Why a Hong Kong Limited Company Still Matters — If You Know How to Use It

A client once told me: “I want to build my Asia business on solid ground. Singapore sounds perfect, but what about Hong Kong? Isn’t that the traditional gateway to China?”

It’s a question I hear often. For decades, Hong Kong was the offshore darling of Asia. It was where entrepreneurs set up companies to tap into China, raise capital, and operate with minimal tax. It was efficient, simple, and respected.

But times have changed. Politics, compliance, and banking have made Hong Kong more complicated than it once was. And yet — despite the headlines — the Hong Kong Limited Company (HK Ltd.) still has a role to play, if you understand when and how to use it.

Reputation and Credibility

First, let’s be honest.

Before 2020, saying you had a Hong Kong company carried weight. Investors, banks, and counterparties saw it as a gateway to China and a serious Asian financial hub. Today, the reputation is more mixed:

• On the one hand, Hong Kong is still a global financial center with strong common-law foundations, independent courts (at least formally), and a developed regulatory system.

• On the other hand, the national security law and Beijing’s tightening grip have spooked many Western investors. Some partners hesitate when they see “Hong Kong” on the letterhead.

So credibility is now context-dependent. If your market is Asia—especially China—Hong Kong still carries clout. If your market is Western Europe or the U.S., a Singapore entity may be better received.

The Tax Benefits of a Hong Kong Ltd.

Tax has always been Hong Kong’s calling card. The system is simple, territorial, and competitive.

1. Corporate Tax Rate

• Profits tax is 8.25% on the first HKD 2 million (~USD 250k) of profits, and 16.5% above that.

• That’s lower than most Western systems, though not as low as Singapore’s effective rates with exemptions.

2. Territorial Taxation

Here’s the key: only Hong Kong–sourced profits are taxed.

• If your Hong Kong company earns revenue from outside Hong Kong, those profits may be offshore and not taxable.

• You can apply for an offshore profits claim with the Inland Revenue Department (IRD). If accepted, the foreign-sourced income is exempt.

This can result in an effective tax rate of 0% for companies with no Hong Kong–sourced income.

3. No VAT, No GST

There is no sales tax in Hong Kong.

4. No Dividend or Capital Gains Tax

• Dividends are tax-free.

• Capital gains are tax-free.

The Catch

Unlike Singapore’s clear foreign-sourced income exemption, Hong Kong’s offshore profits claim is not automatic. The IRD can—and does—challenge claims. You need to prove that profits were generated entirely outside Hong Kong, with supporting documentation.

For many entrepreneurs, this is where the simplicity ends. Without proper structuring and record-keeping, the IRD may reject your offshore claim and tax you at 16.5%.

Banking and Finance

Banking in Hong Kong is both a strength and a weakness.

Strengths

• Home to some of the world’s largest banks: HSBC, Standard Chartered, Bank of China, Citi.

• Multi-currency accounts, trade finance, and payment rails tailored to international business.

• A Hong Kong bank account still signals a serious player in Asia.

Weaknesses

• Opening an account has become difficult. Post-2015 AML rules, FATCA, CRS, and political scrutiny mean many entrepreneurs are rejected.

• If your business is not clearly Hong Kong or China-related, banks may decline your application.

• Digital nomads often find Hong Kong banking nearly impossible without local directors, offices, or substance.

So while a Hong Kong company is respected, the banking access is no longer automatic.

Compliance and Substance

Hong Kong companies are subject to proper governance, which again adds credibility compared to light-touch offshore jurisdictions.

Requirements

• Director: At least one natural person, who may be foreign.

• Company secretary: Must be a Hong Kong resident or a local firm.

• Registered office: In Hong Kong.

• Annual return: Filed with the Companies Registry.

• Financial statements: Required.

• Audit: Mandatory, regardless of size.

Substance in Practice

Hong Kong is still technically a low-substance jurisdiction—you can run the company without staff or offices. But to claim offshore profits, you must prove management and operations are outside Hong Kong.

