane to find out more about how you can benefit your organization. 

We offer a wide range of secretarial services to cater to the needs of our client companies, including registering the branch.

Let us be your partners in business so that you can feel peace of mind when you do business in Hong Kong no matter your background.