How Foreign-Owned Companies Can Access Hong Kong's HK$7 Million BUD Fund

For global entrepreneurs and established SMEs charting a course for Asian expansion, Hong Kong consistently emerges as a strategic nexus of finance, trade, and innovation. While its reputation is often anchored to a simple and low-tax regime, this view only scratches the surface of a far more compelling reality. Hong Kong offers a sophisticated, multi-layered, and intentionally designed support ecosystem built to actively fund, nurture, and accelerate businesses. This advantage extends far beyond its famously efficient administration, encompassing millions in non-dilutive government grants, crucial loan guarantees for startups, world-class incubation facilities, and unparalleled strategic access to the economic powerhouse of Mainland China.

The Hong Kong government's approach is not a disparate collection of grants but a coordinated strategy built on distinct economic pillars: fostering Innovation & Technology (I&T) as a primary engine for future growth, bolstering the resilience and competitiveness of its vital Small and Medium Enterprises (SMEs), and cementing its role as the indispensable "super-connector" to the Greater Bay Area (GBA) and the broader Mainland market.

This in-depth guide provides a comprehensive analysis of this entire support landscape. It moves beyond a simple overview to detail the specific programs available, clarifies the crucial eligibility requirements for foreign-owned and expat-led enterprises, and offers a strategic roadmap for businesses to tap into this dynamic and opportunity-rich environment. It is a playbook for businesses aiming not just to operate in Hong Kong, but to grow with it, leveraging every tool the city has to offer.

The Golden Key: Unlocking Eligibility with "Substantive Business Operations"

Before exploring any specific fund, it is critical to understand the foundational principle that governs access to the vast majority of government support in Hong Kong: "substantive business operations". This is the single most important concept for any foreign-owned enterprise to grasp. The government's core objective is to ensure that public funds generate tangible economic benefits for Hong Kong, such as driving local job creation, generating local tax revenue, and stimulating the local economy. Consequently, it filters for companies with a genuine operational footprint, not "shell" companies registered for purely administrative purposes.

This policy effectively levels the playing field, making most major funding schemes accessible to any locally incorporated company that contributes to the Hong Kong economy, regardless of its owners' nationality. Establishing this genuine presence is a prerequisite investment to unlock the much larger pool of financial and strategic support. While the assessment is holistic and considers the nature of the business, official guidelines from the Trade and Industry Department (TID) provide a clear set of indicators that applicant companies must be prepared to prove with documentation:

• Employees in Hong Kong: The presence of local staff is a strong indicator. This can be proven with records of contributions to the Mandatory Provident Fund (MPF) scheme or through employment contracts.

• Financial and Tax Records: The company must have a Hong Kong business bank account. A crucial piece of evidence is the company's Profits Tax return and assessment issued by the Inland Revenue Department (IRD), as this demonstrates a direct financial contribution and operational history in the local economy.

• Business Transactions: Demonstrable commercial activity within or originating from Hong Kong is vital. This includes invoices and receipts from local sales, contracts with local suppliers or clients, letters of credit, and shipping documents.

• Physical Presence: Maintaining a physical office or a dedicated business address in Hong Kong is a key factor.

• Capital Investment: The amount of capital invested in the Hong Kong operation is also taken into consideration.

The foundational step to building this presence is to incorporate a Hong Kong entity. The Private Limited Company is overwhelmingly the most popular and flexible business vehicle for this purpose. It establishes a separate legal entity, which provides shareholders with the critical protection of limited liability, meaning their personal assets are shielded from business debts.

This structure requires at least one director and one shareholder (who can be a non-resident of any nationality), a Hong Kong resident or licensed company secretary, and a local registered address. This incorporated entity is the legal vehicle required to hire staff, sign a lease, open a bank account, pay local taxes, and ultimately qualify for the powerful support schemes detailed below.

The Expat's Toolkit: A Granular Guide to Core Government Grants

Hong Kong offers several powerful, non-repayable grant schemes designed to catalyze business growth. The three most prominent and broadly applicable funds are fully accessible to foreign-owned firms that meet the "substantive business operations" test.

1. Dedicated Fund on Branding, Upgrading and Domestic Sales (BUD Fund) The BUD Fund is the government's premier program for enterprises undertaking strategic, holistic projects to expand into high-priority markets.

