If you have a foreign company and want to get extra market insight, greater exposure, and holistic understanding of the business environment in Hong Kong before opening a full-fledged office, it is advisable to establish a representative office.
This is only an extension office of your overseas company. The office does not have independent accounting books but will offer support services. A representative office is ideal for small and medium startups that need a lot of support for their target clients. Keep reading to learn more about Hong-Kong representative office: pros and cons.
Key requirements to set up a representative office
(i) A certified copy of the CI (Certificate of Incorporation) or other authenticating documents.
(ii) A certified copy of Chinese or English translation if the original was not done in English or Chinese.
It will take only two working days to process the documents.
Hong Kong Representative Office Setup Procedures
- Consult and evaluate your company design and prepare all the requisite documents for establishment of a representative office.
- Sign the engagement letter to confirm proceeding with the representative office establishment.
- Prepare the documents for the formation of the representative office. While the representative office is not required to register with the Hong Kong Companies Registry, it is required to register with IRD (Inland Revenue Department) and get a Business Registration Certificate.
- Submit the duly signed company documents to IRA and clear the requisite fee on behalf of the client. Remember that the representative office has no legal standing and all the activities are pegged to the main overseas company.
- Monitor the registration process office and keep the client updated. This will help the company management to maintain pace or intensify additional preparations on the tasks that the representative office will be required to do.
- Pick the registration certificate, prepare additional requirements, and submit to clients. Once the office has been registered, it can only operate as a liaison unit to carry promotional work and market research as opposed to profit generating activities.
Benefits of opening a representative office in Hong Kong
- It does not have registration requirements at the Companies Registry or minimum capital demands. Accordingly, there are no requirements for maintaining accounts or even filing tax returns. The sole requirement is registration with IRD.
- Because the Hong Kong representative office is not incorporated, just like the foreign company, it is not required by Hong Kong authorities to maintain filing records or even comply with other statutory requirements.
If you want to change the status of the office to become your Main operational unit, it can be transformed into a branch office.
Cons of having a representative office
- The office cannot be used for profit-making activities. Because it is not a legal entity, it cannot be used to sign contracts or enter into deals on behalf of the foreign company.
- The representative office can only carry liaison or promotion activities such as market research and liaison on behalf of the foreign subsidiary.
A good investor looks at the market and evaluates its viability to craft a winning strategy before venturing into it. While Hong Kong is a ripe market for investors to take advantage of, understanding it more and specific needs of target clients using a representative office will be the best option before taking the next step.
Remember that you can even convert the representative office into the branch office after getting satisfied that Hong Kong is the right market for your company.