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Home » Countries » Asia » Hong Kong

Global expansion is a step to make for any business, regardless of what you wish to achieve. The opportunities that can come with an expansion can be both incredibly exciting as well as intimidating and confusing, especially when you consider all of the registration procedures that needs to be done and documentation required.

Expanding to countries such as Hong Kong – which is characterized by a highly-skilled and productive workforce, multifaceted employment and tax laws, a world-renowned infrastructure network and leading sectors in financial services, tourism, trading and logistics, and professional and producer services – can bring both excitement to the possibilities, but also significant stress to ensuring the entity with the country’s rigorous legal structures and laws.

Ensuring compliance without the sufficient knowledge of the country’s laws also adds to the stress of getting your new entity off the ground and ready to test new markets. Going at it without the proper support can increase the costs, time and risks involved.

Each new markets bring new challenges, and these can be worked through more efficiently and cost-effectively with the support of an International Professional Employer Organization (PEO) such as Bradford Jacobs, especially through our Employer of Record (EOR) framework. This can be best utilized when businesses are just beginning their expansion process and require more information before committing to incorporating an entity and fully establishing themselves in that market.

This guide will over some key facts about the market and culture of Hong Kong, providing a holistic overview of the country and its economic opportunities, as well as how our team’s expertise and global knowledge can guarantee a successful expansion.

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Hong Kong – The Economy

The economy of Hong Kong is a highly developed free-market economy. It is characterized by low taxation, almost free port trade and a well-established international financial market.

Its currency, called the Hong Kong dollar, is legally issued by three major international commercial banks, and is pegged to the US dollar. Interest rates are determined by the individual banks in Hong Kong to ensure that they are market driven. There is no officially recognized central banking system, although the Hong Kong Monetary Authority functions as a financial regulatory authority.

Its economy is governed under positive non-interventionism and is highly dependent on international trade and finance. For this reason, it is regarded as among the most favorable places to start a company.

Hong Kong’s economic strengths include a sound banking system, virtually no public debt, a strong legal system, ample foreign exchange reserves at around US $408 billion as of mid-2017, rigorous anti-corruption measures and close ties with mainland China.

The Hong Kong Stock Exchange is a favorable destination for international firms and firms from mainland China to be listed, due to Hong Kong’s highly internationalized and modernized financial industry. Additional advantages include the city’s capital market in Asia, its size, regulations, and available financial tools, which are comparable to London and New York City.

Hong Kong has also had an abundant supply of labor from the regions nearby. A skilled labor force coupled with the adoption of modern British/Western business methods and technology ensured that opportunities for external trade, investment, and recruitment were maximized. Prices and wages in Hong Kong are relatively flexible, depending on the performance and stability of the economy of Hong Kong. Hong Kong raises revenues from the sale and taxation of land and through attracting international businesses to provide capital for its public finance, due to its low tax policy. According to Healy Consultants, Hong Kong has the most attractive business environment within East Asia, in terms of attracting foreign direct investment (FDI). In 2013, Hong Kong was the third largest recipient of FDI in the world.

Small and Medium-Sized Companies

As of March 2021, there were over 340 000 SMEs in Hong Kong. They accounted for more than 98% of the total number of enterprises and provided job opportunities to more than 1.2 million persons, about 45% of total employment (excluding civil services).

Most of the SMEs were in the import/export trade and wholesale industries, followed by the professional and business services industry. They accounted for about 46% of the SMEs in Hong Kong and represented about 44% of the SME employment.

In Hong Kong, SMEs are defined as manufacturing enterprises which employ fewer than 100 persons and non-manufacturing enterprises which employ fewer than 50 persons are regarded as SMEs in Hong Kong.

CountryHong Kong
CapitalCity of Victoria
No. of States/Provinces18 districts
Principal CitiesHong Kong City, Kowloon, Tsuen Wan, Yuen Long Kau Hui, Tung Chung, Shatin, Tuen Mun, Tai Po, Sai Kung, Yung Shue Wan
Language(s)Cantonese, English
Local CurrencyHong Kong Dollar (HK$)
Major ReligionChinese Folk Religions, Buddhist, Taoist, Christian
Date Formatdd.mm.yyyy
Time ZoneHong Kong Standard Time (GMT+8)
Country Dial Code+852
Population7.5 million
Border CountriesSouth China Sea (south, west, and east), Mainland China (north)
Tax Year1 April – 31 March
Minimum WageHK$37.5 per hour
Taxpayer Identification NumbersHong Kong Identity Card (HKID) number
Business Registration (BR) number
eTAX Account
Leading Sectorsfinancial services, tourism, trading and logistics, professional and producer services, cultural and creative industries, air transport
Main importsintegrated circuits, broadcasting equipment, office machine parts, gold, and telephones
Main exportsgold, broadcasting equipment, gas turbines, integrated circuits, and telephones
Main trading partnersChina, United Kingdom, India, Switzerland, Netherlands, Chinese Taipei, Singapore, South Korea, and Japan
Government TypeDevolved executive-led government within a unitary one-party socialist republic
Current Prime MinisterCarrie Lam (Chief Executive)