• Objective: To provide funding support to individual non-listed Hong Kong enterprises to develop brands, upgrade and restructure their business operations, and promote sales in the Mainland China market and in all other economies with which Hong Kong has signed Free Trade Agreements (FTAs) and/or Investment Promotion and Protection Agreements (IPPAs).

• Funding Mechanics: The fund operates on a 1:1 matching basis, meaning the government will subsidize up to 50% of the project cost. The cumulative funding ceiling for each enterprise is a substantial HK$7,000,000.

• Eligibility: The scheme is open to all non-listed companies registered in Hong Kong under the Business Registration Ordinance that can demonstrate "substantive business operations" in the city. A significant advantage is that an enterprise is not required to have an existing business entity in the target market (e.g., Mainland China) at the time of application.

• Application Streams: The fund offers several streams to cater to different needs. "Easy BUD" is a simplified process for smaller, specific measures like attending an exhibition or placing an advertisement, with a funding cap of HK$100,000 per application and a faster processing pledge of 30 working days. A dedicated "E-commerce Easy" stream assists enterprises in developing their e-commerce business for the Mainland and ASEAN markets.

• Eligible Activities: The scope is intentionally broad and strategic, covering brand strategy and design, new product development, adoption of advanced technology, automation of manufacturing processes, establishing e-commerce platforms, and conducting marketing and promotional events in the target markets.

2. SME Export Marketing Fund (EMF) The EMF is a tactical fund designed to help businesses test and enter new international markets by subsidizing specific promotional activities.

• Objective: To encourage SMEs to expand their markets outside Hong Kong by providing financial assistance for participation in export promotion activities.

• Funding Mechanics: Each enterprise can receive funding up to a cumulative limit of HK$1,000,000. Each individual application is capped at HK$100,000 or 50% of the total approved expenditure, whichever is less.

• Eligibility: The fund is open to non-listed enterprises registered in Hong Kong with substantive business operations. A temporary special measure, effective until June 30, 2026, has relaxed the criteria to include non-SMEs and expanded the funding scope to cover large-scale exhibitions targeting the local market.

• Eligible Activities: The fund covers participation in trade fairs and exhibitions outside Hong Kong, online trade exhibitions, business missions, placing advertisements on trade publications targeting overseas markets, and conducting online export promotion activities such as keyword search advertising or setting up/enhancing a corporate website for export promotion.

• Strategic Future: The government has announced its intention to consolidate the EMF into the more comprehensive BUD Fund upon the expiry of the special measures in mid-2026, signaling a policy shift encouraging businesses to move from singular marketing activities towards more integrated, strategic expansion projects.

3. Technology Voucher Programme (TVP) The TVP is designed to push Hong Kong's businesses, particularly traditional SMEs, towards digitalization by subsidizing the adoption of technology to improve internal operations and productivity—it is for technology adoption, not for creating new R&D.

• Objective: To support enterprises in their use of technological services and solutions to improve productivity, or to upgrade or transform their business processes.

• Funding Mechanics: The TVP provides funding on a generous 3:1 matching basis, where the government covers 75% of the project cost and the enterprise contributes only 25%. The cumulative funding ceiling per enterprise is HK$600,000, which can be spread across a maximum of six approved projects.

• Eligibility: Applicants must be a non-listed company registered in Hong Kong with substantive business operations. A key distinction from other funds is that the enterprise must have been in operation for at least one year prior to application.

• Eligible Services: The program can be used for technology consultancy and for the procurement of off-the-shelf or customized technological solutions. Common examples include setting up Enterprise Resource Planning (ERP) systems, Customer Relationship Management (CRM) solutions, digital payment and shopfront sales systems, and developing online promotion capabilities.

