8 minute read
14 Apr 2022

Why You Should Choose Hong Kong to Set Up a Trading Business

When you don’t know what would benefit a trading business, Hong Kong will give you the exact answer. It is one of the world’s leading trading economies and also a major hub for trading in Asia.

Hong Kong as the world’s largest trading economy is a natural choice for businesses looking to get involved in trading. The city is home to a huge variety of businesses, from small startups to large multinational corporations, and has a thriving economy that is open to foreign investment.

If you want to approach the Chinese market, relieve tariff costs, relax tax burden and enjoy a propitious trading environment, Hong Kong is the place to be.

This article will tell you in detail why you should start a Hong Kong trading company.

1. Hong Kong as a trading-friendly location

Hong-Kong-as-trading-friendly-location

Hong Kong is globally renowned as a trading-friendly location. Situated at the heart of East Asia, Hong Kong provides businesses with preferential access to Mainland China – the world’s second largest economy – as well as to the Chinese mainland’s burgeoning consumer market of 1.4 billion people.

Strategic gateway to growing Mainland China markets

Hong Kong is the ideal gateway to China’s vast and growing markets. Bordered with Shenzhen – the Mainland’s special economic zone, the country is a favorable destination for global investors. This proximity makes it easy to do business with Mainland China, while also providing access to the rest of Asia and the world.

Regional financial and logistics hub for expansion across Asia

Hong Kong is an international trading hub with a strong economy and efficient infrastructure. The city is strategically located for businesses looking to grow across Asia, offering access to a large pool of potential customers. Businesses can benefit from a wide range of trading opportunities and preferential access to markets in mainland China.

Stable, highly-efficient, business-friendly cosmopolitan

Hong Kong is one of the most stable and efficient trading environments in the world. The country is highly cosmopolitan, and its business-friendly atmosphere makes it a preferential place to start and operate a trading company.

Extensive network of free trade agreements (FTA)

Hong Kong has a network of free trade agreements (FTA) with major trading partners, including China, the Association of Southeast Asian Nations (ASEAN), Australia and New Zealand. These FTAs provide preferential tariff treatment for Hong Kong goods exported to these markets.

In addition, Hong Kong is a member of the World Trade Organization (WTO), which means that Hong Kong trading companies can enjoy the benefits of the WTO’s multilateral trading system. This includes access to markets, security of market access and predictable trading conditions.

The preferential treatment under FTAs and the multilateral trading system provided by the WTO offer Hong Kong trading companies a competitive edge in international markets. Therefore, trading in Hong Kong is a good option for companies looking to broaden their businesses internationally.

Additionally, the Closer Economic Partnership Arrangement (CEPA) between Hong Kong and Mainland even provides more advantages for those who want to access the Chinese market.

Well-Developed Banking & Finance Ecosystem

As an international trading hub, Hong Kong boasts a world-class banking and finance ecosystem. This means that businesses in Hong Kong have easy access to the capital they need to grow and expand their operations. In addition, the jurisdiction’s stable economic environment provides a conducive environment for businesses to thrive.

2. Freeport in oversea trading business

There are no tariffs on the import or export of goods in Hong Kong.

The fact that no tariffs are imposed on the import or export of goods makes Hong Kong an attractive destination for trading businesses. There are no restrictions on the movement of goods into or out of the city. This makes it easy to set up a trading business in Hong Kong and to source products from around the world.

It is straightforward to get products cleared in customs.

Hong Kong is known for its clear and efficient customs procedure, which is a big advantage for trading businesses. Companies can get their goods cleared and imported quickly and without any hassle. This makes Hong Kong an ideal location for trading businesses.

Duty is only paid on limited products including alcoholic liquors, tobacco, hydrocarbon oil & methyl alcohol.

Hong Kong is a trading powerhouse. One of the benefits of trading in Hong Kong is that duty is only paid on dutiable commodities. This means that businesses can save on costs and pass on the savings to consumers.

