Hong Kong is one of the world’s leading trading hubs, renowned for its free trade policy, strategic location, and business-friendly regulatory environment. For foreign investors and entrepreneurs looking to engage in international commerce, setting up a trading company in Hong Kong offers significant advantages from low taxation to seamless access to Mainland China through the Closer Economic Partnership Arrangement (CEPA). In this guide, we’ll walk you through everything you need to know about starting a trading company in Hong Kong, including incorporation steps, licensing requirements, tax obligations, and the benefits of doing business in Hong Kong.
Content Outline
Key Takeaways
Business-Friendly Environment
Hong Kong offers a free trade regime, low taxes, and 100% foreign ownership, making it an ideal location for setting up a trading company.
Types of Trading Companies
Entrepreneurs can establish import, export, or entrepôt trading companies, with options for hybrid models based on business needs.
Step-by-Step Incorporation Process
Setting up involves selecting a company name, registering with the Companies Registry, obtaining a Business Registration Certificate, opening a business bank account, and ensuring trade compliance.
Import/Export Licensing and Customs Compliance
While most goods are duty-free, specific licenses are required for controlled items, and all shipments must be declared to Customs within 14 days.
Supportive Trade Financing and CEPA Benefits
Hong Kong businesses can access trade financing options, government support, and preferential treatment for exports to Mainland China under CEPA.
What Is A Trading Company?
A trading company is a business entity that specializes in the buying and selling of goods either locally or across international borders. It acts as an intermediary between manufacturers and end customers. Trading companies play a vital role in the global supply chain by sourcing products, managing logistics, and facilitating commerce. In Hong Kong, trading companies are particularly prominent due to the the country’s status as one of the world’s leading trading economies.
Types of Trading Companies in Hong Kong
Hong Kong offers flexibility for entrepreneurs to operate different types of trading companies depending on their business model and target market. The three primary types include:
1. Import Trading Companies
These companies specialize in sourcing and bringing foreign goods into Hong Kong to meet local market demand. Import trading companies are ideal when certain products are not available domestically or when it is more cost-effective to source internationally.
2. Export Trading Companies
Export trading companies focus on selling goods and services produced in Hong Kong (or sourced from other regions) to overseas markets. These companies help local manufacturers reach global buyers by handling marketing, logistics, and distribution.
3. Entrepôt Trading Companies
Entrepôt (re-export) trading companies import goods from one country and export them to another without major modifications. Hong Kong’s duty-free policy on most goods and its efficient port infrastructure make it an ideal base for such operations.
Additionally, some trading companies in Hong Kong may adopt hybrid models or fall into broader categories like:
- Consulting Trading Firms – Advising businesses on trade strategies, product sourcing, and market entry.
- Manufacturing Trading Firms – Involved in both production and sales of goods.
- Traditional Trade Firms – Engaged in buying and selling a wide range of commodities or specialized products.
Benefits of Setting Up a Trading Company in Hong Kong
Establishing a trading company in Hong Kong offers numerous advantages for international entrepreneurs and corporations. Some of the key benefits include:
1. Easy and Fast Incorporation
Hong Kong’s streamlined company registration process allows you to set up a business in just a few days with minimal red tape.
2. 100% Foreign Ownership Allowed
Unlike many jurisdictions, Hong Kong allows full foreign ownership of companies without local shareholding requirements.
3. Free Trade Policy
Hong Kong practices a free trade regime with no tariffs on imports or exports (with limited exceptions) which makes it one of the most open economies in the world.
4. Attractive Tax System
Hong Kong uses a territorial tax system so only profits generated within the territory are taxable. The corporate tax rates are:
- 8.25% on the first HKD 2 million of assessable profits
- 16.5% on profits exceeding HKD 2 million
There is no VAT/GST, no capital gains tax, and no withholding tax on dividends or interest.
5. Strategic Location and Global Connectivity
Hong Kong is located at the heart of Asia and serves as a regional gateway to Mainland China and Southeast Asia, supported by world-class logistics, ports, and air cargo facilities.
6. Access to Mainland China via CEPA
The Closer Economic Partnership Arrangement (CEPA) provides preferential treatment to Hong Kong-based businesses trading with China, including lower trade barriers and simplified customs procedures.
7. Strong Legal and Financial Infrastructure
Hong Kong offers a stable legal system based on English common law, robust IP protection, and access to a wide range of international banks and financial institutions for trade financing.
Step-by-Step Guide to Incorporate a Trading Company in Hong Kong
Setting up a trading company in Hong Kong is a relatively straightforward process because of its efficient regulatory framework and government services. Here is a step-by-step guide to help you incorporate your trading company:
Step 1: Choose a Company Name and Business Structure
Select a suitable company name that complies with Hong Kong’s naming guidelines. Your company name must be unique and not infringe on existing trademarks or company names registered in Hong Kong.
Then, decide on your business structure. The most common and recommended structure for foreign investors is a private limited company, which offers limited liability protection, a separate legal identity, and easier access to banking and trade services.