Feature	BUD Fund	SME Export Marketing Fund (EMF)	Technology Voucher Programme (TVP)
Primary Objective	Strategic Market Expansion (Mainland/FTA)	General Export Promotion (Global)	Internal Technology Adoption
Cumulative Funding Cap	HK$7,000,000	HK$1,000,000	HK$600,000
Govt. Matching Ratio	50% (1:1)	50% (1:1)	75% (3:1)
Key Eligibility	Non-listed HK Co. with substantive ops	Non-listed HK Co. with substantive ops	HK Co. with substantive ops & 1 yr history
Typical Use Case	Holistic branding project for China market	Attending a trade fair in Europe	Implementing a new CRM system

Accessing Capital: Deconstructing the SME Financing Guarantee Scheme (SFGS)

Beyond non-repayable grants, the government plays a critical role in helping businesses, especially SMEs and startups, access debt financing. It achieves this primarily by de-risking loans for commercial banks through the SFGS, which is managed by HKMC Insurance Limited (HKMCI), a subsidiary of the Hong Kong Mortgage Corporation. The government acts as a guarantor for loans issued by participating commercial banks like HSBC, DBS, and OCBC, making them more willing to lend.

The scheme’s most notable offerings are:

• 80% Guarantee Product: This is a general-purpose product where the government guarantees 80% of a loan facility up to a maximum of HK$18 million per enterprise. It has a repayment period of up to 10 years and requires the applicant company to have been registered and operating in Hong Kong for at least one year.

• 90% Guarantee Product: This product is a deliberate policy tool designed to assist smaller businesses and startups with less operating experience. It offers a 90% government guarantee on loans up to HK$8 million, with a repayment period of up to 8 years. Its most critical feature is that there is no minimum operating history requirement. By absorbing 90% of the potential default risk, the government fundamentally alters the bank's risk-reward calculation, making them willing to lend to new companies they would otherwise reject.

Applications for the SFGS are made through the participating banks, not the government directly. The funds can be used for general working capital or for acquiring business equipment but cannot be used to repay other non-SFGS loans. A personal guarantee from individuals holding more than 50% of the company's equity is generally required.

The Innovation Powerhouses: A Founder's Guide to HKSTP & Cyberport

At the heart of Hong Kong's I&T ambitions are two government-backed flagship organizations: the Hong Kong Science & Technology Parks Corporation (HKSTP) and Cyberport. These are not merely funding bodies but comprehensive ecosystems designed to nurture technology startups through every stage of their lifecycle, providing validation and access that extend far beyond the initial financial grant.

While some pre-incubation "ideation" schemes are reserved for local residents holding a Hong Kong Identity Card (HKID), the main flagship programs are fully open to international entrepreneurs with a Hong Kong-incorporated company.

Hong Kong Science & Technology Parks Corporation (HKSTP) As Hong Kong's largest R&D base, HKSTP hosts over 2,300 tech companies and provides state-of-the-art labs and specialized "InnoParks" for advanced manufacturing. It is the ideal choice for startups in "deep tech," hardware, and life sciences.

• Flagship Incubation Programme: This is the key opportunity for expat-led startups. It offers up to HK$1.29 million for general technology companies and up to HK$6 million for capital-intensive biomedical (Incu-Bio) startups. Eligibility requires a tech company incorporated in Hong Kong for no more than five years, with the founding team collectively holding at least 51% of the shares, a minimum of two full-time staff (with at least 50% engaged in R&D), and a minimum viable product (MVP) or prototype.

Cyberport Cyberport is the cornerstone for digital technology clusters, including FinTech, Smart Living, EdTech, and Web3, and has nurtured unicorns like GoGoVan and Klook.

• Flagship Incubation Programme (CIP): This 24-month program is a prime opportunity for expat entrepreneurs in the digital space. It offers up to HK$500,000 in financial assistance, rent-free office space for on-site incubatees, and extensive business development support. Eligibility requires a digital tech company incorporated in Hong Kong for less than seven years, with founders collectively holding at least 51% of the equity, and a viable business plan with a product that can be launched within 12-18 months.

