Are e-Commerce increasing margins just by incorporating a Hong Kong company?

Are e-Commerce increasing margins just by incorporating a Hong Kong company?

e-Commerce: Hong Kong company?

China is the world factory; Hong Kong is a Chinese city with unlimited access to thousands of suppliers and millions of products. Although the access to product’s information with Alibaba and the likes is easy, purchasing in China could be a little bit difficult, in the past Hong Kong traders were the only beneficiaries of such difficulties and this was a source a wealth which is still displayed in the city.

Major advantages of incorporating a Hong Kong company

By incorporating a company in Hong Kong e-businesses will benefit from many advantages, the first being credibility with mainland China suppliers.

  1. Send a quotation request from France to a Chinese supplier and do the same from your Hong Kong company; for the second the response time with be twice faster and the price 10-15 % lower.
  2. The possibility to pay in RMB or Hong Kong dollars to mitigate currency variations, the possibility to keep and invest in RMB, the multi-currency accounts and faster payments are also protecting the margins of the ones whom decided incorporating a company in Hong Kong.
  3. The low tax environment is only one additional advantage, the ease of operations in a pro-business environment is a crucial element.
  4. By incorporating a company in Hong Kong, you are not only gaining credibility with Chinese suppliers, you are allowing the company an easy access to China market place and favorably positioning the company to welcome investors.

Digital economy / China market

Investors in the digital economy are paying great attention to:

  • Capital gain
  • Share transfers costs
  • Sustainable and stable tax environment

Many investors in the digital economy are from mainland China, they know and respect the Hong Kong advantages.

e-Commerce: Hong Kong company?

Most importantly for a e-business acquiring an investor from Mainland China represents a lot more than its financial contribution, the strategic partnership could drastically change the company future.

A Chinese or Asian investors will show great concern about the company tax exposure, but to be fair US investors might have a totally different approach and consider that by incorporating a company in Hong Kong the founders took a tax risk and so they would prefer to get a US entity where to invest.

Conclusion

As always, the rule is to incorporate only after a due review of the project and all its impacts: on the business & on the personal situation of each shareholder and directors.

Hong Kong shares transfer is an easy process which allow flexibility to the founders to transfer their share into a foreign holding company at very low costs, so should the company situation change… it would be very easy to adapt.

The cost of incorporating a company in Hong Kong will be compensated by the savings on the first order in mainland China!

99,405 new companies were incorporated in Hong Kong in 2020, Hong Kong is home for more than 1,380,000 companies this for a population of 7.5 million only! These simple facts are showing that Hong Kong is a resilient place of business, the perfect location for e-commerce and e-businesses.

Raphael

Comments are closed.

Copyright © 2019 ACCOPLUS LTD. All rights reserved