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Setting up a sole proprietorship in Hong Kong

Hong Kong is a significant investment hub in Southeast Asia. Its government offers several business-supporting incentives that are an offshoot of Hong Kong being a Special Administrative Region (SAR). This free market-based economy attracts numerous companies to register their businesses there. Hong Kong also has a uniform law structure and a tax-friendly jurisdiction. The economy encourages innovative and disruptive technologies to come to the forefront.  

The country has attracted various companies to invest in Hong Kong thanks to the progressive rate of corp tax as well as the no Sales Tax scheme. In addition, there are no restrictions applied to the Foreign Investment and Ownership zones, and foreigners can freely own businesses in Hong Kong. The dominant languages used in the country are English, Cantonese, Mandarin, and English, which allow smooth business activities with major nationals around the globe.
Establishing a sole proprietorship in Hong Kong offers a good mode for expanding businesses globally. Check the process to register a sole proprietorship in Hong Kong below.

Who can be a Sole Proprietor in Hong Kong? 

There are no restrictions to start a sole proprietorship in Hong Kong. Entrepreneurs, small business owners, or freelancers can start a sole proprietorship in Hong Kong. The rules for a sole proprietorship are more straightforward than those for other business types. 

  • Nationality is no constraint to start a sole proprietorship in Hong Kong. There is barely any additional liability applicable to sole proprietorships. Establishing a sole proprietorship in Hong Kong is not very rule-specific, and the processing times for registration are quicker.
  • The main criterion for opening a sole proprietorship in Hong Kong is registering with the Inland Revenue Departmental Business Registration Office.
  • There is no distinction between a business or personal income for a sole proprietor. 

Benefits of Sole Proprietorship in Hong Kong

When you need to register a business in Hong Kong and intend to choose sole proprietorship as the company form, there are a few advantages-

  • Sole proprietorships in Hong Kong come with a simple tax structure based on income tax rates for personal income.
  • Sole proprietorships in Hong Kong have no minimum requirement for capital or shares.
  • The structure can be done without auditing or elaborate financial tools to maintain administration.

Documents Required for Registering Your Business in Hong Kong

The documents you need to register a sole proprietorship in Hong Kong are mentioned as under: 

  • Form-NNC1G since the sole proprietorship does not stand limited by shares
  • Articles of Association 
  • IRBR1 as a Notice for Business Registration of Office

Other Criteria for Registering a Sole Proprietorship in Hong Kong

To begin operations as a sole proprietorship in Hong Kong, you need to ensure having the following in place-

  • A local bank account 
  • Registered tax number
  • Social security registration
  • Annual financial records

Post-registration compliances

Business license and banking

1. Once the Inland Revenue Department registration is done, apply for a License to commence business operations. Each sector has specific licensing norms.
2. After this is done, open a bank account with a major bank in Hong Kong. Verification might be physical, depending on the requirements of the bank.
3. If you want to initiate any change in the business address,  written notification must be given to the IRD within a month of such a change.

Filing taxes

1. The IRD sends a notice for tax dues within 18 months of registration.
2. Within 30 days of receiving such notice, the tax return needs to be filed.
3. If a sole proprietorship in Hong Kong has a turnover below HKD 2,000,000, there is no need to submit fiscal statements with tax returns.

Taxation

The main business and personal taxes for a sole proprietorship in Hong Kong are listed below-

Corporate tax

Hong Kong’s Corporate Tax rate is 15%.

VAT

No VAT applies to goods and services in Hong Kong.

Personal income tax

The rates for income tax on personal income in Hong Kong are-

INCOME RANGE

 

TAX RATE

Till 50,000

2%

50,000-100,000

6%

100,000-150,000

10%

150,000-200,000

14%

Above 200,000

17%

How to Register a Sole Proprietorship Firm in Hong Kong?

As a foreign investor, registering your sole proprietorship in Hong Kong is necessary to apply for an investment visa. 

Here is an in-depth guide on how to register a sole proprietorship in Hong Kong.

Step 1- Name Selection 

  • Visit the Company Ordinal portal or the Office of the Inland Revenue Department of Hong Kong. Choose the type of business you want to register.
  • Once you pick the incorporation structure, choose a relevant name.
  • A sole proprietorship in Hong Kong can have either an English or Chinese name or both. 
  • Chinese names can use English letters but not words.
  • The name must not link with a limited liability company, Government setup, or a public body. Choose a name from the free Registry or pay for an approved name using the Denomination Approval Certificate.

Step 2- Registration

  • Registration of any sole proprietorship in Hong Kong might take a day if all the documents are submitted and approved.
  • The business certificate is paramount and must always be displayed in your office.

Step 3- Tax ID

  • Obtain a tax number by applying to the Inland Revenue Department. 
  • You need to have your passport as an identity document for the same.

Step 4- Banking account

  • Next, apply to open a corporate account at a local bank.
  • Establishing a sole proprietorship in Hong Kong requires only the submission of company registration documents and a tax identification number.

How can Multiplier Help?

To establish a sole proprietorship in Hong Kong, read up on registration processes, rules, and related compliances first. You may outsource the process to Multiplier for help with sole proprietorship formation. Multiplier ranks among the top global employment solutions for assisting businesses to set up a company overseas.

When you initiate business operations in Hong Kong, Multiplier helps with EOR solutions at hand to help ease all those recruitment and structuring worries.

Frequently Asked Questions

Yes, a foreigner can open a business in Hong Kong with an investment visa and a valid passport.

No, the former is a separate registered document needed to run any business you set up in Hong Kong.

There is no prevalence of VAT or any form of sales tax for sales of goods and services in Hong Kong.

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