setting up a business in Hong Kong

INTRODUCTION

A foreign company wishing to carry on business in the Hong Kong may do so by either incorporating a subsidiary (private limited company) or registering a branch of foreign company in Hong Kong with Companies Registrar.

The differences between a Hong Kong branch and a Hong Kong subsidiary of a foreign company stem from the fact that, unlike a branch, a subsidiary is an entity which, under Hong Kong law, separate from its parent. The business scope available to a Hong Kong branch and a Hong Kong subsidiary is generally the same.

The usual reasons for preferring a subsidiary over a branch include the following:

  • The parent company will not be liable for the debts of its subsidiary; its legal liability will be limited to
    the amount of any unpaid issued share.
  • Only information of the subsidiary will be filed with the Registrar.
  • A branch maybe required to file its financial statements for public inspection.

On the other hand, the usual reasons for establishing a branch over a subsidiary include the following:

  • Annual audit is exempt for a branch of foreign company.
  • Banking facilities maybe extended to a branch of foreign company’s overseas banker.

Tax advantages may be available under the tax laws of the place of incorporation of the foreign company, especially the Hong Kong operations may incur loss in the first few years of operation or the operation is not a profit center.

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