3. Simple and low tax regime

Territorial basis of taxation, only incomes sourced from Hong Kong are taxable

Hong Kong’s territorial basis of taxation means that only incomes sourced from Hong Kong are taxable. This is advantageous for trading businesses, as it provides clarity and certainty when it comes to tax liabilities. Profits earned from trading activities outside of Hong Kong are not subject to tax in the territory. This makes Hong Kong the right spot for trading businesses looking to minimize their tax liabilities.

Another benefit of Hong Kong’s territorial basis of taxation is that it eliminates the need for complex cross-border tax planning. This can save trading businesses significant time and money when compared to jurisdictions with a worldwide system of taxation.

Predictable tax system and low tax rate, two-tier tax regime for corporate profits

Hong Kong has a simple and low tax system which is attractive for trading businesses. The maximum profits tax rate is 16.5% and there is no capital gains tax, so trading businesses can keep more of their profits.

If your company meets certain criteria, you can even enjoy a two-tier tax system which further reduces your tax burden.

No sales tax or VAT, withholding tax, capital gains tax, dividends tax, or estate tax

Hong Kong has a simple and efficient tax system that is beneficial for trading businesses. There is no sales tax or value-added tax (VAT), withholding tax, capital gains tax, dividends tax, or estate tax. This provides trading businesses with a significant tax advantage.

Learn more about Hong Kong Tax System to know the tax advantages when starting your trading business in this country.

4.Easy company registration and compliance

Hong Kong is one of the easiest places to set up a trading company. The process is simple and straightforward, and there is a low risk of compliance issues. Additionally, starting Hong Kong company offers many benefits and perks for trading businesses, making it a preferred choice for companies looking to expand their operations.

Hong Kong Limited Company is easy to set up.

You can even own a trading company within just a few hours. There are no complex requirements or procedures, and you do not need to have a minimum amount of capital to start trading. The key documents of a legal business in Hong Kong are Certificate of Incorporation and Business Registration Certificate, which you can obtain from the Companies Registry.

The nationality of the business owner is not restricted.

One of the great advantages of trading in Hong Kong is that the nationality of the business owner is not restricted. This means that you can start a trading business in Hong Kong regardless of your citizenship, and take advantage of the city’s many benefits.

Online registration of Hong Kong Limited Company is allowed.

One of the key reasons why trading businesses choose to set up in Hong Kong is the ease with which they can do so. Online registration of Hong Kong Limited Companies is allowed, and this process can be completed at the touch of a button. This means that businesses can get up and running quickly, and start trading almost immediately.

Requirement of local office address and company secretary is easy to follow.

When trading businesses first set up shop in Hong Kong, they are required to have a local office address and company secretary. The good news is that these requirements are easy to follow, and you can use nominee services to work on your behalf.

5. Possible challenges when trading in Hong Kong

When trading in Hong Kong, businesses need to be aware of the challenges that they may face. These challenges can range from language barriers, to cultural differences, to legal and regulatory issues.

Firstly, the high cost of living in Hong Kong can be a challenge for businesses, as operating costs are generally higher than in other trading hubs such as Singapore or Shanghai. Secondly, the language barrier can be a challenge for businesses, as most of the population speaks Cantonese rather than English.

Finally, businesses should be aware of the political instability in Hong Kong, as the ongoing protests and unrest have created a climate of uncertainty.

Licenses and permits requirements

Before start trading, it’s important to know the Hong Kong licenses and permits requirements. Depending on the nature of your business, you may need one or more licenses and permits from the government. Here are some examples:

  • If you’re trading in food, you’ll need a license from the Food and Environmental Hygiene Department;
  • If you’re trading in pharmaceuticals, you’ll need a license from the Department of Health;
  • If you’re trading in alcohol, you’ll need a license from the Customs and Excise Department.

It’s important to check with the relevant government department to find out what licenses and permits are required for your business. Failure to do so may result in hefty fines.

Conclusion

If you’re looking to set up a trading business, Hong Kong is one of the best places to do it. The benefits of trading in Hong Kong far outweigh any potential hassle.

The country is a trading-friendly location with a number of advantages for businesses, including a simple and low tax regime, easy company registration and compliance, and well-developed banking and finance ecosystem.

There are also a few challenges to trading in Hong Kong, but with careful planning and preparation, these can be overcome.

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