How to Set up a Representative Office in Hong Kong | Article – HSBC VisionGo
A representative office is a low-risk, low-cost way to explore business opportunities in Hong Kong and study regional market dynamics.
One of the best ways to test the waters of a new geographical market is by opening a small Representative Office. It allows you to explore a new country and its economy without investing a large sum in setting up a fully-staffed branch office. For companies looking to dip a toe into Asian (specifically Chinese) markets, Hong Kong is an excellent starting point, and starting with a Representative Office here will allow you to research the region and enter it at your own pace.
What is a Representative Office in Hong Kong
As the name suggests, a Representative Office represents your company in that country. It is the focal communication portal for clients and other stakeholders to work with the company. Representative Offices have limited operational powers in the country and are mainly used for promotions or liaising.
Who can Open a Representative Office in Hong Kong?
In Hong Kong, the Representative Office (RO) can only be set up for companies incorporated outside of Hong Kong. It’s usually leveraged as a launchpad by foreign businesses to explore Hong Kong. Generally, the main branch sends a member to Hong Kong to manage this office and hire local employees as support staff.
Scope Of Work Of Representative Offices In Hong Kong
ROs CANNOT undertake activities that generate revenue or profits in Hong Kong for the local office or the foreign parent company. For example, doing consultancy work for a fee, selling products, trading goods, etc.
A Representative Office is a cost centre and can conduct market research, build relations or network for the parent company in Hong Kong. To facilitate this work, the RO can hire local Hong Kong staff and purchase goods and services.
Legal Status And Regulatory Obligations Of Representative Offices In Hong Kong
Legal status - The Representative Office does not have to be registered under the Companies Registry (CR) as a legal entity. It is considered an extension of the parent company and has no separate legal standing or recognition. The debt and liabilities of a RO has to be borne by the parent company
However, you do need a Business Registration Certificate which is an approval that allows you to function as a Representative Office. This certificate has to be prominently displayed on the office premises.
Tax liability – ROs are not required to file taxes as they are not making any profit in Hong Kong. So, the ROs can petition the Inland Revenue Department for an exemption from filing profit tax returns or file annual profit tax returns as “NIL”.
How to Open a Representative Office in Hong Kong?
You need to apply to the Business Registration Office for a certificate to function as a Representative Office within one month of opening your office in Hong Kong.
The registration process has a one-time lodgement fee (non-refundable fee) of HK$ 295, a HK$ 1425 fee for obtaining a Certification of Registration of non-Hong Kong company and a HK$ 2250 fee for Business Registration Certificate. You also have the choice for applying for a 3-year Business Registration Certificate by paying the HK$ 5,950 instead of HK$ 2250.
The Certificate usually comes through within 14 working days and must be collected from the Companies Registry in person. A proxy carrying an authority letter can also collect the Certificate.
Recapping Key Points
- Only foreign businesses not registered in Hong Kong can open Representative Offices
- ROs cannot make money from its activities in Hong Kong.
- ROs are usually set up to conduct market research or network
- They cannot enter into contracts as they are not a separate legal entity
- Companies need a Business Registration Certificate to operate a RO
- ROs don’t need to file taxes
If you are planning to expand into Hong Kong or beyond, then a Representative Office is an excellent stepping stone into the region. If you need help setting up your business in Hong Kong then do get in touch; we have a range of services centred around facilitating business paperwork and legalities and will be able to make your entry into the Asian markets a smooth affair.