Company Formation in Hong Kong

Hong Kong is the cheapest of the six jurisdictions we work with to incorporate and, for the wrong client, one of the more expensive to keep. The reason is simple: every Hong Kong company must be audited by a Hong Kong practising accountant, every year, regardless of size or activity. Read the fee comparison with that in mind.

The territorial principle and the offshore claim

Hong Kong charges profits tax only on profits arising in or derived from Hong Kong. Profits sourced outside Hong Kong are not chargeable — which is where the phrase “offshore claim” comes from. It is a claim, not a status: the Inland Revenue Department decides on the facts, and the burden of proof is on the taxpayer.

What determines source is the place where the operations that produced the profit were carried out. For a trading company that generally means where the sale and purchase contracts were effected; for services, where the services were performed. Contracts negotiated by email from Hong Kong, staff in Hong Kong, or a Hong Kong bank account used to conclude business all pull towards a Hong Kong source.

What is due each year

Reputation and lists

Hong Kong is not on either annex of the EU list of non-cooperative jurisdictions. It was removed from Annex II in February 2024 after amending its foreign-source income exemption regime, and it does not appear on the list adopted by the Council on 17 February 2026. It is not on the FATF list of jurisdictions under increased monitoring.

It also came off Portugal’s national list under Portaria 150/2004, as amended in 2025 — one of the few recent removals from any Member State list. It remains on Italy’s decree of 4 May 1999, which matters for Italian citizens moving there rather than for the company itself.

Under the Common Reporting Standard, Hong Kong treats 128 jurisdictions as reportable, including every EU Member State, most from the 2018 reporting year. Account information flows to your home tax authority whether or not you mention it.

For EU nationals and EU-resident owners

Hong Kong sits outside both EU annexes, so the coordinated defensive measures do not apply and a deductible payment to a Hong Kong company is not caught by DAC6 hallmark C.1(b)(ii) on the non-cooperative-jurisdiction limb. That is a genuine advantage over Panama, and it is the single clearest reason an EU-resident client chooses Hong Kong over a Caribbean or Central American alternative.

Your Member State’s CFC rules still apply

The Anti-Tax Avoidance Directive sets a minimum: control of more than 50% of votes, capital or profit entitlement, and foreign tax below half of what your Member State would have charged. Each Member State implemented its own version.

The critical variable is the substance carve-out. Article 7(2)(a) of the directive does not apply where the company carries on a substantive economic activity supported by staff, equipment, assets and premises. A Hong Kong company with real people doing real work in Hong Kong is a different proposition from a registered address and a nominee. An offshore profits claim, which asserts that the operations happened outside Hong Kong, sits in obvious tension with a substance defence that asserts they happened inside it — and we work through that tension explicitly rather than hoping no one notices.

Moving there yourself

Hong Kong offers no residence route through company formation. If relocation is part of the objective, it belongs in a separate conversation about employment visas or the Quality Migrant scheme, and the company will not do the work for you.

Italy’s Article 2(2-bis) TUIR presumption applies to citizens moving to Hong Kong, since it is on the 1999 decree list. Germany’s § 2 AStG extended limited liability turns on whether Hong Kong is a low-tax country for that specific test, on income of EUR 77,000 — an analysis to run on your own numbers, not a general answer.

For Indian residents

Hong Kong is unusually workable for Indian-resident owners for one reason that has nothing to do with tax rates: India and Hong Kong have a comprehensive double taxation agreement, signed on 19 March 2018 and in force since 30 November 2018. Panama and the Seychelles have no such treaty.

The exchange-control gate comes first

The Overseas Investment Rules and Regulations 2022 govern the transaction before any tax question arises. A resident individual may invest within the USD 250,000 annual Liberalised Remittance Scheme limit, must file Form FC and obtain a Unique Identification Number before the bank can remit, must route everything through one designated authorised dealer bank, and must file an Annual Performance Report for the entity by 31 December each year.

• The Hong Kong entity must be an operating entity in bona fide business, and must not have a subsidiary or step-down subsidiary in which you hold control.
• No overseas direct investment is permitted into a foreign entity engaged in financial services activity — which rules out a Hong Kong licensed money service operator, fund manager or similar for a resident individual.
• Real estate activity, as defined in rule 2 of the 2022 Rules, is prohibited for every person resident in India.
• Tax collected at source of 20% applies to remittances above ₹10 lakh in aggregate in the financial year; creditable against tax, but cash out at the moment of transfer.

And then place of effective management

A Hong Kong company whose key management and commercial decisions are in substance made in India is Indian tax resident under section 6(10) of the Income-tax Act, 2025, taxable in India on its worldwide income. That risk is heightened, not reduced, by the offshore profits claim: if you tell the Inland Revenue Department that the operations were not carried out in Hong Kong, you should expect to be asked where they were carried out.

Schedule FA disclosure applies to a resident and ordinarily resident on a calendar-year basis, and the Black Money Act penalties described on our UAE page apply identically here.

Setting up: what it takes

The cost picture over three years

Our fee starts at $1,600, the lowest of the six. Government fees, the company secretary, the registered office and — every year without exception — the statutory audit sit on top. For a small holding company the audit is often the largest single recurring line. We give you the three-year number before you decide, because on a first-year comparison Hong Kong always wins and on a third-year comparison it sometimes does not.

Banking

Hong Kong banks assess the beneficial owner and the business model, not the certificate of incorporation. They will ask what the company actually does, who the counterparties are, where the goods or services move and why Hong Kong is the right place for the account. A clear, documented answer is worth more than any introduction.

Accounts for companies with no Hong Kong nexus and no operating history are harder than they were, and virtual-asset and payment businesses harder still. We assess the outlook before incorporation rather than after, and we do not sell an account as part of a package.

When Hong Kong is not the answer

It is a poor fit where you need residence — there is no route through the company. It is a poor fit for an Indian resident whose intended activity is financial services, which the overseas investment rules bar outright. It is a poor fit for a dormant holding vehicle, because the audit cost recurs whether or not anything happens. And it is a poor fit where the plan is an offshore claim run from your kitchen table in an EU Member State, because that is precisely the fact pattern both the Inland Revenue Department and your home CFC rules are built to catch.

It is a strong fit for genuine trade with mainland China and the wider region, for groups that want a common-law holding company with a real court behind it, for IP and licensing structures with substance on the ground, and for owners who value no capital gains tax, no withholding tax and no VAT over a headline zero.

Frequently asked questions

Compare with the other jurisdictions

Choosing between two or three options is normal at this stage. Each page below sets out the same ground — tax, audit, reporting, residence and the rules that apply where you are resident — so the comparison is like for like.

Dubai & the UAE · Singapore · Cyprus · Panama · the Seychelles

Or start from the full comparison of all six, which sets them side by side on tax, audit, residence and EU list status.