Less Burden of Hiring Locals and Favorable Tax Rates
CEPA Takes Effect in March... Entry into China Possible Under Hong Kong Regulations
The Hong Kong Investment Promotion Agency held an event introducing ways for domestic companies to enter the Hong Kong market, along with various support measures and benefits.
On the 21st, the Hong Kong Investment Promotion Agency held a press conference at an event hall in Jung-gu, Seoul, under the theme "Hong Kong, Asia's Financial and Digital Tech Hub," announcing support plans for domestic companies to enter the Hong Kong and Asian markets. Alpha Lau, the head of the Hong Kong Investment Promotion Agency, personally presented these details. He is the first Hong Kong-born director appointed since the agency's establishment in 2000, rather than a British national. Born in Hong Kong, he earned both bachelor's and master's degrees from the University of Oxford in the UK and has worked at several financial institutions including HSBC.
Director Lau emphasized, "Hong Kong offers the best business environment for domestic companies aiming to expand overseas, with its business-friendly tax system, free trade policies, and strong legal infrastructure," adding, "It also provides cultural facilities, living infrastructure, and international schools for children, making it a great place for businesspeople dreaming of overseas expansion to reside."
In fact, companies that have entered Hong Kong do not need to pay complex taxes such as VAT or capital gains tax. Corporate tax is only 8.25% on profits up to HKD 2 million (approximately KRW 369.28 million), and profits exceeding that amount are taxed at 16.5%. Additionally, companies enjoy freedom from various regulations, rental support policies, and tariff exemptions. Director Lau noted that companies entering Hong Kong are only subject to an 8.25% corporate tax on their first sales.
He also highlighted the differences from Singapore, which is considered a financial hub in Southeast Asia. Unlike Singapore, Hong Kong does not require local shareholders or a minimum percentage of local employees. Most importantly, Hong Kong serves as a proper gateway to China. With the China-Hong Kong Comprehensive Economic Partnership Agreement (CEPA) coming into effect on March 1, the environment for business activities in Hong Kong has become even more favorable. Alpha Lau stated, "When entering the vast Chinese market, companies are regulated under Hong Kong's legal system, not China's," emphasizing, "Based on common law and market-friendly Hong Kong regulations, companies can operate freely."
He clarified that the trend of overseas companies leaving due to the Hong Kong National Security Law, implemented by China in 2020, is a thing of the past. In response to a question about British bank HSBC withdrawing from Hong Kong because of the law, Lau explained, "I worked at HSBC for over 10 years, and HSBC did not withdraw from Hong Kong but rather increased employment," adding, "Overseas companies are also returning to Hong Kong." However, at that time, HSBC expressed support for the Hong Kong National Security Law, which drew criticism from Hong Kong's opposition camp.
He also explained the advantages in asset management. Foreigners establishing a 'family office' for asset management in Hong Kong can enjoy tax reduction benefits comparable to those of locals. Hong Kong does not impose dividend income tax on investment assets. Inheritance tax was abolished in 2006, and gift tax is effectively not levied. Hong Kong has also signed comprehensive double taxation avoidance agreements with 50 countries, including South Korea, reducing tax uncertainties.
Director Lau concluded, "Hong Kong is open to all countries," and expressed hope that "Korean companies will also enter Hong Kong and gain various opportunities."
Alpha Lau, Director of the Hong Kong Investment Promotion Agency (center), held a press conference on the 21st at an event venue in Jung-gu, Seoul, explaining measures to promote overseas companies' investment in Hong Kong.
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