Step 2: Register Your Company with the Companies Registry
Once you have finalized the name and structure, you will need to register your trading company with the Hong Kong Companies Registry. The standard registration requirements include:
- At least one director and one shareholder (individuals or corporations; can be the same person)
- A company secretary (must be a Hong Kong resident or a local corporate entity)
- A registered Hong Kong business address
- Details of share capital (no minimum capital requirement)
The documents required include:
- The Articles of Association
- Completed Incorporation Form (NNC1) detailing the company’s structure, officers, and business nature
- Identity and address proof of directors and shareholders
After you got the approval, you will receive a Certificate of Incorporation.
Step 3: Apply for a Business Registration Certificate
After incorporation, you must apply for a Business Registration Certificate from the Hong Kong Inland Revenue Department (IRD). This certificate is mandatory for legally operating any business in Hong Kong and must be renewed annually or every three years, depending on the option chosen during application.
Step 4: Set Up a Business Bank Account
To conduct trading activities efficiently, open a corporate bank account in Hong Kong. Most banks will require:
- The Certificate of Incorporation
- Business Registration Certificate
- Articles of Association
- Board resolution approving the account opening
- Proof of business activities (e.g., invoices, contracts)
Opening a bank account may also involve a due diligence process, especially for companies with international shareholders or trading activities.
Step 5: Ensure Compliance with Trade and Tax Regulations
As a trading company, you must comply with Hong Kong’s trade and customs regulations. Key compliance areas include:
- Import/Export Licences and Permits: Depending on the nature of the goods, specific licences (e.g., for food, electronics, or pharmaceuticals) may be required.
- Import/Export Declarations: Every import or export transaction must be declared to the Hong Kong Customs and Excise Department within 14 days of shipment.
- Customs Clearance: Ensure all goods pass customs inspections and meet documentation requirements to avoid penalties or delays.
- Duties and Taxes: While most goods in Hong Kong are duty-free, excise duties may apply to specific items like alcohol, tobacco, and fuel. Additionally, maintain proper records for profit tax filing (8.25% on the first HKD 2 million, 16.5% thereafter).
Working with a professional service provider can help simplify ongoing compliance with accounting, tax filing, and trade licensing requirements.
Import and Export Licenses and Permits Requirements In Hong Kong
Hong Kong is known for its free trade policies, streamlined customs processes, and minimal tariffs. However, depending on the type of goods being traded, specific import or export licenses and permits may be required.
When Is an Import/Export License Required in Hong Kong?
While many products can be imported or exported freely, certain controlled, restricted, or dutiable goods require prior approval from relevant authorities. Businesses have to secure the necessary licenses and permits before trading these items. The types of goods that require licenses and the corresponding regulatory authorities are as below:
| Type of Goods | Responsible Authority |
| Dutiable goods (e.g. liquor, tobacco, hydrocarbon oil, methyl alcohol) | Customs and Excise Department |
| Controlled chemicals | Customs and Excise Department |
| Optical disc mastering & replication equipment | Customs and Excise Department |
| Animals or birds | Agriculture, Fisheries and Conservation Department |
| Endangered species (animals, plants) | Endangered Species Protection Division, AFCD |
| Pharmaceutical products and dangerous drugs | Pharmaceuticals Import/Export Control Unit, Department of Health |
| Chinese medicine | Chinese Medicine Council of Hong Kong |
| Frozen confectionery | Centre for Food Safety, Food and Environmental Hygiene Department |
| Chilled/frozen meat and poultry | Import Registration Office, F |
| Milk and milk beverages | Centre for Food Safety, FEHD |
| Hazardous chemicals | Subject to international treaties (Stockholm and Rotterdam Conventions) |
| Pesticides | Plant and Pesticides Regulatory Division, AFCD |
| Plants, fruits, vegetables, cut flowers | Plant and Pesticides Regulatory Division, AFCD |
| Radio transmission equipment | Licensing Unit, Office of the Telecommunications Authority |
| Rice | Rice Control Unit, Trade and Industry Department |
| Rough diamonds | Director-General of Trade and Industry (Kimberley Process) |
| Strategic commodities (e.g. weapons, nuclear materials, sensitive technology) | Strategic Trade Controls Branch, Trade and Industry Department |
| Textiles | Director-General of Trade and Industry |
| Radioactive substances and irradiating apparatus | Department of Health |
Import and Export Declaration Requirements
Under the Import and Export (Registration) Regulations, businesses must file an import or export declaration within 14 days of the shipment. This applies to all goods except those specifically exempted.
