The branch in Hong Kong is an extension of the parent company and it is one of the available methods through which foreign corporations can enter the Hong Kong market. The branch has a set of important advantages but also some particularities that need to be taken into consideration.
Foreign business owners who want to expand their activities in Hong Kong have several options regarding the business entity. When deciding to establish a branch in Hong Kong, company owners should know that its main feature is that this type of business form is dependent on the foreign parent company.
Our company formation agents in Hong Kong can give you detailed information about other types of structures suited for foreign company incorporation, like the subsidiary of a foreign company or the representative office.
The list below highlights the main characteristics of a branch in Hong Kong:
• A branch in Hong Kong is a legal entity registered at the Company Registry: Even though it has lighter registration and reporting requirements, any new branch in Hong Kong needs to follow the registration procedure.
• The parent company abroad is fully liable for the branch’s actions: Unlike the subsidiary, the branch is an extension of the parent company and thus the foreign company is accountable for the debts and liabilities of the branch office located in Hong Kong.
• The branch can engage in the activities of the foreign company: the local activities in which the branch can engage in Hong Kong are limited to those performed by the foreign company.
• The branch will only be taxed on its Hong Kong profit: the city has a territorial taxation regime, meaning that only Hong Kong income is taxed; what’s more, then branch can benefit from the provisions of the double tax treaties.
Any branch in Hong Kong must have an appointed officer: a Hong Kong resident who is authorized to accept legal notices served for the company. The officer can be an individual or an accounting firm. Although no minimum capital is required for a branch in Hong Kong, it must have a place of business/office located in Hong Kong. The name of the branch is generally the same as the one of the parent company, however, if the name is already taken by another company in Hong Kong, the Companies Registry has the right to declare that the name cannot be taken. You can use our simple name check tool to find out if a name is already in use.
The registration procedure has several steps and it begins with the approval of the company name. After the name is cleared, the branch must make an application for branch office registration at the Companies Registry.
The documents requested for registration are:
- details about the branch: registered address, local representative.
- a copy of the foreign company’s incorporation documents and a certified copy of its Certificate of Registration;
- a copy of the most recent accounts of the mother company;
- the details of the local representative.
All documents must be submitted in English or Chinese. The documents are submitted to the Companies Registry. The branch registration procedure should last approximately two weeks. After this time, the Companies Registry will issue a Certificate of Registration of non-Hong Kong Company.
The branch must also apply for a Business Registration Certificate at the Inland Revenue Department and apply for any necessary business licenses. A local bank account must be opened for the branch.
Once a management seat is registered with the Companies Register in Hong Kong, a branch office will automatically be subject to the same compliance requirements of all other local companies. Any change brought to the management structure of the branch must be announced to the Trade Registry which will update the info in its records accordingly. This means that if business partners will want to conduct a company due diligence process, they will be able to carry out a search with the Trade Register where they will find information on the branch office’s name and address. Our company formation consultants in Hong Kong offer company due diligence services to foreign investors doing business with local companies.
Part of the compliance requirements of the Hong Kong Commercial Code is also obtaining a license for certain activities carried out in the country. However, the branch office may only undertake the same activities of the parent company.
Just like any other Hong Kong company, the branch office will respect the same tax regulations imposed by the Inland Revenue Department. Moreover, the Hong Kong branch is also required to file annual accounts with the Companies Register which will be signed by the director, by the authorized representative or secretary. A special mention should be made regarding the representative, which must be acknowledged by the Registrar upon the incorporation of the branch office.
This is why our company registration agents in Hong Kong offer nominee director and secretary services, which can be very useful when it comes to respecting the legislation and requirements imposed by the Companies Register.
Please contact our consultants if you have any questions about how to open a company in Hong Kong.