Companies that decide to open a representative office in Hong Kong will do so before incorporating any other type of company, as a preliminary step and an opportunity to test the Hong Kong market. In this article, our team outlines the main uses of a representative office, along with other details that are useful for first-time investors in Hong Kong.
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Key facts about the representative office in Hong Kong
A liaison office can be a suitable choice for companies that are considering expanding their activities to the Asia-Pacific region. Our lawyers in Hong Kong present below some of the most important issues to keep in mind about the representative office:
- This establishment, also known as a liaison office, cannot perform business or produce income for the mother company but important research activities can be performed from its premises;
- The most important function of the liaison office in Hong Kong is to help the parent company determine if the jurisdiction is a suitable one for the expansion of its business activities;
- While investors are not required to open a company in Hong Kong when they set up this type of office, due diligence and understanding the local market particularities are still a necessity;
- The registration procedure for a representative office in Hong Kong is much simpler compared to that required for all other types of companies. The representatives at our Hong Kong law firm can help you register and start your activities within a liaison office;
- The liaison office will not have to obtain special permits and licenses, given the fact that it will not engage in commercial (profit producing) activities;
- The representative office can hire local or foreign staff. For the latter, a work visa is required.
Should the foreign company determine that doing business in Hong Kong is a suitable choice, it will have to start the formal procedures for company formation in this jurisdiction. In some cases, the use of a shelf company (an already registered legal entity) is a good option. Our attorneys in Hong Kong can present the available options and offer counsel when choosing the business form.
The use of a representative office in Hong Kong
The representative office does not have legal status and cannot perform any activities that would generate profit for the company abroad. However, it is useful for companies that are unsure of how their services would be perceived in the Asia-Pacific region and need to conduct a research before making any important investments in the area.
The representative office can perform the following activities:
- promotion for the foreign company,
- marketing research and connected activities,
- establishing a relationship with possible Hong Kong customers and business partners.
The Hong Kong liaison office can be seen as a bridge between the foreign company and the Hong Kong market. In some cases, it can even act as a springboard, effectively allowing a foreign company to establish connections and engage in valuable business communication prior to starting the company formation process.
Incorporating a representative office in Hong Kong
The representative office does not need to be registered with the Companies Registry in Hong Kong, however, it will need to have a valid Business Registration Certificate from the Inland Revenue Department.
The team of experts at our law firm in Hong Kong can provide complete assistance with drawing up the documents submitted with the local authorities for the purpose of notifying that a foreign company intends to establish a representative office.
When setting up a liaison office, it is common to rent an office space, as opposed to purchasing a property in Hong Kong for this purpose. Below, our team offers examples of office rental prices in per square meter in Hong Kong Island:
- HK$18 asking price for a 310.11 square meter Grade C office;
- HK$34 asking price for a 201.41 square meter office with an efficiency ratio of 65%;
- HK$38 for a 133.31 square meter office with an efficiency ratio of 70%.
The office can hire employees and may enter certain types of agreements, although their scope is limited. Examples include those with various utility providers or rent agreements.
Because the activities of the representative office are very limited, this type of establishment does not need to observe the usual taxation requirements. Also, no annual tax returns are required.
Other options for doing business in Hong Kong
The branch is another option for foreign companies that want to enter the market. Unlike the representative office, these are able to perform business activities, however, the scope of their commercial activities is limited to the ones performed by the company abroad.
The subsidiary is a locally registered company in which a foreign legal entity owns the majority of the shares (essentially controlling it). It can be a suitable option for foreign companies that intend to distance themselves from the activities of the Hong Kong subsidiary, as this legal form can engage in different business activities compared to the ones performed by the foreign company, unlike the branch.
In case you are interested in another offshore jurisdiction for opening a liaison office or a branch office, we can put you in contact with our partners from Panama. The team at BridgeWest Panama can help you incorporate your business in Panama.
If your company could benefit from setting up a liaison office, contact our law firm in Hong Kong for detailed information and legal assistance for the incorporation procedure.