Setting up a Holding Company in HK

Hong Kong Advantages

One significant benefit of establishing a holding company in Hong Kong lies in its taxation system. Hong Kong operates under a territorial tax regime, meaning that only income generated within Hong Kong’s borders is subject to taxation, thus presenting a tax-efficient structure for holding companies.

A holding company, typically not engaged in active business operations but rather focused on acquiring and managing shares in other companies, requires a jurisdiction that facilitates straightforward incorporation processes. Additionally, investors seeking to establish such entities often seek jurisdictions with favorable tax regimes.

Hong Kong stands out as one of the most business-friendly jurisdictions globally, offering an array of advantages to companies regardless of their size. Furthermore, Hong Kong’s Closer Economic Partnership Arrangement (CEPA) fosters trade between Hong Kong and China, providing additional benefits.

Under CEPA, service providers based in Hong Kong receive preferential treatment when competing for projects in China, further enhancing the appeal of Hong Kong as a jurisdiction for holding company incorporation.

Why setting up a Holding Company in Hong Kong

Setting up a holding company in Hong Kong is a strategic choice for many international businesses, especially those operating in Asia. Hong Kong offers a combination of favorable tax treatment, robust legal infrastructure, and global connectivity that make it an attractive jurisdiction for holding companies.

Low and Simple Tax Regime

Corporate tax rate: 8.25% on the first HKD 2 million of profits, 16.5% thereafter.
No capital gains tax
No withholding tax on dividends, interest, or royalties paid to non-residents.
No VAT, GST, or sales tax

Especially beneficial for passive income and shareholding structures.

No Tax on Dividends and Foreign-Sourced Income

Dividends received by a Hong Kong company (including from overseas) are not taxable.
Foreign-sourced income (including dividends, interest, and capital gains) is not taxed, provided it is not remitted to or earned in Hong Kong—though the Foreign-Sourced Income Exemption (FSIE) regime may apply (see below).

Since 2023, Hong Kong applies an FSIE regime for passive income (e.g. dividends, gains) under which economic substance is required to maintain tax exemption on foreign income.

Robust Double Tax Treaty (DTT) Network

Hong Kong has signed 40+ double taxation agreements, including China, Singapore, UK, France, Germany, India, Luxembourg, Japan.
These help reduce foreign withholding taxes and prevent double taxation for cross-border investments.

Access to Mainland China (via CEPA)

Hong Kong companies benefit from preferential access to China under the Closer Economic Partnership Arrangement (CEPA).
Ideal for holding shares in Chinese subsidiaries or JVs.

Strong Legal and Financial Infrastructure

Common law system based on English law.
Independent judiciary and strong rule of law.
Highly developed banking and finance ecosystem.
International financial center status with easy access to capital.

Ease of Incorporation and Maintenance

Fast and inexpensive company formation (1–5 days).
No requirement for local shareholders.
Minimal ongoing reporting obligations.
No minimum capital requirement.
Can be 100% foreign-owned.

Reputation and Substance

Hong Kong is not considered an offshore tax haven, so holding companies here are more likely to be accepted by banks, regulators, and tax authorities.
Easier to demonstrate commercial purpose and economic substance compared to “classic” offshore jurisdictions.

Important Consideration
FSIE Regime (as of 2023)

To comply with OECD BEPS standards, Hong Kong now requires economic substance for tax exemption on passive foreign-sourced income (dividends, interest, capital gains, royalties) where:

• The income is received in Hong Kong and
• The entity is a pure holding company (i.e., only holds equity interests)

In such cases, basic substance requirements apply:

• Adequate premises in Hong Kong.
• Local director(s) who manage and oversee the investments.
• Local administration (e.g., bookkeeping, compliance).

Use Cases for a Hong Kong Holding Company

• Holding investments in Mainland China or across Asia.
• Regional headquarters for Asia-Pacific operations.
• Receiving dividends from subsidiaries in treaty countries.
• Asset protection and succession planning.

TBA services

We have 2 decades of experience in the incorporation and management of asset holding companies, whether it be for owning property, or for other reasons such as holding an investment portfolio.

We do not simply incorporate Hong Kong Holding companies – we always take a client’s needs and personal circumstances into consideration before deciding upon which jurisdiction of incorporation will be best and most suitable.

Owning your assets through a company can reduce or eliminate the inheritance tax, capital gains tax and income tax, and afford confidentiality (seen as a major benefit for those clients residing in high-risk countries). Asset holding companies can also circumvent the need for the granting of probate, an often time-consuming and expensive process, and play a vital role for long term family financial planning.

We are happy to examine possibilities with you for as long as it takes, in order to find the best solution for you and your family.

Please do not hesitate to contact us for more information on how we might be able to benefit you in the ownership of your assets.