Why invest in Hong Kong?
Opinion 4 minute read

Why invest in Hong Kong?

18 June 2014

APAC is streaks ahead of the competition when it comes to ease of doing business, with five of the top 10 in the latest World Bank rankings coming from the east – and consistently up there near the top is Hong Kong. Ahead of our webinar on investing in Hong Kong – find out more here – our Hong Kong MD talks us through the opportunities and the challenges of business in the tiny island state.

Challenges of doing business in Hong Kong…

  • A new Companies Ordinance came into force on 3 March 2014, divided into 21 parts comprising 921 sections and 11 schedules. It represents significant reforms to Hong Kong company law and includes changes such as abolishing Memorandum of Association and par value of shares for all companies; restricting corporate directorship in private companies; introducing court-free procedures for capital reduction. It also clarifies directors’ duties of care, skill and diligence; facilitates simplified reporting; and strengthens the rights of auditors.
  • An ambitious labour force means there is a high employee turnover rate. The jobsDB hiring index found that companies with more than 500 staff experienced a turnover rate of almost 25% in Q1 2013; the good news is that for smaller companies the rate is between 6.7% and 11.4%.  
  • While it’s relatively easy to incorporate a company in Hong Kong, that company must have at least one Hong Kong resident or company as company secretary, at least one natural person as director and you must have a registered office in Hong Kong, too.
  • There are regular profits tax filings required, and the form needed will depend on the company; these are even needed if returns are nil. Annual audits are also required for all Hong Kong companies.
  • An aging population and increased life expectancy led the government to initiate an “MPF” system to fulfil the World Bank’s second pillar of old age protection, “a mandatory, privately managed, fully funded contribution scheme”. Hong Kong’s Mandatory Provident Fund Schemes Ordinance (MPFSO) was enacted in 1995, and the MPF system launched in December 2000. The system involved myriad regulations and mandatory contributions, and can be confusing to the outsider. Its “mandatory” nature means it cannot be forgotten.  
  • At 5%, the MPF is also not as competitive as other APAC countries; add it to the high cost of living in the state and there is a disincentive for young workers to stay in the Hong Kong talent pool.
  • There is more to the extensive programme of labour legislation in Hong Kong; 42 pieces of legislation were enacted between 1997 and 2001, with more planned. It aims to apply relevant international labour standards as local circumstances allow; this includes a comprehensive code of employment known as the Employment Ordinance. 

…and the opportunities

  • Hong Kong is ranked No 2 for ease of doing business in the World Bank’s index; it’s also second in the trading across borders ranking. Starting a business is relatively easy, taking less than one day to incorporate via an online procedure.
  • There is a simple and low tax regime, with Hong Kong a signatory to many free trade agreements and double tax treaties. It has no capital gains tax, withholding tax, VAT or GST, and dividends are not taxable in Hong Kong – in fact, only income arising in Hong Kong is taxable.
  • As a gateway to Asia and the world, Hong Kong is unparalleled; all of Asia’s key markets are within four hours, and half of the world’s population is within five hours’ travel.
  • As an international financial centre, Hong Kong offers much – but it also presents plenty of opportunities in creative media, the film industry and the IT sector among others. The Hong Kong government is actively promoting these sectors, so it’s worth talking to local experts to find out more about opportunities there.
  • There is an independent judiciary functioning under English common law, and the region’s cultural openness and high level of internationalisation help to create an environment where Chinese and Western influences fuse. Hong Kong has long been used as a gateway to China, but it is also China’s gateway to the world.
  • Finally, in these days of virtual working, it’s good to know that Hong Kong has the world’s fastest internet speed.

To find out more about doing business in Hong Kong, be sure to register for our webinar on 25 June.

Written by

Mark O'Sullivan

Former Managing Director

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