Using a Hong Kong company to operate a business in China

Hong Kong has historically been a gateway to China. Despite the rise of major financial and trading centers in the mainland (Shanghai, Shenzhen, Beijing, Guangzhou etc.), the city has remained attractive for foreign companies expanding into the region because of its free market system, clean government, low taxes, world-class infrastructure, skilled workforce and international lifestyle, among other advantages.

For China residents, especially foreign nationals, incorporating in Hong Kong has always been a very strong alternative to setting up a business in a mainland Chinese city, where start-up. Consulting and trading are two areas where using Hong Kong has become a trend.

Consultants in China can use their Hong Kong company to bill their customers, both in China and overseas. For their China customers, providing services as company would definitely be better perceived than doing it as an individual. For international clients, one can provide China-related consulting services by using a Hong Kong company, which technically is part of China, without the price tag that comes with incorporating in mainland China.

Sole traders living in China can use a Hong Kong company to receive payments from international clients and pay their Chinese suppliers. Considering that China doesn’t tax offshore profits, and mainland China is considered offshore, this is a very attractive solution to conduct international trade without the need to rent and operate an actual office.

There are disadvantages for using Hong Kong companies to operate in China however. The first one would be the inability to receive RMB payments and bill your Chinese customers in RMB. Indeed, Chinese firms and individuals will require in most cases to pay in Chinese Yuans (or RMB, the official currency), and will need an official tax receipt (“fapiao”) to justify their expenses in their accounting records. A Hong Kong company is legally a foreign company in mainland China and as so is not able to issue such invoices. Furthermore, Chinese Yuans/RMB cannot be sent from mainland China to your Hong Kong company bank account, meaning the need for your customers to change their money into USD/HKD first which can be a burden.

Another disadvantage would be the visa and other tax/legal issues if you live in China. As we said earlier, a Hong Kong company is considered a foreign company in China and as does not entitle the owner for a residence permit in mainland China. In face of the increasing tightening of the visa regulations in mainland China, this may mean frequent trips to Hong Kong or even to your home country. This can be solved however when you set up a representative office for your Hong Kong company in a Chinese city.

We register Hong Kong companies for USD1,200 only. Feel free to contact us for more information or to receive the application form. Only a passport copy is required and the whole procedure can be completed within 15 days.