Hong Kong Branch or a New Company? Registered Non-Hong Kong Company vs Subsidiary

At a glance

The point most often misread: “branch” is the colloquial term; in law it is a “registered non-Hong Kong company”. Registering it means the same overseas company has opened a place of business in Hong Kong — it has not given birth to a new company.

Legally, where does the difference lie?

The definition of a registered non-Hong Kong company is direct: a company incorporated outside Hong Kong that establishes a place of business in Hong Kong must apply to register within one month of establishing it. You are not forming a new company; you are registering an existing overseas company’s operating presence in Hong Kong.

A Hong Kong subsidiary is the opposite: you incorporate a brand-new Hong Kong limited company with its own certificate of incorporation, business registration certificate, directors and shareholders (the shareholder can simply be the parent), and it is an independent body corporate in law. That distinction carries through everything afterwards: which name the bank account is in, who the contracting party is, what gets filed each year, and how you wind it down.

If something goes wrong in Hong Kong, who bears the liability?

Here it is worth being straight. The common industry line is that “a branch is not a separate legal person, so Hong Kong debts and legal liabilities fall back on the parent, whereas a subsidiary is limited to its share capital”. That is generally right, but neither the Companies Registry nor the IRD states it in those terms on their websites — it reads more like an inference from general common law principles.

Practically, you can understand it this way: a branch and its parent are one legal entity, so a Hong Kong counterparty is in principle pursuing the whole parent; a subsidiary is a separate entity, and the parent’s exposure generally stops at the capital it put in, plus any guarantee it signed separately. Which jurisdiction the parent sits in, and whether it has given guarantees, both change the answer — so take advice on the specific case.

What is written down in black and white: a branch must have at least one authorised representative in Hong Kong to accept service of process or notices on the company’s behalf, and that representative must be a natural person resident in Hong Kong, or a solicitors’ firm, a legal body, a firm of certified public accountants, or a professional firm.

On tax, does a branch save anything?

The most common assumption is that a branch does not have to file tax in Hong Kong. Hong Kong profits tax does not distinguish resident from non-resident: any person (including a body corporate) carrying on a trade, profession or business in Hong Kong and deriving assessable profits arising in or derived from Hong Kong is chargeable. An offshore company doing business in Hong Kong equally has to register the business, file profits tax returns, and keep records for at least 7 years.

One point on the two-tiered regime has to be worked out carefully: for years of assessment from 1 April 2018, the first HK$2 million of a corporation’s assessable profits is taxed at 8.25% and the balance at 16.5% — but only one connected entity in a group may elect the two-tiered rates each year. If the group already has a Hong Kong company enjoying them, opening a second does not give you two. See how the two-tiered rates work and the profits tax guide.

How different is the annual filing?

Both are 42 days, but what goes in differs.

A registered non-Hong Kong company files form NN3 within 42 days of its registration anniversary, covering the registered office in the place of incorporation, the principal place of business in Hong Kong, and particulars of directors, company secretary and authorised representative. Where section 789 applies, it must also be accompanied by a certified copy of the latest published accounts, covering not less than 12 months. Failing to file NN3 within the 42 days is a criminal offence, and the company, its responsible persons, and any authorised agent who permits the breach can all be prosecuted.

A Hong Kong subsidiary files NAR1, also within 42 days of the anniversary — and a private company’s NAR1 does not require financial statements. For a group that would rather not publish the parent’s numbers, that point alone often decides it.

So which situation calls for which?

If you are simply opening a small operating point in Hong Kong, the business is entirely integrated with the parent, and you do not mind the parent’s accounts being public — a branch is administratively more direct, and winding down is quicker: form NN13 within 7 days of ceasing to have a place of business and it is done.

If you want liability separated from the parent, a Hong Kong identity for dealing with local customers and banks, the option of bringing in local shareholders or selling later, or simply the parent’s accounts kept out of view — a Hong Kong subsidiary is usually far more practical, and it is the route most overseas owners end up taking. On account opening and director arrangements, see foreigners setting up a Hong Kong company and the guide for non-local clients.

Once you have chosen, how long does it take?

The two routes need different preparation: a branch needs a certified copy of the parent’s constitutional documents and an authorised representative arranged in Hong Kong; a subsidiary needs decisions on shareholding, directors, company secretary and the year end.

Tell us where the parent sits, what the Hong Kong business will do, and whether you will be contracting with local customers, and the direction usually becomes clear quickly.

Ready to start? Get started. Still undecided? Talk to us — we are a licensed Hong Kong trust or company service provider (TCSP) and handle both.

The forms, fees and filing requirements described are as published by the Companies Registry and the IRD; government fees are adjusted from year to year. This is general information, not professional advice — for individual situations, particularly on where liability falls and on group tax arrangements, take advice from a professional.