Hong Kong is the fourth easiest place to do business in Asia according to a new independent report by TMF Group, a leading provider of international administrative services.
In the Global Business Complexity Index, Hong Kong was ranked considerably higher than a number of attractive markets in the region like Taiwan, Singapore, India, Vietnam, Malaysia, Philippines, Mainland China and Indonesia.
The benchmark report, which was based on a combination of statistically weighted data and qualitative research among local market experts globally, focuses on three areas: rules, regulations and penalties; accounting and tax; and hiring, firing and paying employees.
For accounting and tax, Hong Kong scores well for its adherence to International Financial Reporting Standards, compared with much of Asia which continues to use a local GAAP (Generally Accepted Accounting Principles) framework, which is more difficult for some international firms to apply.
Hong Kong also scores well for being flexible in extending tax filing deadlines, one of only 32% of jurisdictions to do so globally. Hong Kong, however, is among 30% of jurisdictions reporting that the responsibilities of company secretaries and legal officers have increased over the last three years. Moreover, the report expects such responsibilities will continue to increase in the next five years.
"Compliance requirements are making it more intricate to do business than before in Hong Kong, similar to other comparable jurisdictions in the region," said Margaret Fung, TMF Group Managing Director for Hong Kong. "The relative maturity of the market, the foresight of regulatory policy makers and a substantial ecosystem of service providers underpin our position as one of the region's and world's most straightforward places to do business in accounting, tax and regulatory terms."
Differences in tax, regulatory and HR-related complexity between Mainland China and Hong Kong mean the territory will continue to be an important commercial gateway for the country at large. For businesses entering APAC, Hong Kong offers the perceived benefits of its common-law system, while its Government works towards converging business regulations with those in the mainland, with the aim to decrease compliance complexity and costs for all.
Hong Kong has a number of policies and schemes designed to help companies looking to expand to Mainland China. Its "China Attesting Services" validate and certify documents emanating from Hong Kong for use on the Mainland, while companies from other countries can only secure such certification through the embassies of the People's Republic of China (PRC). Highly-skilled PRC individuals find it easy to travel and work in Hong Kong via the Admission Scheme for Mainland Talents and Professionals.
Business complexity in Mainland China
By contrast, the Global Business Complexity Index ranks Mainland China as one of the region's more complex markets. Key factors include discrepancies between PRC regions and municipalities and disparities between domestic companies and foreign enterprises.
However, the report suggests good reasons for optimism for Mainland China over the long term, given measures to develop and implement more consistent tax and regulatory compliance standards. It's position on the index is a marked improvement on the 2018 compliance complexity list produced by TMF Group.
For Mainland businesses expanding overseas, Hong Kong remains a natural jumping-off point. Close cultural ties are complemented by dual language company registration and filing capabilities. China expertise is plentiful, with professional services firms and a workforce which understands PRC and overseas markets.
"China's ongoing growth and modernisation makes Hong Kong a natural gateway for Mainland markets. This used to be very much one-way 'inbound' traffic but today we play an increasingly important role in helping Chinese companies expand overseas," continued Margaret Fung. "With Hong Kong's international expertise and close relationships with domestic business, Hong Kong has never been in a better position to help Mainland China's businesses develop overseas."
Please visit Global Business Complexity Index to download the full report.
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