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Hong Kong Company Registration Guide

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Company Formation Guide - Hong Kong Legislation

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Consistently named as one of the freest economies in the world and within close proximity to many emerging markets in Asia, Hong Kong is a compelling place to form and operate a business. However, the sheer pace and volume of business in Hong Kong can be somewhat overwhelming. To help you with setting up a company in Hong Kong and operating successfully, Links International has created a Hong Kong hiring guide that includes useful information about the main employment laws, business registration, and best practices in Hong Kong. Please note that all the information listed below is to be used as a general guideline only. For more detailed accounts of Hong Kong employment laws and regulations, please visit the official governmental websites.

How To Set Up a Company in Hong Kong

Company registration is required for any person setting up a company in Hong Kong. A branch office of a foreign company must also register with the Companies Registry. Businesses other than a corporation (e.g., sole proprietorship or partnership businesses) must make their Hong Kong business registration applications within one month of business commencement.

Any person/entity setting up a company in Hong Kong must apply for a Business Registration Certificate from the Inland Revenue Department (IRD)1 within one month from the date of commencement of the business. The Inland Revenue Department (IRD) will not accept any applications for registration of businesses which have never existed or have yet to commence operation.

A valid Hong Kong Business Registration Certificate must be displayed at the place of business.

You should open a local company bank account in Hong Kong. This can be done once registration has been completed. Requirements vary between different banks. Some banks may take a more stringent approach with overseas companies to avoid money laundering. 

Typically, the documents required will include:

  • Director’s ID
  • Address proof(s) – Residential proof such as rental lease or property license under your name
  • Company documents, such as Business Registration, Cert. of Incorporation, M&A as well as Register books

How To Set Up A Company Hong Kong - 4 Core Aspects

There are four essential aspects you mustn’t overlook when setting up a company in Hong Kong, we call it P.A.L.M – people, accounting, legal, and marketing. Although Hong Kong is an international city that is accustomed to global business culture, to successfully set up a business and excel in each of these core aspects, businesses would require experience and professional, local insight. For instance, you need to be familiar with all the legal know-how and be up-to-date with all the requirements when hiring talents, or comply with all the important things about drafting employment contracts or other legal documents.

To stand against fierce market competition, new businesses need a streamlined set up, with high cost-effectiveness and minimum errors. If you want to avoid fixing costly mistakes, penalties and legal issues at the early stage of your entrepreneurial endeavours, hiring seasoned HR, payroll and recruitment teams is pivotal. Finding in-house talents as an early-stage company can be a challenge in Hong Kong, as employees may have less trust and the talent pool to fit your specific business needs is limited. Hiring junior staff and training them up can be an option if you have a longer investment window. A highly cost-conscious and strategic solution is to outsource your HR, Payroll or Recruitment tasks to an established team, who can offer tailored solutions and who has good reviews.

Benefits of Registering a Company or Business in Hong Kong

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Infrastructure

Hong Kong is one of the most modern cities in the world and with that comes advanced technology, logistics, telecommunications, and utilities. Transportation in Hong Kong is also some of the best globally, with affordable taxi rides and the convenient MTR. The Hong Kong Exhibition and Convention Centre is world class and has received many awards.

 

Location

Hong Kong is situated in a strategic location at the heart of Asia, right near mainland China. Getting to places is convenient when the Hong Kong International Airport (HKIA) is so efficient – it is the fifth busiest international passenger airport with 100 airlines servicing over 180 destinations. Being a port city, Hong Kong is also a focal point of all maritime activities in southern China.

 

Tax

When considering forming a company in Hong Kong, limited taxes on corporations are a major selling point. The most updated corporate tax rates as of Jan 2024 are as follows 2 :

Corporations

First HK$2 million of profits will be taxed at 8.25%. The remaining profits be taxed at 16.5%.

Unincorporated businesses

The first HK$2 million of profits will be taxed at 7.5%. The remaining profits will be taxed at 15%.

There is neither capital gains tax nor any withholding tax on dividends and interest or collection of social security benefits.

