What are the Benefits from Hong Kong Trading Company?

 If you are a Hong Kong trading company manufacturer who exports you will generally be taxed and attract expenses in 3 ways:

Export duty

Freight costs

Insurance fees

The range of costs involved varies enormously due to different tariffs imposed on different types of products.

However, it cannot be avoided, and therefore exporting directly from China does attract the additional tax cost levied by the Chinese government.

Minimizing your tax burden should always be in mind, and in order to get the best deal on tax and doing business in China in general we can look at using Hong Kong as an exporting hub.

Before we can export from Hong Kong trading company though, Hong Kong company formation is preferable. A local presence allows Chinese manufacturers to act as a local Hong Kong trading company in Hong Kong, and gain certain benefits not available to Mainland Chinese companies.

 1. No Export Tax
All products except fuel, tobacco, and alcohol are exempt from export duty and taxes. This gives HK companies a financial advantage when exporting that Mainland counterparts simply don't have.

2. No Restrictions On Capital & Profit Transfers
Unlike Mainland China where the transfer of funds either in or out of the country is heavily regulated and subject to fees, in Hong Kong there are no restrictions meaning that a local company could transfer back into China more easily.

3. Profits Generated Outside Of Hong Kong Are Tax Free
If your China company is making profit on goods in the mainland, but exporting via the HK company they won't be subject to tax there, as only profits made in Hong Kong are taxed with corporate income tax, and then only at 16.5%. The DTA network must also be mentioned (double tax treaty), as many safeguards are in place to minimise the risk of Hong Kong companies and individuals being taxed twice, both locally and abroad in Austria, Belgium, Czech Republic, France, Hungary, Ireland, Italy, Jersey, Liechtenstein, Luxembourg, Malta, Netherlands, Portugal, Spain, Switzerland, and the United Kingdom .

4. CEPA
CEPA is a revolutionary free-trade agreement aimed at enhancing the relationship between Mainland China and Hong Kong.

It allows greater and easier access to both the Mainland and HK markets for companies on both sides of the border.

It may be that you require to import goods or services in order to conduct your business in China, and if you use a Hong Kong company to do so then they may well be subject to a 0% tariff. The aim of CEPA is to "progressively reduce or eliminate tariffs and non-tariff barriers on substantially all the trade in goods between the two sides so moving forward we can expect to see more and more tax savings if using a Hong Kong company in tandem with a Mainland HQ.

5. Ease Of Doing Business
The very nature of Hong Kong stems back to its Colonial British history.

As an overseas territory of the United Kingdom, Hong Kong's laws and business practices were built on the same foundations as those in Britain, namely 'common law.