How can an overseas company set up a branch or office in Hong Kong? What are the accounting and tax requirements?

For overseas companies, Hong Kong always attracts global business attention. Setting up an office in Hong Kong can provide a unique platform for overseas companies to conduct business transactions and open up new markets. It not only enhances the company’s business image, but also helps to further develop the market. In the following paragraphs, we will explain in detail how to set up an office or branch in Hong Kong to open the door to the global market for your overseas company.

How to set up a Hong Kong office for an overseas company?

According to the Companies Ordinance, an office does not have the status of a legal person. It is not allowed to carry out profit-making activities, and its main functions are to conduct market research, promote the business of the parent company, and handle customers’ enquiries. A branch office, on the other hand, can carry out profit-making activities, but the legal liabilities and debts it is responsible for need to be borne by the parent company.

Procedures for setting up a Hong Kong office:

To set up an office in Hong Kong, you only need to apply for business registration with the Inland Revenue Department of Hong Kong by submitting a Business Registration Form (Form F1) and applying through the following steps:

Complete a prescribed application Form 1(b);

Pay the business registration fee and levy;

Providing proof of identity.

How to set up a Hong Kong Branch (Subsidiary)?

A Hong Kong branch is in fact a Hong Kong subsidiary of an overseas company, which is essentially an entity with separate legal personality and is capable of assuming legal liabilities on its own. There is no inherent legal difference between this kind of branch and a normal Hong Kong local company.

Procedures for setting up a Hong Kong branch:

To set up a branch, the only documents that need to be submitted include NNC1 and IRBR1, which are used to apply for incorporation of a limited company.

Since the Hong Kong government has a very short processing time for company registration, the time for company establishment process is also very fast. Therefore, setting up a branch in Hong Kong is an ideal choice for overseas companies.

What are the subsequent accounting and tax requirements?

Regardless of whether it is an office or a branch, the company is still required to submit an annual report containing the latest audited financial statements of the parent company to the Hong Kong Companies Registry each year, which will be audited by an accountant. In addition, the company is also required to update its Annual Return (NAR1) and Business Registration Certificate.

Since the office does not carry out profit-making activities, it is not subject to profits tax in Hong Kong. However, if the office staff or branch staff work in Hong Kong, they need to file tax returns for salaries tax and profits tax in accordance with the Hong Kong tax laws.

All in all, setting up an office in Hong Kong for an overseas company seems to be a relatively simple process. However, due to the complexity of accounting and taxation issues involved, it is advisable to seek professional legal and accounting advice during the establishment process. The above information is for reference only. If you have any questions or information regarding tax return (individual tax return, corporate tax return, accountant tax return), you are welcome to contact our professional consultants and we will provide you with a free quote and consultation service in due course.

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