How to File an Import/Export Declaration
Declarations can be lodged using:
- Direct electronic services via approved service providers:
- Brio Electronic Commerce Limited
- Global e-Trading Services Limited (Ge-TS)
- Tradelink Electronic Commerce Limited
- Paper-to-electronic conversion through designated agents
Types of Declaration Forms
| Form | Purpose |
| Form 1 | General imports |
| Form 1A | Food imports |
| Form 1B | Exempt import articles |
| Form 2 | General exports and re-exports |
| Form 2A | Hong Kong made textiles and footwear |
| Form 2B | Exempt expert/re-export articles |
Import/Export Clearance Procedures in Hong Kong
Hong Kong Customs and Excise Department oversees the clearance process for all imported and exported goods. Importers/exporters must ensure:
- Submission of removal permits (for dutiable goods)
- Shipment occurs within the approved time
- Goods are sent directly to the receiving destination
- Quantity, packaging, and description match those listed in the permit
Required Documents for Customs Clearance
- Import/export license or removal permit
- Bill of lading or airway bill
- Commercial invoice
- Packing list
- Manifests
- Detention notice (if applicable)
Random inspections may be conducted by customs to verify compliance.
Duties, VAT/GST, and Customs Fees in Hong Kong
Hong Kong maintains a free port status, which means:
- No customs tariffs on most goods
- No VAT or GST
- Excise duties apply only to:
- Liquors (based on alcohol strength)
- Tobacco products
- Hydrocarbon oils
- Methyl alcohol
Excise duties are calculated based on specific rates per unit or value, depending on the product type.
Trade Financing Options for Import/Export Businesses
To support growing trading activities, businesses in Hong Kong have access to various trade financing solutions:
1. Letters of Credit (LC)
A letter of credit ensures payment to the exporter by the buyer’s bank upon delivery of goods, reducing non-payment risks.
2. Short-Term Trade Finance
Offered by local banks, these include:
- Import/export loans
- Revolving credit facilities
- Overdrafts and term loans
3. Export Credit Insurance
Insurance is provided by the Export Credit Insurance Corporation (ECIC). This protects businesses from non-payment risks and can be used as collateral for loans.
Hong Kong-China Free Trade Agreement (CEPA)
The Mainland China and Hong Kong Closer Economic Partnership Arrangement (CEPA) is a free trade agreement established in 2004 to strengthen economic ties between Hong Kong and Mainland China. As the first FTA signed by the Mainland, CEPA offers preferential treatment for Hong Kong-origin goods and qualified service providers entering the Chinese market.
CEPA is more than a traditional trade deal since it eliminates tariffs on goods, provides market access across service sectors, and enhances cooperation in investment, trade facilitation, legal transparency, and regulatory alignment.
Key Advantages for Trading Companies
Trading companies incorporated in Hong Kong enjoy significant advantages under CEPA:
- Zero Tariffs: All goods manufactured in Hong Kong that meet CEPA rules of origin can be exported to Mainland China tariff-free, offering a direct cost advantage over competitors.
- Simplified Customs Procedures: CEPA facilitates smoother customs clearance saving time and operational costs for importers and exporters.
- Service Sector Access: CEPA allows qualified Hong Kong-based service providers, including logistics, freight forwarding, and distribution companies, to operate in the Mainland with fewer barriers.
- Enhanced Credibility and Trust: The CEPA framework boosts confidence among Mainland Chinese business partners improving partnership and investment opportunities.
How to Qualify for CEPA Benefits
To access CEPA’s preferential treatment:
- Your company must be incorporated in Hong Kong and fulfill the local substantial business operations requirement.
- Products exported under CEPA must be accompanied by a valid Certificate of Hong Kong Origin – CEPA, issued by the Trade and Industry Department or one of the five recognized certification bodies.
- Services must meet sector-specific qualification criteria defined under CEPA supplements, which are updated regularly.
Trade Financing and Support Options
Access to reliable trade financing can significantly improve cash flow and scale operations for trading companies. Hong Kong offers a range of financial tools and government-backed support to empower import/export businesses.
Letters of Credit (L/C), Factoring, and Invoice Financing
- Letters of Credit (L/C): A widely used tool in international trade, L/Cs ensure that payment is only made once goods are delivered according to the contract, reducing risk for both buyers and sellers.
- Factoring: Businesses can sell their accounts receivable to a third party at a discount to access immediate funds.
- Invoice Financing: Short-term funding is provided against unpaid invoices, improving working capital without taking on debt.
Government Support Schemes
Several government initiatives are available to support trading companies:
- HKTDC SME Export Marketing Fund (EMF): Reimburses up to 50% of eligible export promotion expenses.
- Trade and Industry Department (TID) – CEPA-related assistance: Offers information, consultation, and coordination to help businesses benefit from CEPA.
- Hong Kong Export Credit Insurance Corporation (ECIC): Provides export credit insurance to protect businesses against non-payment risks.
Banks and Fintech Trade Finance Providers
Besides traditional banks like HSBC, Standard Chartered, and Bank of China, Hong Kong’s growing fintech ecosystem offers innovative trade finance solutions:
- Digital L/C platforms
- Supply chain finance platforms
- Integrated trade finance solutions
These options allow flexible, faster access to funding, particularly for SMEs and startups.
How FastLane Group Can Help You
Starting a trading company in Hong Kong involves multiple regulatory and operational steps. FastLane Group offers end-to-end business solutions to help you launch and grow seamlessly.
