I have been running my own company in Hong Kong called Wohok Solutions Limited, which also owns this website, since 2014. In doing so, I have learned quite a bit on what to do and what not to do. In this article, I will share what you need to know before you open a company, what recurring expenses you can expect every year and much more.
Disclaimer: Be aware that anything written below is information provided by an amateur and might very well be wrong. I am a web developer by trade, not a lawyer or accountant, so make sure you do more research and don’t rely on my opinions and experiences. Furthermore, the information below isn’t everything you need to know, make sure to talk to accountants and do some more research!
Who should open a Hong Kong company
I opened a Hong Kong Limited company for two reasons:
- I wanted to have some separation between myself and the business, especially legally and in terms of liability. A Limited company can give you that (to some extent at least).
- When you do have a Limited company with ongoing revenue, you might be able to sponsor yourself to get a work visa in Hong Kong (which I did).
So the short answer is to who should open a company is, whoever wants to run a company AND lives/wants to live in Hong Kong. If you are a digital nomad, it might also work. If you’re living in another country, however, there might be better options out there.
Regarding tax advantages, which is probably what most people would want especially if they don’t live in Hong Kong, my own opinion is, that Hong Kong is probably not the best place.
Running a Hong Kong company from abroad has become more and more difficult over the years, especially if you don’t have a team/office in Hong Kong – especially with regards to banking.
Opening a Bank Account in Hong Kong
The main reason why running a company in Hong Kong while not living here has become so difficult, is that banks are very strict on KYC (Know Your Customer).
This affects existing companies (mine included) with regular questionairs to make sure the bank knows where the money in my bank account is actually coming from.
However, where it really hits hard, is if you want to open a new bank account for a new company. When I opened my account in 2014, everything went smoothly thanks to not so strict regulations back then and an introduction from my accounting firm.
Today, I’m writing this in 2023, being able to open a business bank account is the number 1 hurdle to actually set up a Hong Kong company – everything else is easy really.
So my advice before you start the process of registering your company is to make sure and ask the company you hire to help with that process about what they can do to help you get a business bank account (if you are a foreigner, don’t try opening a company yourself – you can, but expect problems along the way, not worth it in my opinion).
Most firms in the company formation space have relationships with banks. Make sure they have at least two banks they can refer you to and that they have back-up plans if things go south.
Opening a Limited Company in Hong Kong
With the exclaimer about how difficult opening a bank accoung might be out of the way – opening a company as such in Hong Kong is quick and cheap.
It should take around 1 week to get everything done and cost between USD 1000 and USD 2000, depending on the company you work with and what is included in the deal.
A few things to consider when picking a company/deal:
- Make sure you get a physical company stamp as part of the package. That stamp is important in Hong Kong, so don’t lose it, you’ll need that more often than you think.
- If you plan on staying with the company you choose for accounting, audits, etc., make sure you know how they bill those in advance. More on that below.
- If you are a small company (like I am), consider having your company’s registered address be the address of your accounting firm. Makes things like moving office or even work from home a lot easier – especially if you hardly get any mail.
- If you want to apply for a work visa through the company you set up, make sure the CPA company you pick offers or has partners that offer a visa service. Having everything from one provider makes things a lot easier.
- And – of course – the bank account thing mentioned above. Very important.
Once your company is set up, you’re ready to go. Now the real fun starts.
Running a Company in Hong Kong
Setting up a company in Hong Kong is quick and cheap – running it not so much (it’s fairly simple to be fair, but not cheap when compared to other countries). Below are a few things you’ll have to consider after setting up the company:
MPF (Mandatory Provident Fund)
If you plan on having employees or pay yourself a salary, this is extremely important. The MPF is Hong Kong’s version of a pension system. You pay into a fund you, as the employer, choose and get it out once you’re 65 (or leave Hong Kong).
Not setting up an MPF properly for yourself and – especially – your employees can get you, as the director/employer, into deep trouble.
If you are a one-person company like I am, doing the MPF yourself isn’t too difficult. You can read through the government website about it, go to an MPF provider (I use HSBC for example – they were very helpful), set up an MPF account and every month, together with the salary, pay a certain amount into the MPF account.
The payments are split into an employee portion and an employer portion. If you pay yourself a salary, you can voluntarily increase the employer portion to 10% of your salary and have it being tax deductable (at least as far as I know). Something to maybe talk to your accountant about.
