First-year cost of a Hong Kong company: set-up, the BR fee, and profits tax.
Total first-year cost
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First-year profits tax
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Set-up and service fees
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Business registration fee
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Profit after first-year cost
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Your breakdown
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What the first year of a Hong Kong company actually costs
Hong Kong is genuinely cheap to set up a company in compared with most of Asia, but the first-year cost is more than the incorporation fee a service agent quotes. Three things stack up: the one-off set-up and company secretary fees, the annual business registration fee payable to the Inland Revenue Department, and profits tax once the company makes money. This tool adds those together so you see the real first-year outlay, not just the headline incorporation price. It suits a founder deciding whether to incorporate, a freelancer weighing a limited company against staying a sole trader, or anyone budgeting a new venture.
The two-tiered profits tax is the part worth understanding
A Hong Kong company does not pay a single flat rate on its profits. Under the two-tiered regime the first $2,000,000 of assessable profits is taxed at a lower rate, modelled here at 8.25 percent, and everything above that at the standard rate, modelled at 16.5 percent. So a company making exactly $2 million pays the low rate on all of it, while a company making more pays the low rate on the first slice and the higher rate only on the excess. That design deliberately favours small and new businesses. The figures here are the rates this calculator applies for 2025/26, and both the rates and the business registration fee, which the Budget adjusts most years, should be confirmed with the IRD before you commit. Worth knowing too: profits tax in Hong Kong is territorial, so only profits that arise in or are derived from Hong Kong are taxed. A company can in principle claim that offshore-sourced profits fall outside the net, though the IRD scrutinises such claims closely and the bar is high.
A first year that crosses the $2 million line
Take a company expecting $2,400,000 of profit, with $12,000 of set-up and secretarial fees and a $2,200 business registration fee. The profit splits across the two tiers, and the tax is the sum of the two pieces:
The profits tax dwarfs the set-up and registration fees, which is the real lesson: incorporation is cheap, but tax on a profitable year is the dominant cost. The company keeps $2,154,800 after the lot. The chart shows how the total first-year cost is overwhelmingly tax.
Costs the basic model leaves out
This is a first-year planner, not a full accounting projection, so it deliberately omits a few recurring items you should budget separately. An audit is mandatory for a Hong Kong limited company and adds an annual accountant's fee. If you hire staff you take on the employer's 5 percent MPF contribution, capped at $1,500 a month per employee, the ceiling the MPFA applies. And the two-tiered low rate is restricted to one company in a group of connected entities, so a founder running several companies cannot claim it on each. For salaries tax on what you pay yourself, or the full corporate computation, use the dedicated tools.
Does a company with no profit still pay anything?
Yes. Even a loss-making or dormant company must keep paying the annual business registration fee and, unless formally declared dormant, file an audited profits tax return. Profits tax itself is zero when there is no assessable profit, but the registration fee and the cost of the annual audit do not go away.
Is a sole trader cheaper to run than a company?
Often yes in the early days. A sole trader skips the incorporation and audit costs and pays profits tax at the unincorporated rates, modelled here at 7.5 percent then 15 percent, which are slightly lower than the company rates. The trade-off is no limited liability. Compare the two with the company-versus-sole-trader tool before deciding.