Feature	HKSTP (Incubation Programme)	Cyberport (Incubation Programme)
Core Focus	Deep Tech (Electronics, Biotech, Green Tech, Advanced Materials, Precision Engineering)	Digital Tech (FinTech, Web3, Smart Living, AI, Digital Entertainment)
Flagship Funding	Up to HK$1.29M (General) / HK$6M (Bio)	Up to HK$500,000
Program Duration	3-4 Years	2 Years
Key Eligibility	HK-incorp, <5 yrs old, 51% founder equity, MVP	HK-incorp, <7 yrs old, 51% founder equity, business plan
Ecosystem Vibe	R&D-heavy, hardware-friendly, strong university linkages, focus on "Innofacturing"	Digital-native, software/platform focused, strong FinTech and Web3 clusters
Best For...	A startup with a physical product, deep IP, or requiring lab facilities	A startup with a digital platform, app, or software-based solution

The China Gateway: Leveraging CEPA and the Greater Bay Area

Hong Kong's most unique and powerful advantage is its role as the undisputed gateway to Mainland China. This is not merely a geographic convenience but a deeply integrated economic and legal strategy supported by national-level policies.

The Closer Economic Partnership Arrangement (CEPA) CEPA is a free trade agreement between Mainland China and Hong Kong that provides local companies with preferential market access that goes far beyond China's commitments to the World Trade Organization (WTO).

• The Key Benefit for Foreign Companies: The most significant feature of CEPA is that its benefits are extended to any qualifying "Hong Kong Service Supplier" (HKSS), even if that company is wholly owned by foreign interests. By incorporating in Hong Kong and meeting the HKSS criteria, a foreign enterprise can effectively gain the same preferential access to the Mainland market as a local Hong Kong company.

• Game-Changing Reform: A crucial recent amendment to CEPA has removed the three-year operating requirement for Hong Kong service suppliers in most sectors. This dramatically shortens the timeline for new foreign entrants to qualify for and leverage CEPA benefits.

• CEPA Advantages: These include zero tariffs on all goods certified as 'Made in Hong Kong' ; the right to establish wholly-owned enterprises in numerous service sectors where foreign firms might be restricted to joint ventures ; enhanced investment protection ; and the ability to choose Hong Kong law as the governing law for commercial contracts and Hong Kong as the seat of arbitration.

This strategic position is further supported by quasi-governmental bodies like InvestHK, which offers free, confidential, and customized advisory services to help overseas and Mainland companies set up and expand , and the Hong Kong Trade Development Council (HKTDC), which provides extensive market intelligence, business matching services, and promotional platforms through its world-renowned trade fairs and specific support programs like T-box and "E-commerce Express" for navigating Mainland e-commerce.

An Exhaustive List of Niche and Sector-Specific Support

Beyond the broad-based schemes, the Hong Kong government offers a wide array of specialized funding programs that target specific industries and policy goals, demonstrating the depth and breadth of the support ecosystem.

• For Creative Industries: The CreateSmart Initiative (CSI) is the primary fund for supporting the growth of Hong Kong's creative sectors such as design, advertising, and film. This is complemented by the Film Development Fund, which supports local film production and development.

• For Research & Development (R&D): To encourage private sector innovation, the R&D Cash Rebate Scheme (CRS) offers a direct cash rebate equivalent to 40% of a company's eligible R&D spending. The Patent Application Grant (PAG) provides up to HK$250,000 to first-time patent applicants to cover costs. For more substantial projects, the Enterprise Support Scheme (ESS) offers funding of up to HK$10 million per project for companies to conduct in-house R&D.

• For Green Tech & Sustainability: Reflecting global priorities, the Green Tech Fund supports R&D projects focused on decarbonization and environmental protection. The New Energy Transport Fund subsidizes the trial and adoption of green transport technologies like electric commercial vehicles.

• Other Industry-Specific Funds: Support extends to a diverse range of other key industries, including the Construction Innovation & Technology Fund (CITF) to boost productivity and safety in the construction industry ; the Maritime and Aviation Training Fund ; the Chinese Medicine Development Fund (CMDF) ; and the Social Innovation and Entrepreneurship Development Fund (SIE Fund) to support projects that alleviate poverty and address social exclusion.

The Universal Subsidy: An In-Depth Analysis of Hong Kong's Tax Regime

Hong Kong's tax system is not an incidental feature; it is a powerful and intentional form of indirect government support. Its simplicity, predictability, and low rates function as a universal subsidy that is codified in law and automatically available to all qualifying enterprises, providing a stable and predictable financial advantage.

