Hong Kong is one of the world’s largest trading economies and has a free trade policy. As a result, Hong Kong is an ideal country for foreign investors seeking to establish a trading company. In this guide, we have gathered information that investors should know before setting up a trading company in Hong Kong.
Let’s dive in for more in-depth information.
What is a trading company?
A trading company is a type of company that focuses on importing and exporting products. It can either import products and services from other countries, export goods and services to other countries or engage in both.
Benefits of a trading company
The benefits of a trading company in Hong Kong are:
- Easy incorporation
- Foreign investors can fully own the company
- Free trade policy
- Owners of limited liability companies are only liable to the amount of share capital
- Gateway to the Chinese market
- Closer Economic Partnership Arrangement (CEPA)
- Corporations will be taxed at 8.25% for the first HKD 2 million and 16.5% for profits of over HKD 2 million
- Imposes a territorial tax system (only profits generated in Hong Kong will be taxed)
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Types of trading companies in Hong Kong
There are three types of trading companies in Hong Kong, which are:
- Import trading company
- Export trading company
- Entrepot trading company
Import trading company
An import trading company involves purchasing products and services from foreign companies to meet the demands inside Hong Kong.
Import trading companies are set up when goods and services cannot be produced locally or when it is cheaper to import products than manufacture them domestically.
Export trading company
The export trading company sells goods and services produced locally to foreign countries.
Entrepot trading company
An entrepot trading company involves both importing and exporting products and services. It imports goods and services from one country and exports them to other countries around the world.
Setting up a trading company in Hong Kong
To set up a trading company in Hong Kong, you will first need to register a Hong Kong company with the Companies Registry. The most common form of company is a limited liability company.
The requirements for company registration are:
- Company name
- A minimum of one director and one shareholder
- A company secretary
- Registered business address
The documents you will need for registration are:
- A copy of the articles of association
- Completed incorporation form including:
- The company name
- Registered business address
- Description of the company’s activities
- Directors, shareholders and company secretary’s information
- Share capital
- Non-resident shareholders and directors – a copy of the passport and overseas residential address
- Resident shareholders and directors – a copy of the Hong Kong identity card and residential address
The registration does not require you to specify the business scope. Once the registration is successful, the Companies Registry will issue the Certificate of Incorporation.
Obtaining import/export licenses, permits
The company may start commencing business upon the issuance of the Certificate of Incorporation. However, if the trading company plans to import/export certain controlled and prohibited goods, it must obtain the required permits and licenses.
The types of import/export licenses and permits in Hong Kong are:
| Type of import/export license and permit | Responsible authority |
| Dutiable goods import/export license | Customs and Excise Department |
| Controlled chemicals import/export license | Customs and Excise Department |
| Animals or birds | Import and Export Division, Agriculture, Fisheries and Conservation Department Endangered animals, plants or species – Endangered Species Protection Division, Agriculture, Fisheries and Conservation Department |
| Pharmaceutical products, medicines and dangerous drugs import/export license | Pharmaceuticals Import/Export Control Unit, Pharmaceutical Service, Department of Health |
Import of food items:
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| Hazardous chemicals import/export license | Subject to regulation under the Stockholm Convention on Persistent Organic Pollutants or the Rotterdam Convention on the Prior Informed Consent Procedure for Certain Hazardous Chemicals and Pesticides in International Trade |
| Pesticide import/export license | Plant and Pesticides Regulatory Division, Agriculture, Fisheries and Conservation Department |
| Plant import license (Plants including fruits, vegetables and cut flowers imported and produced in China are exempted) | Plant and Pesticides Regulatory Division, Agriculture, Fisheries and Conservation Department |
| Radio transmission equipment import/export license | Licensing Unit, Office of the Telecommunications Authority |
| Rice import/export license | Trade and Industry Department’s Rice Control Unit |
| Rough diamonds import/export license | Director-General of Trade and Industry |
| Strategic commodities import/export license | Strategic Trade Controls Branch of the Trade and Industry Department |
| Textile import/export license | Director-General of Trade and Industry |
| Irradiating apparatus and radioactive substances import license | Department of Health |
Import/export declaration
The Import and Export Registration Regulations require companies that import or export any goods or articles unless they are exempt must file an import/export declaration within 14 days after importing or exporting the good.
Failure to file the declaration may result in a penalty.
How to lodge the import/export declaration?
The declaration can be lodged by two methods:
- Direct electronic declaration service
Declarations can be lodged through the following three service providers appointed by the government:
- Brio Electronic Commerce Limited (Brio)
- Global e-Trading Services Limited (Ge-TS)
- Tradelink Electronic Commerce Limited (Tradelink)
- Paper-to-electronic conversation service via specified agents
Import/export declaration forms
There are six types of declaration forms, and you must ensure that you use the right form.
The types of forms are:
- General imports – Form 1
- Import of food items -Form 1A
- Import of articles exempted from declaration charge – Form 1B
- General exports or re-exports – Form 2
- Exports of Hong Kong made clothing and footwear items specified in Schedule 1 to the Industrial Training (Clothing Industry) Ordinance – Form 2A
- Export/re-export of articles exempted from declaration charge – Form 2B
Import/export clearance
To clear imported dutiable goods, a trading company must submit a removal permit to the Customs and Excise Department.
The permit holder must keep in mind the following points:
- The goods should be removed within the approved date and time.
- Goods are removed and shipped directly to the designated receiving point.
- The description, packaging and quantity of the goods must match with the details on the permit.
Required documents for import/export clearance
The required documents for import/export clearance are:
- Manifests
- Import/export license or removal permit
- Copy of the detention notice (if applicable)
- Bill of lading
- Airway bill
- Invoice
- Packing list
Import/export taxes in Hong Kong
Trading companies should be aware of the import/export taxes in Hong Kong.
These taxes include:
- Custom fees:
- GST or VAT
- Excise duty
Hong Kong does not impose VAT, GST or custom fees on imports or exports.
Excise duty is imposed on only four types of goods which are liquors, tobacco, hydrocarbon oil and methyl alcohol.
Conclusion
Setting up a trading company in Hong Kong can be done by registering with the Companies Registry and obtaining the necessary licenses and permits. If you are interested in trading in Hong Kong, feel free to contact Acclime for advice.
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