HK Company Registration Domestic or Overseas? The Truth You Need to Know!

Is a Hong Kong Company Considered Domestic or Overseas After Registration? The Truth You Need to Know!

In recent years, as mainland Chinese enterprises accelerate their global expansion and the international business environment continues to evolve, more entrepreneurs and business owners are choosing to register companies in Hong Kong. Whether for the purpose of expanding into overseas markets, optimizing tax structures, or facilitating financing and listing, Hong Kong has become a top choice for many businesses due to its unique legal system, status as a free economy, and close ties with the mainland.

However, in practice, many people remain confused about whether a Hong Kong company is considered domestic or overseas. This distinction significantly impacts areas such as cross-border investment, bank account opening, and tax reporting. It directly affects applicable policies, regulatory procedures, and even the flow of capital. This article explores the issue from multiple perspectives and incorporates recent news to help you understand the real situation.

1. From a Legal Perspective Hong Kong Is a Special Administrative Region with an Independent Judicial System

According to the Constitution of the People's Republic of China and the Basic Law of the Hong Kong Special Administrative Region, Hong Kong has enjoyed a high degree of autonomy under the One Country, Two Systems principle since its reunification with China in 1997. Its legal system is based on common law, which is significantly different from the civil law system used in mainland China.

This means

Hong Kong companies are established under the Companies Ordinance of Hong Kong;

Their registration, operation, auditing, and dissolution are all governed by Hong Kong law;

In mainland China, Hong Kong companies are regarded as foreign-invested enterprises and must comply with relevant foreign investment regulations.

From a legal standpoint, Hong Kong companies are classified as overseas entities-even if their parent company or actual controller is based on the mainland.

2. From a Tax Perspective Hong Kong Has an Independent, Low-Tax Regime

Hong Kong adopts a territorial tax system territorial basis of taxation, meaning it only taxes profits sourced within Hong Kong. For many mainland enterprises, setting up a subsidiary or holding company in Hong Kong has become a common tax planning strategy.

In 2025, Hong Kong continued to implement policies to simplify its tax system and reduce business costs-for example, further optimizing the two-tier profits tax regime for small and medium enterprises SMEs to ease the burden on startups. These measures have attracted more mainland companies to register in Hong Kong.

However, it is important to note

If a Hong Kong company has a permanent establishment or conducts actual business operations in mainland China, it must pay taxes in accordance with mainland tax laws;

When mainland resident enterprises make payments such as dividends, interest, or royalties to overseas entities, withholding income tax may apply;

Cross-border capital flows are regulated by the State Administration of Foreign Exchange and must be reported accordingly.

Therefore, although a company is registered in Hong Kong, its actual place of business must be considered when handling tax matters.

3. From a Financial Regulation Perspective Hong Kong Companies Are Overseas Entities

In recent years, with the implementation of international rules such as anti-money laundering AML and Base Erosion and Profit Shifting BEPS, countries have increasingly demanded transparency from offshore companies. At the same time, China has strengthened its oversight of cross-border capital flows.

At the end of 2025, the State Administration of Foreign Exchange issued a notice on further facilitating cross-border RMB settlement, emphasizing the need to strengthen authenticity reviews for outbound investments and prevent false investment activities. This has raised the bar for companies using Hong Kong entities for capital operations.

Specifically

Mainland individuals or enterprises transferring money overseas must provide genuine trade background documents;

When opening NRA Non-Resident Account accounts or applying for ODI Outward Direct Investment registration, the purpose of the funds must be clearly stated;

Banks have tightened their scrutiny of overseas company account openings, with some banks suspending applications from shell companies.

These developments show that although Hong Kong is geographically close to the mainland, it remains an overseas entity, and related financial activities must comply with cross-border regulatory requirements.

4. From a Practical Operations Perspective Whether It Is Treated as Overseas Depends on the Context

Although Hong Kong companies are legally and tax-wise considered overseas entities, their classification may vary depending on specific policy implementations

1. Foreign Investment Access

Under the Foreign Investment Law and its implementation regulations, Hong Kong investors can benefit from the Closer Economic Partnership Arrangement CEPA between mainland China and Hong Kong. For example, Hong Kong-funded enterprises may enjoy more favorable access conditions in manufacturing and services than general foreign investors.

2. Red Chip Listing Structure

Many mainland companies preparing for overseas listings adopt the Red Chip structure-establishing an overseas holding company often in the Cayman Islands that controls the mainland operating entity. In this structure, a Hong Kong company often serves as an intermediary for fund management and tax planning. Even though it operates in Asia's financial hub, it is still regarded as part of the offshore investment structure.

3. Pilot Policies in Free Trade Zones

In pilot areas such as the Shanghai Free Trade Zone and the Hainan Free Trade Port, certain policies allow companies to use overseas entities-including Hong Kong companies-for specific business activities like cross-border settlements and bonded exhibitions. In such cases, a Hong Kong company may be treated as a quasi-overseas entity, but it must still meet local regulatory requirements.

5. Conclusion The Status of a Hong Kong Company Depends on Its Use and Regulatory Context

In summary, a Hong Kong company is essentially an overseas entity because it is incorporated in a jurisdiction with its own legal and tax system. However, in practice, whether it is treated as overseas depends on the specific policy, industry, and regulatory environment.

If you are considering using a Hong Kong company for cross-border business, here are some recommendations

Clearly define the purpose of setting up the company and plan the structure carefully;

Fulfill tax reporting obligations in compliance with local laws;

Understand foreign exchange and customs regulations in advance;

Seek professional advice from lawyers and accountants to avoid compliance risks.

In an era of increasing global economic uncertainty, choosing the right jurisdiction and corporate structure is not just about efficiency-it's about security. And as a bridge between mainland China and the world, Hong Kong remains a crucial stepping stone for many companies going global.