The Main Sectors of the Hong Kong Economy

The economy of Hong Kong relies on specific key or “pillar” industries to provide impetus to the growth of other sectors, such as the creative industries, as well as create new employment. These industries are as follows:

  1. Financial Services – Hong Kong’s financial services cover a wide range of services, such as asset management, banking, stock brokerage, insurance, and other financial services. The financial services industry in Hong Kong enjoys a “first-mover” advantage in offshore business. Hong Kong has been nominated as the business and international financial hub in the world. The industry also employs around 8% of the territory’s total workforce.

    In 2018, Hong Kong was ranked third in Asia, and fifth worldwide as per market capitalization of Hong Kong’s stock market. Moreover, Hong Kong was also ranked as the world’s most active market for initial public offerings (IPOs) in IPOs funds raised in 2018. The stock trading activities and banking facilities render the support to the continued growth of net output in the financial services industry.

  2. Tourism – This industry contributes around 4% of the territory’s GDP and employs around 6% of the territory’s workforce. This industry can be divided into two categories: inbound tourism and outbound tourism. Inbound tourism includes all the accommodating services, food and beverage services, retail trade, transport, and personal services, pertaining only to the part provided to visitors.

    However, outbound tourism covers reservation services and its related activities, cross-boundary passenger transport services, and travel agency, pertaining only to the part provided to Hong Kong residents traveling abroad. According to reports in 2020, the tourism industry has contributed to 0.4% of GDP and 5.9% of total employment.

  3. Trading and Logistics – The trading and logistics industry is the largest among the four pillar industries in Hong Kong. The logistics industry includes planning, executing, and regulating the movement and storage of goods and services from the origins to final consumption. The goods can be raw materials, goods in progress, and finished commodities.

    Storage, freight transport, postal, freight forwarding, and courier services are all activities that fall under this type of industry. As a matter of fact, trading firms are closely associated with logistics activities. Therefore, the statistics on the employment situation and economic contribution of trading services are presented together with logistics services.

    Concerning the trading and logistics fields, Hong Kong secured the position as the seventh largest trader position worldwide in 2018.

  4. Professional & Producer Services – Another critical pillar in Hong Kong’s economy. The professional services of Hong Kong comprise of technical testing and analysis, legal, accounting, architecture and engineering activities, scientific research and development, auditing, management, and management consultancy activities, information technology-related services, advertising, specialized design, and related services.

    Similarly, the producer services include the services for use by other business entities in the local economy, as well as exports of services to companies and individuals. These two industries have also done excellent work in generating value-added of 11.6% of GDP and 15.4% of total employment.

  5. Cultural & Creative Industries – Creative industries are important economic drivers for Hong Kong. They help to increase the innovation capacity of the economy and can be a powerhouse for future economic growth. Hong Kong has developed a leading edge in key areas of creative industries like film, television, music, design, architecture, advertising, digital entertainment, and printing and publishing, etc.

    According to the latest statistics, Hong Kong has around 28 780 creative industry-related establishments, with about 136 880 practitioners engaged. In 2020, the value added of creative industries stood at around 4.5% of the Hong Kong’s Gross Domestic Product, and 6.2% of the total employment.

Compliance Highlights

  • Inland Revenue Department (IRD) – the Hong Kong government department responsible for collecting taxes and duties. The IRD is responsible for the administration of Hong Kong ordinances on taxes and duties and the related rules and regulations. They also carry out the following duties:
    • collecting revenue efficiently and cost-effectively
    • providing courteous and effective service to the taxpaying public
    • promoting compliance through rigorous enforcement of law, education, and publicity programs
    • enabling staff to acquire the necessary knowledge, skills, and attitude so that they can contribute their best to the achievement of our vision
  • The Labor Department – The Labor Department is the principal government agency responsible for the execution and coordination of labor administration functions in Hong Kong SAR. Since 2003, the Department has also had a strengthened role in labor policy formulation.

    In addition to providing comprehensive employment services, the Department enforces labor laws, improves employees’ rights and benefits, fosters harmonious labor relations, and promotes safety and health at the workplace. It also provides services and information to both workers and employers and educates them on labor laws.

