APAC is streaks ahead of the competition when it comes to ease
of doing business, with five of the top 10 in the latest World
Bank rankings coming from the east – and consistently up
there near the top is Hong Kong. Ahead of our webinar on investing
in Hong Kong – find out more here – our Hong Kong MD
talks us through the opportunities and the challenges of business
in the tiny island state.
Challenges of doing business in Hong Kong...
A new Companies Ordinance came into force on 3 March 2014,
divided into 21 parts comprising 921 sections and 11 schedules. It
represents significant reforms to Hong Kong company law and
includes changes such as abolishing Memorandum of Association and
par value of shares for all companies; restricting corporate
directorship in private companies; introducing court-free
procedures for capital reduction. It also clarifies directors'
duties of care, skill and diligence; facilitates simplified
reporting; and strengthens the rights of auditors.
An ambitious labour force means there is a high employee
turnover rate. The jobsDB hiring index found that companies with
more than 500 staff experienced a turnover rate of almost 25% in Q1
2013; the good news is that for smaller companies the rate is
between 6.7% and 11.4%.
While it's relatively easy to incorporate a company in Hong
Kong, that company must have at least one Hong Kong resident or
company as company secretary, at least one natural person as
director and you must have a registered office in Hong Kong,
There are regular profits tax filings required, and the form
needed will depend on the company; these are even needed if returns
are nil. Annual audits are also required for all Hong Kong
An aging population and increased life expectancy led the
government to initiate an "MPF" system to fulfil the
World Bank's second pillar of old age protection, "a
mandatory, privately managed, fully funded contribution
scheme". Hong Kong's Mandatory Provident Fund Schemes Ordinance
(MPFSO) was enacted in 1995, and the MPF system launched in
December 2000. The system involved myriad regulations and mandatory
contributions, and can be confusing to the outsider. Its
"mandatory" nature means it cannot be
At 5%, the MPF is also not as competitive as other APAC
countries; add it to the high cost of living in the state and there
is a disincentive for young workers to stay in the Hong Kong talent
There is more to the extensive programme of labour legislation
in Hong Kong; 42 pieces of legislation were enacted between 1997
and 2001, with more planned. It aims to apply relevant
international labour standards as local circumstances allow; this
includes a comprehensive code of employment known as the Employment
...and the opportunities
Hong Kong is ranked No 2 for ease of doing business in the
World Bank's index; it's also second in the trading across
borders ranking. Starting a business is relatively easy, taking
less than one day to incorporate via an online procedure.
There is a simple and low tax regime, with Hong Kong a
signatory to many free trade agreements and double tax treaties. It
has no capital gains tax, withholding tax, VAT or GST, and
dividends are not taxable in Hong Kong – in fact, only income
arising in Hong Kong is taxable.
As a gateway to Asia and the world, Hong Kong is unparalleled;
all of Asia's key markets are within four hours, and half of
the world's population is within five hours' travel.
As an international financial centre, Hong Kong offers much
– but it also presents plenty of opportunities in creative
media, the film industry and the IT sector among others. The Hong
Kong government is actively promoting these sectors, so it's
worth talking to local experts to find out more about opportunities
There is an independent judiciary functioning under English
common law, and the region's cultural openness and high level
of internationalisation help to create an environment where Chinese
and Western influences fuse. Hong Kong has long been used as a
gateway to China, but it is also China's gateway to the
As a destination for foreign investors, India is fast closing the gap on China to become the world's most popular investment hub. Figures released by the country's Reserve Bank in August 2008 showed that foreign direct investment in India for the first quarter of this financial year exceeded the total received in 2005/06.
Developing Asia is facing considerable headwinds. Delayed recovery in major industrial economies and moderating prospects for the large economies of the China and India weigh on region's project growth forecasts.
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