In other words:

• If you want 0% tax, you must show the company is managed from abroad.

• If you want treaty benefits (Hong Kong has a smaller but growing treaty network), then IRD expects real management and control in Hong Kong.

It’s a balancing act, and one that requires careful planning.

Why This Works for Dubai Residents

For clients based in the UAE, a Hong Kong Ltd. can be an alternative to Singapore when:

• You want to tap into China or North Asia markets.

• You want to structure profits offshore and claim 0% in Hong Kong, while avoiding Dubai’s new 9% corporate tax.

The logic is similar to Singapore:

• Keep your Dubai entity for residence.

• Use Hong Kong as the real operating company.

• Ensure management and control is not in Dubai (to avoid UAE tax exposure).

The downside:

• More AML scrutiny than Singapore.

• Harder bank account opening.

• Offshore profits claim requires documentation and patience.

For many Dubai clients, Singapore is the smoother option, but Hong Kong can still shine if your business has real ties to China or the region.

Hong Kong vs. Singapore

So which is better?

• Tax: Both can reach near 0%, but Singapore’s exemptions are clearer and more predictable. Hong Kong requires offshore claims that may be challenged.

• Banking: Singapore banking is easier for international businesses; Hong Kong banking is tougher unless you are China-facing.

• Reputation: Singapore is neutral; Hong Kong is increasingly politicized.

• Compliance: Both require filings, but Hong Kong audits are mandatory for all companies, even small ones.

👉 Bottom line:

• If your business is Asia-global, choose Singapore.

• If your business is China-facing, Hong Kong may still be the natural gateway.

Hong Kong vs. U.S. LLC

Many clients compare Hong Kong with the U.S. LLC model.

• A U.S. LLC can be tax-free if there’s no U.S. source income or PE. But it doesn’t file full corporate returns, which can look suspicious to investors and banks.

• A Hong Kong Ltd. files full audited financials, making it look more “serious.”

• Dividends from Hong Kong are tax-free, and audited accounts prove compliance.

So:

• If you need credibility and clean dividends, Hong Kong is better.

• If you want simplicity and transparency, an LLC may suffice.

Costs

• Incorporation: Around USD 2,000–3,000.

• Annual maintenance: USD 4,000–8,000, including secretary, filings, and audit.

• Audit/accounting: Required annually; costs vary with revenue.

This is not a cheap jurisdiction, but it reflects its positioning as a real business hub.

Who Should Use a Hong Kong Company?

• China-focused entrepreneurs: Import/export, sourcing, logistics, or services tied to the Mainland.

• Regional traders: Using Hong Kong as a hub for North Asia.

• Investors: Wanting clean dividend flows with audited returns.

• Dubai residents: Seeking an Asian base while avoiding UAE corporate tax (with careful management outside Dubai).

How We Help

We don’t just explain the rules—we set up and manage Hong Kong Ltd. companies for our clients.

Our services cover:

• Incorporation and structuring.

• Company secretary and registered office.

• Bank account setup (traditional or fintech).

• Annual returns and audits.

• Offshore profits claims with IRD.

• Substance planning: whether to manage from Hong Kong or abroad.

• Integration with Dubai residency or other offshore setups.

Final Thoughts

Hong Kong isn’t the easy offshore playground it was a decade ago. Banking is tougher, compliance is stricter, and politics are riskier. But for the right profile—especially those looking toward China and North Asia—a Hong Kong Ltd. is still powerful.

It offers:

• Territorial taxation (potentially 0%).

• Strong legal system and audited credibility.

• Access to world-class banks (if you qualify).

• Clean dividend flows and no capital gains tax.

It’s not for everyone. For global entrepreneurs, Singapore often wins. For lean setups, a U.S. LLC may be simpler. But if your future points north—to China, to supply chains, to Asian trade routes—then Hong Kong still matters.

👉 Book a consultation with us today and we’ll map whether Hong Kong, Singapore, or another jurisdiction is right for you.