Considerations when Setting up a Company in Hong Kong

Mandatory Provident Fund (MPF) is an employment-based retirement protection system.  Except for exempt persons, employees and self-employed all persons aged between 18 to 65 and employed for a continuous period of 60 days or more are required to join the MPF schemes.

Employers and employees are both required to make regular mandatory contributions of 5% of the employee’s relevant income to an MPF scheme, subject to the minimum and maximum relevant income levels. For employees whose monthly income is HKD 7,100 or more, the employer is required to deduct 5% as the employee’s contribution to the Mandatory Provident Fund (MPF) scheme and to pay an additional 5% as their own contribution. For employees whose monthly income is more than HKD 30,000, the contributions are capped at HKD 1,500 each for the employer and the employee.   

Both employees and employers are free to make voluntary contributions in addition to mandatory contributions.

The employer is required to submit an MPF Remittance Statement to the MPF trustee within 10 days of the following month, detailing the employee’s relevant income, employer’s and employee’s mandatory and voluntary contributions.

An employer must also provide each employee with a monthly payrecord showing the employee’s relevant income and the amount of contributions (both the employees and employers) within 7 working days after the mandatory contributions are made.

The Hong Kong government has announced the abolition of MPF offsetting arrangement will take effect on 1 May 2025. Under the new policy, employers cannot use the accrued benefits derived from their mandatory MPF contributions to offset the severance payment/long service payment of an employee. However, accrued benefits that are derived from the employers’ voluntary MFP contribution, as well as gratuities based on length of service, can still be used to offset severance payment/long service payment.
The maximum amount of severance payment/long service payment is still capped at HK$ 390,000 after the new policy comes into effect. Similarly, the ceiling on the monthly wages to calculate the severance pay/long service payment remains at HK$22,500. If, however, the amount exceeds the limit, the amount in excess of the cap will be deducted from the post-transition portion.

Simply put, the calculation of SP/LSP that is paid to a monthly-rated employee is as follows:

  1. Employment period starting from the transition date:
    Employee’s last full month’s wages before the termination of employ x 2/3 x years of service starting from the transition date
  2. Employment period before the transition date:
    Employee’s last full month’s wage immediately preceding the transition date x 2/3 x years of service before the transition date.

Please refer to these links for more information:

https://www.mpfa.org.hk/en/info-centre/faq/employer/mpf-employer

https://www.labour.gov.hk/eng/news/aoa.htm

Read More: How to choose the right MPF provider

Employment Law in Hong Kong

Employees’ Compensation

Under Section 40 of the Employees’ Compensation Ordinance, an employer can not employ anyone unless there is an official insurance policy in place for the employee for an amount not less than the amounts specified below:

Does not exceed 200 employeesNot less than HK$100 million per event
Exceeds 200 employeesNot less than HK$200 million per event

 

Work Permits

As a general rule, any person other than those having the right of abode or land in the Hong Kong Special Administrative Region (HKSAR), must obtain a visa/permit before coming to HKSAR for the purpose of taking up employment. 

Visas for foreigners to work in the Hong Kong Special Administrative Region (HKSAR) as professionals are under the General Employment Policy (GEP), and are quota-free and non-sector specific. Considerations for visa approval for each applicant include:

  • Good security clearance and no known record of serious crime
  • Good education background with proven professional capabilities and/or relevant experience
  • There is a genuine job vacancy
  • Confirmed offer of employment for a relevant job vacancy that is not easily filled by the local workforce
  • Reasonable remuneration package including income, accommodation, medical and other fringe benefits, in line with prevailing market level

Applicants may sponsor their spouse and unmarried dependent children under the age of 18 to the HKSAR. Once all required documents have been submitted to the Immigration Department, it takes about four to six weeks to process the visa application.

Read More: Getting a Hong Kong Work Visa: Everything You Need to Know 

 

Minimum Wages

The statutory minimum wage in Hong Kong was raised $40 per hour starting 1 May 2023 3. Concurrently, the monetary cap on the requirement of employers to keep records of the total number of hours worked by employees is now at $16,3004 per month.

