Setting Up a Company in Hong Kong: Company Secretary, Annual Maintenance and Why Holdings Use Hong Kong

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Hong Kong is one of the easiest places in the world to incorporate a company, and it remains a favourite base for groups doing business with mainland China and the rest of Asia. This article covers incorporation, the role of the company secretary, annual maintenance and the reasons why so many groups place their holding company in Hong Kong.

1. Incorporation

The usual vehicle is a private company limited by shares under the Companies Ordinance (Cap. 622). The basic requirements are:

• At least one shareholder, individual or corporate, of any nationality.
• At least one director who is a natural person, aged 18 or over, of any nationality and not necessarily resident in Hong Kong.
• A company secretary who is a Hong Kong resident individual or a company with its registered office or place of business in Hong Kong.
• A registered office address in Hong Kong.

The application is filed with the Companies Registry, usually online, together with the business registration with the Inland Revenue Department. Electronic applications are typically processed very quickly, and the certificate of incorporation and business registration certificate are issued together. The next step is opening a bank account, which in practice often takes longer than incorporation because of the banks’ due diligence.

2. The company secretary

Every Hong Kong company must have a company secretary. If there is only one director, that person cannot also be the sole secretary. The secretary’s main duties are:

• Keeping the statutory registers: members, directors, company secretaries and the significant controllers register.
• Filing the annual return and notifying changes (directors, secretary, registered office, share capital) to the Companies Registry within the legal deadlines.
• Preparing minutes and written resolutions, and keeping the company’s records in order.

Firms that provide company secretarial services as a business in Hong Kong must hold a Trust or Company Service Provider (TCSP) licence issued by the Companies Registry. It is worth checking this when choosing a provider.

3. Annual maintenance

• Annual return to the Companies Registry, within 42 days after the anniversary of incorporation for private companies.
• Business registration renewal, every one or three years.
• Accounting records kept for at least seven years, and annual financial statements audited by a Hong Kong certified public accountant.
• Profits tax return filed with the Inland Revenue Department when issued, together with the audited accounts. The first return is usually issued around 18 months after incorporation.
• Annual general meeting, or written resolutions where the law allows the company to dispense with it.
• If the company has staff in Hong Kong: employer’s returns and Mandatory Provident Fund (MPF) contributions.

4. Why groups use Hong Kong holding companies

• Territorial tax system. Only profits arising in or derived from Hong Kong are subject to profits tax, at 8.25% on the first HKD 2 million and 16.5% on the rest for corporations.
• No tax on dividends paid, no withholding tax on dividends, no capital gains tax and no VAT or GST.
• Tax treaties, including the arrangement with mainland China, which can reduce Chinese withholding tax on dividends to 5% where the Hong Kong company is the beneficial owner and holds at least 25% of the Chinese company, subject to the treaty conditions.
• Legal certainty: a common law system, free movement of capital, a stable currency and courts and arbitration institutions with international recognition.
• Gateway to mainland China: proximity, language, professional services and banking experience with Chinese investment.

Points to plan for: since 2023 the foreign-sourced income exemption (FSIE) regime can tax certain foreign dividends, interest and disposal gains received in Hong Kong by group entities unless an exception applies, such as economic substance or the participation exemption. Treaty benefits require real substance and beneficial ownership, and large multinational groups are subject to the global minimum tax. A holding structure should therefore be designed with real substance, not only on paper.

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The views expressed are personal and do not necessarily represent the position of NET CRAMAN. This article is for general information only and does not constitute legal or tax advice. Rules change over time; seek specific advice before acting.