An increasing number of foreign investors and entrepreneurs decide to register their companies in Hong Kong because of its favourable conditions to businesses. The conditions include 100% foreign ownership, low taxes, preferential access to Mainland Chinese markets, etc. The most popular and preferred options for the business structure is setting up the wholly-owned subsidiary companies.
This article will guide you through the regulations and the process of registering a subsidiary company in Hong Kong.
Content Outline
Key Takeaways
Hong Kong Offers Favorable Conditions for Subsidiary Setup
With 100% foreign ownership, low tax rates, and strategic access to the Mainland China market, Hong Kong is a prime location for foreign businesses to establish a wholly-owned subsidiary.
Private Limited Company is the Most Preferred Structure
Among available subsidiary types, the private limited company offers the best balance of legal protection, flexibility, and credibility for foreign investors.
Clear Legal and Regulatory Requirements Apply
Requirements include at least one director, a Hong Kong-based company secretary, a local registered address, and compliance with annual filing, auditing, and tax regulations.
Registration Involves a Multi-Step Process
Steps include name approval, incorporation, business registration, and post-incorporation tasks like opening a bank account and obtaining relevant licenses.
Subsidiaries Benefit from a Territorial Tax System and Incentives
Only Hong Kong-sourced profits are taxable, and subsidiaries can leverage the two-tier tax regime, capital allowances, and environmental tax deductions to reduce their tax burden.
Types of Subsidiaries in Hong Kong
Companies can establish different types of subsidiaries based on their operational goals and company scale. Each subsidiary type offers different advantages. For most foreign businesses, a private limited company strikes the best balance between flexibility, compliance, and credibility.
1. Business Partnership
A business partnership can be categorized as either a:
- General Partnership – All partners share unlimited liability for debts and obligations.
- Limited Partnership – General partners (with unlimited liability) and limited partners (liable only up to their capital contribution).
There is no audit requirement in this business partnership and it is flexible in raising external capital. This partnership is suitable for smaller or joint ventures.
2. Private Limited Company
This is the most common subsidiary structure for foreign businesses in Hong Kong. This is a separate legal entity with limited liability with 1–50 shareholders and no minimum share capital. Shares cannot be offered to the public. The directors can be foreigners and have to have at least one company secretary which must be a Hong Kong resident or firm. Private limited companies must have a registered office in Hong Kong and must pay a tax of 16.5% on profits.
3. Public Limited Company
This structure is ideal for large corporations planning to raise public capital or list on the stock exchange. It has more than 50 shareholders and can publicly offer shares.
This structure is eligible for listing on the Hong Kong Stock Exchange (HKEX) and subject to rigorous regulatory and disclosure requirements
Key Legal and Regulatory Requirements For Subsidiary Company
- Subsidiary Company Name: The choice of the company name is subject to approval by the Companies Registry and it should also satisfy the Company Name Guidelines.
- Shareholding: Full ownership of the foreign company is allowed.
- Directors: The subsidiary of a Hong Kong company must have at least one director which is a person or body corporate; foreigner or local who is above 18 years old and must not be bankrupt or convicted of any malpractices.
- Shareholders: The minimum shareholders of a Hong Kong subsidiary should be one and can be up to 50 while the majority shareholders should be either a person aged above eighteen years, a corporate or a foreigner.
- Company Secretary: It is compulsory that a local company secretary who is either an individual or a body corporate is present in the case of a company that is registered and has its head office in the locality.
- Local Registered Address: The registered office must be a real office and cannot be a PO box. Whether it’s commercial offices or home offices, they are allowed.
- Auditor: An audit of a Hong Kong subsidiary requires an auditor that is a member of the Hong Kong Society of Accountants and possesses a practicing certificate.
- Share Capital: So, there is no minimum or maximum limit for share capital. The standard practice is having an authorized capital of HKD 10,000 represented by 10,000 ordinary shares of HKD 1.00 each and the issued/paid-up capital is usually 1 share of HKD 1.00.
- Taxes: Subsidiaries are taxed by the same tax regime, at the same rate of tax, as other locally incorporated limited companies in Hong Kong.
- Compliance: Apart from that, the audited accounts are to be submitted along with Tax Returns to the Inland Revenue Department on a yearly basis. The Annual Return should be submitted to the Companies Registry. An Annual General Meeting(AGM) has to be held once a year and that is obviously a calendar year.
Required Documents
The foreign companies will need to get the professional services of business entities to register their subsidiary companies in Hong Kong. The following documents are required for the registration of the Hong Kong subsidiary :
- A completely filled incorporation form
- Articles of association for the subsidiary
- Documents for the parent company which are Certificate of Incorporation and Articles of Association.
- Documents for company officers:
- For non-residents: Scan of passport and proof of your newest overseas address (if there is any).
- For Hong Kong residents: Copy of identity card, issued by the Hong Kong Government.
Note: The certified translation of any non-English documents is required officially.