Labor Contracts Law

Labor law in Hong Kong is based on both employer and employee protection. The Employment Ordinance is the governing law of employment, and also includes the influence of trade unions and work councils. However, this may vary according to the industry and sector, and it is best to confirm with the Labor Department on what regulation applies.

In Hong Kong, it is common practice for employment contracts to be presented to employees in writing. There are two contract types to choose from – with the main differences between them being the contract length and benefits entitlement.

There is no requirement for an employment contract to be in writing, but it is strongly encouraged by the Labor Department and is common practice. Upon the employee’s request, however, the employer must provide a written document with the terms and conditions of the employment in writing.

If an employment contract is to be in writing, the employee is to be provided with a copy of the signed employment contract, with the following information to be included – wages, the wage period, the length of notice for termination of the employment contract, and any end-of-year payments.

There are two types of employment contracts:

  • An employment contract – Employment contracts provide employees with basic protection under the Ordinance, which includes wage payments, wage deduction restrictions, statutory leave, etc.

    Every employment contract is implied to be valid for one month and is renewable from month to month until it is deemed a continuous contract.
  • A continuous employment contract – Continuous employment contracts, however, entitle employees to all statutory benefits under the Employment Ordinance – rest days, paid annual leave, sickness allowance, severance payments, etc.

    A continuous contract of employment is the standard contract for most employment cases and can be defined as a contract under which an employee works for the same employer for 4 weeks or more for at least 18 hours every week.

    For a continuous contract, all benefits are offered to employees – including rest days, paid annual leave, sick allowance, severance payments, long service payments, and extra benefits.

Payroll – Tax Contributions and Benefits

Income Tax: Any individual earning an income from Hong Kong must pay local taxes, regardless of their residential status. Income tax is not imposed on an individual’s total income. Instead, there are 3 types of income tax an individual can contribute to:

  • Salaries Tax – income from employment, office, or pensions
  • Profits Tax – income from business or trading profits
  • Property Tax – rental income from immovable property

All individuals are subject to pay Income Tax, the most common being salaries tax. Income tax is to be paid by the individual in an annual tax return.

Income Tax is worked out progressively, according to the employee’s income. Employees are responsible for making their own payments to the tax authorities. Individuals must file an annual tax return, which is issued on the first working day of May and must be submitted within a month from the date of issue.

Health and Social Insurance: All employees in Hong Kong are entitled to health insurance – public healthcare in Hong Kong is delivered through a universal system which entitles citizens to free or low-cost healthcare which is funded by the government.

However, private health insurance options are also available and can be acquired on the employee’s or company’s initiative.

Regarding social insurance, the only social security contributions that both the employer and employee must pay monthly are pension schemes, which is known as the Mandatory Provident Fund.

Employers are in charge of setting up funds for themselves and their employees to contribute to. Employees automatically join your company’s scheme after 60 days of work. These contributions include:

Sick Pay: An employee working under a continuous contract is entitled to sick allowance if they meet the following requirements:

  1. Sick leave taken is not less than four consecutive days
  2. Sick leave is supported by an appropriate medical certificate
  3. The employee has accumulated enough sickness days

An employee can accrue paid sickness days after having been employed under a continuous contract. Paid sickness days are accrued at the rate of two paid sickness days per each completed month during the first year of employment, with an increase of 4 paid sickness days every month after that. However, paid sickness days cannot exceed 120 days at any one time.

The daily rate of sickness allowance is 80% of daily wages earned in the 12-month period exceeding the sick day.

Annual Vacation Leave: An employee is entitled to paid annual leave after being employed under a continuous contract every 12 months. Leave entitlement increases progressively, according to the years of service:

  • 1 year – 7 days
  • 2 years – 7 days
  • 3 years – 8 days
  • 4 years – 9 days
  • 5 years – 10 days
  • 6 years – 11 days
  • 7 years – 12 days
  • 8 years – 13 days
  • 9+ years – 14 days

Holidays: All employees are entitled to holiday leave. That are 12 statutory holidays, and most employers extend this entitlement to also include at least 5 general holidays. However, holiday pay is not required for general holidays. The statutory public holidays are:

  • New Year’s Day
  • Lunar New Year’s Day
  • The second day of Lunar New Year
  • The third day of Lunar New Year
  • Ching Ming Festival
  • Labor Day
  • Tuen Ng Festival
  • Hong Kong Special Administrative Region Establishment Day
  • The day following the Chinese Mid-Autumn Festival
  • Chung Yeung Festival
  • National Day
  • Chinese Winter Solstice Festival or Christmas Day (optional)


For more information, download our free guide or get in touch with our consultants here