Read More: Top 5 Questions to Calculating Minimum Wage in Hong Kong 

 

Maximum Working Hours

There are no legislative requirements on maximum working hours except in the case of a young person (over 15 but under 18 years of age) in industrial undertakings. The general working hours are between 40-48 hours per week.

 

Paid Annual Leave

An employee is entitled to 7 days’ annual leave with pay after serving every period of 12 months under a continuous contract.  An employee’s paid annual leave entitlement increases progressively from 7 days to a maximum of 14 days according to his length of service. It is also common practice for companies to provide different entitlements depending on the industry or level of seniority of the role, which would be stated in the employment contract.

 

Rest Day

Employees employed under a continuous contract are entitled to not less than one rest day in every period of seven days.

 

Termination

During probation, no notice is required for termination of an employment contract within the first month, and at least seven days’ notice thereafter. If the employment contract does not specify notice, either party must give at least one month’s notice for termination.

Upon the termination of employment, the employer must report the personal particulars of the employee, the expected date of termination and remuneration paid/deemed paid in the termination year to the IRD by filing form I.R.56F one month before the employment termination date.

In the case of an employee terminating employment to depart from Hong Kong,  employers have to file two copies of IR56G or via  Electronic Filing of Employer’s Return no later than one month before the expected date of departure.

From the date of filing IR56G and until such time the employee has made tax clearance and can produce to you a “letter of release” issued by the IRD, you should withhold all amounts due to be paid to him (including salaries, commission, bonus, reimbursement of rent/expense, money or money’s worth included).

 

Severance Payment & Long Service Payment

An employee is entitled to a severance payment in the case of redundancy, provided there has been service of at least 24 months of continuous employment, or is entitled to long service payment in the case of dismissal, not due to misconduct after having served not less than 5 years.

Both severance payment and long service payment are calculated based on: (last full month’s wage x 2/3)(up to a maximum of HKD 15,000) x years of service. 

 

Employees

Benefits In Kind

Employers are not obligated to provide employees with medical insurance. However, in Hong Kong it is common practice for companies to provide medical or private health insurance as a part of their employee package. 

 

Share Options

Employees have to pay salaries tax on any benefits associated with stock-based awards arising from your office or employment.

Both employees and their employers must observe the reporting requirements in the returns. Failure to do so may result in heavy penalties. Refer to this link to learn more: https://www.gov.hk/en/residents/taxes/salaries/salariestax/chargeable/options.htm   

 

New Employees

Upon hiring a new employee, the employer must report the personal details of the new employee, date of commencement and the terms of employment to the Inland Revenue Department (IRD) by filing form I.R.56E “Notice of Employee Commencement Form” within 3 months of the commencement date.
  

Discrimination Laws

The Hong Kong Bill of Rights Ordinance generally stipulates that all persons are equal before the law and the law, shall prohibit any discrimination on any ground. This principle is materialised through the enactment of the following four ordinances:

Statutory Benefits

Employees are entitled to 14 continuous weeks of paid maternity leave capped at HK$80,000.

An employee is eligible for maternity leave if she has been employed under a continuous contract for not less than 40 weeks immediately before the commencement of scheduled maternity leave and has given notice of pregnancy and intention to take leave to the employer. The employer can request a medical certificate with the expected delivery date.

According to the Ordinance, a male employees is entitled to 5 days’ paternity leave for each confinement of their spouse/partner if he is the father of the new-born child and has been employed under a continuous contract. The employee has to give their employer prior notification as required by law before taking the leave.

Statutory – Paid sickness days are accumulated at the rate of 2 days upon completion of each month’s service for the first year and 4 days a month afterwards up to a maximum accumulation of 120 days. During his/her sick leave, the employee receives 80% of the average daily income earned in the 12-month period before the first day of sickness.

Occupational – employers can pay above statutory.

Eligibility – An employee is entitled to sickness allowance if the sick leave taken is not less than four consecutive days, and is supported by a medical certificate and the employee has accumulated a sufficient number of paid sickness days.

 

Tax

Financial Filing

  • 1 April to 31 March of the following year.
  • Inland Revenue issues a BIR56A form to employers in April each year.  
  • Employer is given 1 month to complete their requirements.
  • Extensions are obtainable if necessary.