In general, if you’re new to this, talk to your accounting firm to make sure you have everything covered. If you plan on having employees, definitely at least talk to an HR firm – ideally use their payroll services, that’s what I would do to not get into trouble in that regard myself.
This is also very important, as it can either save or cost you a lot of money.
My first accounting firm worked with Excel sheets and billed me on a per transaction basis. This is NOT what you want to get into. In the beginning, invoice numbers were low, so it was alright. But it got extremely expensive later on.
Today I’m on a plan that allows me to do the accounting myself using Xero with an accountant looking over everything on a quarterly basis to make sure I have everything correct (I’m using FastlanePro for that). I get invoiced a fixed amount every quarter and can plan with that – which is fantastic.
In terms of cost, you can calculate with at least HKD 1000 per month for a very small business, going up depending on how big your business gets.
To sum up, when picking an accounting firm, make sure that:
- They do use a cloud accounting system like Xero
- You pay a flat fee per month – NOT per transaction
- Your accounting firm can help with the audit
The thing you probably won’t hear about until you get to the end of year 1 – the audit. Other than in many western countries, where only companies of a certain size have to do audits, in Hong Kong every Limited company has to (if your company is active).
This will set you back at least HKD 10,000 every year, gradually more the higher your revenue gets.
Most accounting firms can happily help with that. They usually have set up a separate company that does audits (can’t be the same as your accountant) and if you do it this way, an audit should be fairly straightforward.
At the end of it, after you’ve answered all questions by the auditor, you’ll get audited statements + the auditor will help you file your profit tax form to the government.
Make sure you’ll keep the statements for 7 years somewhere in Hong Kong, that’s the law here.
Every April 1st (or around that time) your company will receive a form to provide all salary information to the government so they can calculate salary tax for your employees (and yourself if you pay yourself a salary).
This is something where it’s worth using an HR firm or your accounting company who should usually provide filing that statement as a service for a low fee.
A few other random things that I had to deal with in my 9 years running a Hong Kong Limited:
If you want to get a work visa for yourself or an employee you want to hire, I would advise to use an HR firm for that. I’m usually using FastlaneHR, but you can ask your accounting firm, they’ll be happy to help.
If you plan to get an office (other than a co-working space), make sure you follow all the regulations related to that. Safety inspectors are actively visiting companies (which is actually a good thing) to check that work places are safe.
At the very least you will have to have a first-aid box with certain things in it. Depending on what your field of business is, other things might also apply. Just make sure you think about things like that at the outset – not when someone knocks at your door.
I, myself, had that experience when I was renting a cubicle in an industrial building. The government person was very friendly and told me what I needed to get – which I then did.
When you rent a place or office in a coworking space, many of those things are taken care of by the coworking space (still worth checking with the people there though).
It is worth having your address at your accountant’s office as a virtual office. Not only can they then help to scan all letters that come in, it also makes you as a company a lot less dependent on a physical space and allows you to move around more freely.
If you choose to either have your own office or work out of a coworking space and use that address as your registered address, make sure your company name is somehow shown at the entrance to your office (another thing required by law).
I’m a web developer myself, so allow me to talk my own book here a bit. If you need a website for your company, feel free to get in touch at any time (also for advice if needed).
Hong Kong domains (.hk or .com.hk) are best bought via HKDNR. Like many websites in Hong Kong, it’s very hard to use, but you’ll get there at the end.
Depending on what kind of IT system you set up for your company, you might be able to get some government subsidy for that. There are plenty programs to incentivice Hong Kong businesses to get into the 21st century. Make sure you search for that before you start any project (or ask vendors/companies you work with).
Depending on what kind of company you want to run, you might have to apply for a license from the government or become an accredited X (accountant, property agent, etc.) to be allowed to operate. Make sure you check on that before you start earning money.
This is most of what I know about opening and running a company in Hong Kong. If you have any questions, feel free to reach out to me via the contact information on the top of the page. If you need a website, please do the same, I would be more than happy to help.
In terms of suggestions on who to work with – I have two:
Fastlane is the company I’m currently working with in Hong Kong. They are wonderful, have a nice family, small-company vibe and provide fantastic service (in all areas mentioned above). If you pick them, tell them that Wolfgang sent you.
Sleek is the bigger alternative and might be just right for you if you want to work with a bigger company. I use them for my UK company and I’m very happy with the service. It’s a bit less 1:1 than Fastlane, but everything gets done and works.
All in all, I’m happy I’m working and living in Hong Kong. It’s a great city, exceptional weather and I would make the move again if I had to. Hope to see you here soon!