Recent years, Hong Kong has had some serious competition as Asia’s premier gateway for international business. Singapore and Seoul have long been contenders, but people are also beginning to take notice of other cities, such as Kuala Lumpur, Bangkok and Jakarta.
Still, it’s a tough ask to unseat Hong Kong’s pole position. Consider that:
- In 2019, the World Economic Forum (WEF) rated Hong Kong as having the world’s top financial system, well ahead of its nearest competitor, the U.S., in the Global Competitiveness Report.
- Astute pandemic management means that Hong Kong has experienced very low Covid infection rates, avoided lockdowns and remained largely open for business over the last ten months. Few other large cities can say the same, whether in Asia or globally.
- Company incorporation numbers in Hong Kong quickly jumped back after 2020’s Covid-related uncertainty, resulting in 110,000 new Hong Kong companies in 2021.
Here are seven reasons why, in my view, Hong Kong is still a top spot for international commerce in 2023:
Ease of company incorporation
Setting up an offshore company in Hong Kong can usually be done within seven days — not weeks or months. As well as time saved, the application and documentation requirements are straightforward, with no restrictions on overseas directors or shareholders: It is not even a requirement to be physically present to open a company in Hong Kong.
Not only does it save time and effort, incorporation in Hong Kong is a cost-effective option — there are no minimum-share capital requirements, with many companies being opened with $1 share capital.
Corporate income tax in Hong Kong is 16.5 percent. Hong Kong has always had low corporate and personal income tax rates. However, with a new global 15 percent minimum corporate tax rate set to come into force, Hong Kong will now have one of the lowest corporate income tax rates in the world. Personal income taxes are low as well — from two to 17 percent. This makes Hong Kong an attractive location for expat employees of international businesses, who take home a much larger proportion of their pay packet compared to elsewhere. Hong Kong does not apply indirect taxes, such as a value-added tax (VAT) or goods and services tax (GST).
A director of a Hong Kong company does not need to be a natural (i.e., a real) person: Hong Kong allows for foreign companies themselves to be directors of a Hong Kong company. This allows international businesses and entrepreneurs to direct and control their Hong Kong company without needing to be personally identified in any public records. A nominee director can be appointed to act on the foreign company’s behalf, and can keep all personal information confidential.
Note that Hong Kong companies will still need to provide information to the regulatory authorities about any individuals who are significant controllers of Hong Kong companies, but this is not on the public record.
Hong Kong means free trade
Hong Kong is a free port, meaning it does not apply any import or export duties.
Hong Kong is also unique in its trade arrangements with both mainland China and the broader world. There is a free trade area between Hong Kong and mainland China (the Closer Economic Partnership Arrangement (CEPA)). There are also free trade agreements between Hong Kong and various other developed economies, including Australia, New Zealand, the ASEAN member states and the member states of the European Free Trade Association.
As well as reducing the direct costs of doing business, this cuts down significantly on associated form-filling and business red-tape.
Lack of currency restrictions
In our connected world, working in multiple currencies is all-but-inevitable for ambitious businesses. Hong Kong has no foreign exchange controls, making it possible to make and receive payments worldwide without government restriction.
Hong Kong also makes it straightforward to use foreign currencies in a range of official contexts. For example, company share capital can be paid in any major currency, not just the Hong Kong Dollar.
A world banking and payments hub
As a center of international finance and investment, Hong Kong has no shortage of payment services and solutions to best manage your money: It’s a breeze to set up and access multi-currency business accounts, saving significant amounts on currency conversion when dealing in multiple currencies.
The distinct advantage in Hong Kong is the ease of transactions with businesses in mainland China: businesses can pay in RMB as well as the Hong Kong Dollar. Many companies that operate primarily in cities like Shanghai, Shenzhen or Guangzhou also have a presence in Hong Kong, making transactions even easier.
World-class business reputation
Hong Kong is one of the world’s few global cities, standing alongside the likes of New York, London and Paris. With a centuries-old reputation as a business hub, international businesses trust companies incorporated in Hong Kong as their partners and clients.
While their prospects are improving, the same cannot be said for companies based in other parts of Asia such as Indonesia, the Philippines or Thailand. For this reason, many businesses from elsewhere in Asia choose to incorporate a subsidiary in Hong Kong to carry out their international business.
With an established reputation as an international business hub, few barriers to trade and low tax and compliance costs, Hong Kong is likely to continue to be Asia’s number one international business hub. Its unique geographical location, bridging the gap between east and west, means that if you want to expand your business, Hong Kong remains the go-to option.