Income Tax Calculation

Employers are required to provide employees with a copy of the I.R.56B form showing his/her annual remuneration at the end of the tax year.

The amount of tax charged should not exceed the amount charged by applying the standard rate, which is 15% as of Jan 20245.

For tax planning purposes, employers may structure the remuneration package to include rental allowance.

 

Tax Payment to Authority

Employee to arrange own payment of taxes. Electronic tax coupons are available to ease tax payments at end of the year.

  

Annual Employer Returns

B.I.R. 56A & B are to be filed annually.

General

(1) When you receive an Employer’s Return (BIR56A), you must complete it and lodge with IRD within 1 month even if

  • you do not hire any employee (a Nil return should be made),
  • the business has not commenced, or
  • the business has ceased.

(2) If you have employed persons who meet the conditions stated in item 1(a) of Notes and Instructions for Forms BIR56A and IR56B but do not receive an Employer’s Return for the year of assessment 2023/2024 by mid April 2024, you should request the IRD to issue a return. Click here for more information.

(3) A copy of the completed IR56B/56E/56F/56G should be provided to the employee concerned to facilitate the correct completion of his/her tax return. Also see Obligations of An Employer (IR56H)6.

 

Submission Methods

Employer to complete IR56A form and provide completed the IR56B to their employees. This should be signed by a proprietor, the authorised signatory of a company in Hong Kong. 

 

 

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Banking Industry

Payment

 

Bank Accounts and Paying Salaries

There are various wages/salaries payment methods; the method should be used with the consent of an employee by Autopay, cheque or TT wire.

The majority of Hong Kong employees are paid on a monthly basis.  The employer should pay wages to an employee as soon as practical but no later than seven days after the end of the wage period.

For each pay period, employees will be paid the basic salary, allowances, bonus, commission, overtime, MPF/ORSO employee contribution and other ad hoc payments as required. There is no fixed format for payslips nor fixed calculation for salaries (more often done by calendar days).

 13th Month and Bonus Payments

Year-end bonus payment is at the discretion of an employer, however, the employment contract should stipulate the terms of such payment.

Although not required by law, it is common practice for employers in Hong Kong to give employees a bonus at the end of the year. Should this not be stipulated in the contract, the bonus amount will consist of one month’s pay, based on the average over the preceding 12-month period. Normally this will be categorised as a ‘discretionary bonus’. 

ATM and Cash Currency

Interested to explore the idea of payroll outsourcing, EOR, or Visa application services?

Links International is a leading payroll outsourcing provider across Asia Pacific and supports payroll in over 17 countries. Please do not hesitate to contact us.

Local Information

Hong Kong Public Holidays 2024

Employees are entitled to public holidays as follows:

HolidayDate
The first day of January1 January
Lunar New Year’s Day10 February
The third day of Lunar New Year12 February
The forth day of Lunar New Year13 February
Good Friday29 March
The day following Good Friday 30 March
Easter Monday1 April
Ching Ming Festival4 April
Labour Day1 May
The Birthday of the Buddha15 May
Tuen Ng Festival10 June
Hong Kong Special Administrative Region Establishment Day1 July
The day following the Chinese Mid-Autumn Festival18 September
National Day1 October
Chung Yeung Festival11 October
Christmas Day25 December
The first weekday after Christmas Day26 December

Summer / Winter Working

Most businesses are closed for 3 days during Chinese New Year and on Christmas Day and the first weekday after Christmas Day.

Local office working hours and Time Zone

Working Hours: 09:00-18:00

Standard time zone: UTC/GMT +8 hours

 


1Source:Inland Revenue Department – “Business” Required to be Registered and Application for Business Registration
2Source:Inland Revenue Department – Two-tiered Profits Tax Rates Regime Q.1
3Source:Labour Department – Statutory Minimum Wage
4Source:Labour Department – The Minimum Wage Ordinance, Cap. 608 Q.4
5Source:Gov.HK – Tax Return Filing, Enquiry & Payment – Tax Rates of Salaries Tax & Personal Assessment
6Source:Inland Revenue Department – Obligations of An Employer