• The Two-Tiered Profits Tax System: To alleviate the tax burden on startups and SMEs, Hong Kong implemented a two-tiered profits tax regime. For corporations, the first HK$2 million of assessable profits is taxed at a reduced rate of 8.25%, and any profit above that amount is taxed at the standard 16.5% rate. For unincorporated businesses, the corresponding rates are 7.5% and 15%. To prevent abuse, the two-tiered rates can only be elected by one enterprise within a group of connected entities.

• Absence of Major Taxes: Hong Kong's appeal is significantly enhanced by what it doesn't tax. Crucially, it does not impose any of the following:

  
  

  • Value-Added Tax (VAT) or Goods and Services Tax (GST)

  • Withholding tax on dividends or interest

  • Capital gains tax

  • Estate tax The absence of capital gains tax is a particularly powerful incentive for entrepreneurs and venture capitalists, as the full financial upside from a successful business sale or IPO is not subject to tax in Hong Kong.

• Offshore Profits Tax Exemption: A foundational principle of Hong Kong's tax system is its territorial basis. Only profits that arise in or are derived from a trade or business carried on in Hong Kong are subject to profits tax. Profits sourced from outside Hong Kong are generally not taxable. To claim this exemption, a company must be able to prove to the Inland Revenue Department (IRD) that the income-generating activities occurred entirely offshore.

• Enhanced Deductions: A 100% immediate write-off is allowed for capital expenditure on plant and machinery related to manufacturing, as well as on computer hardware and software. Specific deductions are also available for the purchase of intellectual property rights and for capital expenditure on environmental protection machinery.

• Tax Concessions for Specific Industries: To bolster its status as a hub for certain high-value industries, Hong Kong offers a concessionary profits tax rate of 8.25% (half the standard rate) for qualifying profits from activities like reinsurance, corporate treasury centres, and aircraft leasing. An even more attractive 0% tax rate is available for qualifying ship leasing activities, and a new "patent box" regime offers a concessionary tax rate of 5% on qualifying income from eligible intellectual property.

Strategic Application Roadmaps

Navigating this extensive support ecosystem requires a strategic approach tailored to a company's specific profile and objectives.

For the Expat-led Tech Startup:

• Phase 1 (Setup & Validation): The immediate focus is on proper incorporation and establishing "substantive business operations". Concurrently, apply for the TVP to get a 75% subsidy on essential tech setup costs like CRM systems. Do not waste time on resident-only schemes like HKSTP Ideation.

• Phase 2 (Incubation & Growth): The primary goal is to gain entry into the HKSTP Incubation Programme (for deep tech/hardware) or the Cyberport Incubation Programme (for digital tech/software). Simultaneously, apply for the SFGS 90% Guarantee Product for non-dilutive working capital, as its lack of an operating history requirement makes it ideal for startups.

• Phase 3 (Scaling): Leverage the incubator's network to attract VC funding. Explore the R&D Cash Rebate Scheme and Enterprise Support Scheme (ESS) for ongoing innovation.

For the Foreign SME Expanding to China:

• Phase 1 (Establishment & Strategy): Incorporate a Hong Kong subsidiary, build out substantive operations, and immediately engage InvestHK for free, one-stop advisory services.

• Phase 2 (Market Entry): Develop a comprehensive China expansion plan and apply for the BUD Fund, which is the most suitable grant, offering up to HK$7 million to finance branding, e-commerce channel setup, and Mainland marketing campaigns. Work with legal partners to structure the entity to qualify as an HKSS and leverage the significant market access benefits of CEPA.

• Phase 3 (Financing Growth): As operations scale, use the SFGS 80% Guarantee Product to secure larger loans from local banks to finance inventory and operational expansion.

Conclusion

Hong Kong's support for business is not a passive feature of its economy but an active, deliberate, and multi-layered strategy. It is an ecosystem that extends far beyond a competitive tax code, offering a tangible partnership through substantial grants, risk-mitigating loan guarantees, elite incubation programs, and a unique, legally enshrined role as the primary conduit into the world's second-largest economy. This intricate framework demonstrates a clear commitment to fostering innovation, bolstering SMEs, and cementing its status as a premier international business center.

For the global entrepreneur, the message is clear and compelling: establish a genuine presence, and Hong Kong will provide a powerful and diverse toolkit to build, fund, and scale your vision on the world stage.