Hong Kong is well known for its strategic location with gateway to mainland China and other Asia market, free market economy, low and straightforward tax regime, well-established banking system and world-class infrastructure. These compelling advantages make Hong Kong as one of the most attractive jurisdictions for entrepreneurs to start a trading company. If you are also interested in this topic, take this guide to know how to register a trading company in Hong Kong with LNT Consulting.
Benefit of a trading company in Hong Kong
A trading company is the entity that engages in importing and exporting goods. It serves as a middleman between manufactures and customers, make it easier to distribute products in both local and global scale, ensure the smooth flow of supply chain.
What is the benefit of a Hong Kong trading company? Let’s explore:
- Easy access to mainland China and Asia markets
- Free trade agreement policy (CEPA) with China
- Favorable tax regime with 0-16.5% corporate tax, no VAT and no dividend tax
- Easy of doing business online without physical presence
- Various options for well-establish banks and payment gateway
Common industries of trading companies
Trading Company (Only Import/Export or both)
These firms will serve as intermediate agencies, mainly buy products (specific types or a wide variety of goods) from manufacturers, then mark up the fee and sell them to local or international customers. Profits are based on the different prices. Your corporate tax in Hong Kong is exempted, if your goods are not passed through and no profits are generated inside of this country.
Consulting or Service Company
They specialize in giving advice for trading companies about the knowledge on markets and trends, research on best suited products to trade in specific countries, pros and cons before entering any markets and suggestions for effective strategies. Newly incorporated company that is seeking to expand the trading operations can greatly benefit from their valuable insights.
Manufacturing Trading Company
Manufacturing companies manage the entire process of producing goods for sale, beginning with sourcing raw materials or components, transforming them to finished products, and undergoing quality control before distributing goods to consumers. Common industries of manufacturing trading companies are automotive, electronics, furniture equipment or textiles.
Free agreement trading between Hong Kong and China
There is a Free Trade Agreement between Hong Kong and mainland China which provide favorable conditions for goods and services for Hong Kong company including:
- Zero tariff preference for qualified products imported into the mainland market
- Various services such as financial or legal services enjoy preferential treatment once entering to mainland China
- Encourage and facilitate investment (promoting or protection) between Hong Kong and mainland China with preferential treatment
This agreement plays an important role in maintaining Hong Kong’s position as one of the leading financial hubs, especially the promotion and facilitation of trading and investing flow among Hong Kong, mainland China and the rest of countries. However, it’s crucial to follow up with changes on the regulations because the agreement is up to date from time to time, enabling further deepening of economic ties between 2 places.
Procedure to start a Hong Kong trading company
Trust that you have an overview on starting a trading company, let’s find out 4 steps to open the Hong Kong company. Note that it’s not only important to set up the business but also need to ensure compliance with local laws for annual administrative tasks.
Step 1: Open a Hong Kong company
It’s essential to appoint a local company secretary like LNT Consulting to simplify the incorporation process. Basically, the applicant needs to follow the procedure below:
- Check the company name with the Companies Registry if it’s available to use.
- Prepare the documents for company formation including the passport, address proof, business description and selfie video for identity verification purpose.
- Confirm the company structure on authorized share capital, who will be the director, shareholder and beneficial owner.
- Submit the order with the Companies Registry and wait for their approval in 24 hours.
- Record the company documents including the Certificate of Incorporation, Article of Association, NNC1 and Business Registration Certificate.
Step 2: Obtain the necessary licenses and permits from authorities
Some kinds of products will require to obtain the special license to trade such as:
- Medicines and pharmaceutical products such as vaccines, analgesics or antibiotics
- Trading animals that are listed in endangered species
- Products related to radioactive substances or nuclear equipments
Therefore, it’s essential to check with lawyers and relevant authorities whether any special license is required for your trading company to ensure that you have permission to trade in places.
Step 3: Obtain the import/export clearance
Your business must declare the trading of goods (import/export) with Hong Kong Customs and Excise Department if they are passed through to this country. In order to get the import/export clearance, the below documents are normally requested:
- Import/export license for your products (if applicable)
- Bill of lading, invoice, packing list or airway bill (supporting documents)
- Manifest (transportation)
- Detention notice (if any)
Please be up to date with the import/export clearance process and regulations to avoid delays or penalty for late filing.
Step 4: Submission of import/export declaration
According to the local laws and regulation, the business must file an import/export declaration to the Census and Statistics Department of Hong Kong within 14 days after the goods are imported/exported to this country. These declarations include detailed information on the products such as value, quantity, description, origin or destination. Failure to file the declaration on time will result in fines and penalties.
Conclusion: Starting a trading company in Hong Kong can be a challenge but also a lucrative venture for expanding operation overseas. Follow the key steps and procedure above written by LNT Consulting, along with the careful planning and execution, you can establish a successful trading company and leave it thrive in the competitive global market.
Disclaimer: LNT Consulting aims to provide up-to-date and accurate information on this website. However, this information is intended for reference only and should not replace professional legal advice. For guidance on your specific case, please contact LNT’s customer service.
