Types of Hong Kong entity
- the expected nature and scale of the business activities;
- the levels of risk anticipated in the initial stages;
- the intended duration of the business activities;
- accounting and taxation considerations;
- Hong Kong statutory compliance and reporting obligations; and
- commercial considerations
- Company: A limited liability company offers protection of personal assets from business risks and liabilities and is a separate legal entity.
- Foreign Company Office: Foreign companies interested in setting up an office in Hong Kong can also register a branch office or a representative office.
- Partnership: This business structure allows two or more people to share ownership of a single business. Partnerships enable a sharing of responsibility and increases the ability to raise funds. However, partners are jointly and individually liable for the actions of the other partners. The most common form of partnership is a Limited Partnership, as it offers limited liability to limited partners.
Hong Kong taxation
- Taxes on corporate income: Hong Kong adopts a territorial basis of taxation. Profits tax is payable by every person (defined to include corporation, partnership, and sole proprietorship) carrying on a trade, profession, or business in Hong Kong on profits arising in or derived from Hong Kong from that trade, profession, or business. Gains and receipts that are capital in nature are not subject to tax. Dividends from local companies chargeable to tax are exempt, whereas dividends from overseas companies are generally offshore in nature and not subject to tax in Hong Kong SAR. The tax treatments of public and private companies are the same.
- Income Tax: Hong Kong does not impose income tax based on an individual’s total income. Instead, the three main types of income derived by individuals are taxed under different income taxes. That is, business or trading profits are taxed under profits tax, income from employment, office, or pension is taxed under salaries tax, and rental income from immovable property is taxed under property tax. The residence status of an individual is not a determinative factor in examining one’s liability to salaries tax except in a tax treaty context.
- Social Security: Hong Kong (SAR) does not have a social security tax system. However, all employees and self-employed persons over the age of 18 but below 65, normally residing and working in Hong Kong (SAR), are required to join a Mandatory Provident Fund (MPF) scheme.
Setting up the office
- Co-working: If you’re a solopreneur or manage a small team, you might decide to rent desks in a co-working space. Many run events for members, enabling you to network and grow.
- Private office: If you want your own space, you can rent a private office in a flexible workspace. Shared amenities mean you’ll still pay a competitive price and get to meet other businesses.
- Managed office: Designed with medium to large businesses in mind, a managed solution provides a self-contained, customisable workspace solution on flexible contractual terms.
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