Registration Procedure and Timeline
The procedure of incorporation has two steps :
- The company name approval
- Company registration
The corresponding registration fee and the capital fee of HKD1 for every or part of HKD 1,000 of the nominal share capital (this capital fee is subject to a maximum of HKD 30,000 in each case), is payable to the Companies Registry.
The records of successfully processed applications usually take 4-7 working days. The Companies Registry will be assigned to give out the Certificate of Incorporation.
Step-by-Step Guide To Set Up A Hong Kong Subsidiary Company
Step 1: Choose a Company Name
Choose a unique company name. The name can be in English, Chinese, or a combination of both. When choosing a name:
- Ensure it is not the same as existing registered company names.
- Avoid names that are misleading, offensive, or contrary to public interest.
You can conduct a name search through the Companies Registry’s online database to check availability.
Step 2: Get Name Approval
Once a name is selected, submit it to the Companies Registry for approval. If you want to use the name as a brand, it is advisable to register it with the Trade Marks Registry to secure intellectual property rights in Hong Kong.
Step 3: Apply for Incorporation
Submit the incorporation application with required documents either:
- Online via the e-Registry system, or
- Offline by delivering physical documents to the Companies Registry.
If all documents are in order, the incorporation process usually takes 3–7 working days.
Step 4: Obtain Business Registration Certificate
After incorporation, apply for a Business Registration Certificate from the Inland Revenue Department (IRD). This certificate must be obtained:
- Before commencing business operations, or
- Within 30 days from the date of incorporation.
Your company will receive the Certificate of Incorporation from the Companies Registry. Both certificates are mandatory to legally operate your subsidiary in Hong Kong.
Post Registration Formalities
Apply for Registration Certificate of the Business
It is compulsory for all the companies in Hong Kong to register with the Business Registration Office of the Inland Revenue Department and get a Certificate of Business Registration. The time frame for business registration with the Inland Revenue Department following the incorporation with the Companies Registry, even if the company is not in business at that time, is one month When applying, the Business Registration Certificate is issued on the next working day if one has all the required documents and must be collected in person. Displaying the Business Registration Certificate on the company premises in a visible manner must be done all the time.
Open Bank Account
As soon as your company is registered with the Companies Registry and Inland Revenue Department Unit, you can open up a corporate bank account with one of the major banks in Hong Kong. Bank requirements and procedures for opening different accounts may vary. Whether you will be expected to pay the visit in person or not might be a difference from one bank to another. The company you have chosen as your consultant should be in a position to guide you about the bank policies.
Apply for Business Licences
If the subsidiary`s activity ought to have a license from a relevant regulatory authority, you must take proper measures before the activity commences. For the licensed business, more information can be gained from the Hong Kong Business License Guide.
Taxes For Subsidiary Companies in Hong Kong
Territorial Tax System
Hong Kong operates on a territorial source principle of taxation. This means that only profits derived from or arising in Hong Kong are subject to tax. Profits generated outside Hong Kong are not taxable, regardless of whether they are earned by residents or non-residents.
This applies equally to Hong Kong subsidiaries of foreign companies which is a significant tax efficiency for international businesses engaged in cross-border operations.
Profit Tax Rates for Subsidiaries in Hong Kong
Hong Kong offers two types of profit tax regimes: single-tier corporate tax system and two-tier profit tax regime which allows businesses, particularly SMEs to optimize their tax liability.
1. Single-Tier Corporate Tax System
Under the standard corporate tax regime:
- Corporations are taxed at a flat rate of 16.5% on assessable profits.
- Unincorporated businesses (e.g., partnerships and sole proprietorships) are taxed at 15%.
2. Two-Tier Profit Tax Regime
To ease the tax burden on smaller entities, Hong Kong introduced a two-tier tax system:
For corporations:
- First HK$2 million of profits taxed at 8.25%
- Profits above HK$2 million taxed at 16.5%
For unincorporated businesses:
- First HK$2 million of profits taxed at 7.25%
- Remaining profits taxed at 15%
Tax Incentives for Subsidiaries in Hong Kong
Hong Kong offers various tax incentives and allowances to promote business development, innovation, and sustainability. Some of the key incentives are:
Capital Allowances and Deductions
100% write-off for capital expenditure on:
- Machinery and plant
- Computer software and hardware
Five-year deduction for expenses related to renovation or refurbishment of business premises.
Environmental Tax Deductions
100% tax deduction for capital expenditure on:
- Environmentally-friendly machinery
- Clean energy and pollution control apparatus
Investment Exemptions
Income from long-term investments made after 22 June 1998 in authorized financial institutions may qualify for tax exemption, subject to conditions.
Exemptions for Trusts and Mutual Funds
Tax concessions are available for authorized unit trusts, mutual funds, and open-ended fund companies, making Hong Kong a preferred jurisdiction for fund management.
How FastLane Group Can Help?
Ready to establish your subsidiary company in Hong Kong quickly and efficiently? FastLane Group is here to streamline the subsidiary company incorporation process for you. With our expert guidance and professional services, you can navigate the complexities of registration seamlessly. Contact us now to kickstart your business expansion journey in one of Asia’s most dynamic financial hubs!
