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Is starting an online or eCommerce business in Hong Kong a good idea?

One of the best countries to start your business is Hong Kong. It is well known as a global business hub with highly-advanced information and technology infrastructure. It does have an incredibly favorable tax regime and efficient banking system.  

E-commerce is a thriving field that gives investors significant opportunities to stay connected to a global audience. The e-commerce business is growing in such a way that what was once possible for brick-and-mortar companies without marketing and financial resources is no longer the case.

start ecommerce business in Hong Kong

According to the World Bank, Hong Kong ranks highly in the ease of doing business index. The e-commerce market of Hong Kong is expected to grow at an annual rate of 10.5% through 2021. Such a growth rate indicates that a huge number of budding e-Commerce businesses are being set up in Hong Kong. 

In case you are planning to start an online or an e-Commerce business in Hong Kong and wondering if it is the right choice for you or not. Then you are going to make the correct choice for yourself after reading this article. The article will cover the reasons you should choose Hong Kong as an online business. Keep on reading and we hope this article helps you make the final decision.

E-Commerce Market in Hong Kong

Before you start your own e-Commerce business, it is important that you know the current market status of Hong Kong. Due to the fact that almost every other retailer sets up an online shop and shoppers also change their consumption lifestyle and patterns, e-Commerce businesses are developing fast. Hong Kong has a sizable domestic sector that offers a large number of attractive options for startups and long-term opportunities to scale up in the business. The availability of incorporating agents, high web traffic, and lower taxes are some of the many factors that attract business owners worldwide to set up businesses in Hong Kong. 

Revenue of approximately US$6,399m was generated by the Hong Kong e-commerce business in 2020 and is expected to depict an annual growth rate of 11.1% by 2024, which will be approximately US$9,734m. These figures show that starting an e-Commerce business in Hong Kong would be a good idea as it will help business people generate ROI in the upcoming year. 
Many traditional stores have established online purchasing platforms to increase their presence worldwide by watching this online shopping trend. These numbers are an excellent indicator for e-Commerce startups and other online platforms to get a piece of the action.

Why set up an e-Commerce Business in Hong Kong?

Given below are the reasons on why you should set up a business in Hong Kong:

Favorable Taxation Policy

High corporate taxes represent a significant role in driving investors into unfolding offshore companies in low-rate tax jurisdictions. Hong Kong does not impose any corporation tax on foreign-owned companies, as long as their profits are sourced outside the country.

How does this affect the online businesses whose sales activities are regulated over the internet? Is it the same for any mode of sales? According to the Inland Revenue Department (IRD), a purchase or sales contract carried in Hong Kong using telephone or other electronic media will be considered as the contracts affected in Hong Kong. This means all the profits earned from selling the products and services to Hong Kong will be taxed.

The country also has zero:

  • Estate duty/Inheritance tax – When you pass on, your Hong Kong company’s total assets won’t be subject to estate tax. Your appointed successors will take over every piece of the company
  • Withholding tax – It won’t be required to withhold any taxes on payment of share dividends to investors in case you choose to publicly list your internet company in the Stock Exchange of Hong Kong Limited.
  • Capital gains tax – In case you trade some of your company’s property, none of your profits (gains) will be taxed.

It is not only the no-tax environment that makes Hong Kong an appropriate jurisdiction for your online business, which we will study further. The IRD is very transparent on how it generates and strengthens its tax administration processes. There is reduced tax certainty, so you can set up your company in the confidence that the current tax-regime won’t change abruptly in the future.

Easy Company Formation

It is easy and affordable to form a company in Hong Kong because of the straightforward process. The moment your company name is decided, the next thing that you need to do is submit an application to the Companies Registry online. It takes approximately less than a day to review the application, and applicants are successfully issued a certificate of incorporation. In case you plan to extend your team and hire employees on a full or half-time basis, you shall get compensation insurance from a private insurance company.

Stable Jurisdiction and Good Reputation

Businesses cannot grow in jurisdictions with political instability. It is not surprising for politically-unstable jurisdictions to block or limit access to the internet, which dramatically affects online businesses’ performance. Countries with such problems usually record low rates of foreign direct investment.

Although civil movements advocate for the transfer of Hong Kong’s sovereignty from China, the country itself has a very controlled and stable political environment with a free market economy. It is frequently becoming a favored target for global firms looking to set up regional headquarters in the Asia-Pacific region. Good governance is one of the benefits of working in Hong Kong. In case you set up a business in Hong Kong, it is rare that you encounter any bureaucratic or corrupt government officers. Hong Kong is ranked among the 20 least corrupt nations in the world, according to Transparency International’s Corruption Perception Index.

Efficient Banking System

Online business means international trading, and when it comes to international trade, you need to have an efficient banking system. Hong Kong has a sound banking system. Also, it is home to 71 of the world’s 100 biggest international banks, including HSBC, DSB Bank, Standard Chartered, and Citibank. Should you set up your business in Hong Kong, you will have access to a wide range of banking services and can easily opt for merchant and multi-currency accounts to do international money transfers. You will not find any trouble as long as your company is registered correctly.

Advanced Information and Technology Infrastructure

When it comes to the e-Commerce business, it is important that you have an advanced IT infrastructure system. In order to efficiently run a business online, you need access to stable servers, data centers, and other pieces that comprises a great internet infrastructure. In Hong Kong, you will find all the tools you need to establish and grow your online business. These include:

  • Internet readiness – Hong Kong has the second-fastest internet speed on the planet (114 Mbps on average). Fast internet connectivity makes sure that your e-commerce website is quickly accessible to internet users. Several companies provide reliable web hosting and data storage services.
  • ICT Talents – You need to assemble a team of skilled IT specialists such as web developers, designers, and engineers,in order to grow your online business.
  • Power Supply – Internet infrastructure is powered by electricity. Frequent power disruptions will for sure affect the accessibility of your online business. Hong Kong has reliable power supply providers, and even in case any unplanned outages occur, it lasts for less than 3 minutes.
  • Data Privacy – Hong Kong enforces strict privacy laws, meaning unauthorized individuals or government authorities cannot access your data centers.

Now that you know all the perks of starting a business in Hong Kong, It is easy for you to start your dream company here. In case you encounter any problem opening the company it is important that you hire or at least consult a professional. Startupr will help you in maintaining your company in good standing and managing the annual compliances and company filings as well.

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