How to Open a Retail Shop in Hong Kong

The economy worldwide is bouncing back, and Hong Kong's retail sector is set to be a big part of this growth.

Hong Kong has a streamlined registration process, a low corporate tax rate (16.5%), and a free market system that makes starting a business efficient and attractive. Its minimal government intervention also allows businesses to operate more flexibly.

According to focus-economics.com, Hong Kong's economic growth rate is projected to be a whopping 4.6%.

Among the top four key industries in Hong Kong are financial services and tourism and with plane travel becoming a reality again this could be an ideal time to make a solid profit from people who are tired of sitting at home and who are ready to do things with their money.

As tourism explodes, so does retail!

Why Choose Hong Kong for Your Retail Business?

Hong Kong offers a striking combination of factors that make it an ideal location for your retail business.

Business-Friendly Environment

Hong Kong has no sales tax (VAT), capital gains tax, or withholding tax. The corporate tax rate is competitive at 16.5% (8.25% for the first HKD 2 million). Their individual tax rate is incredibly reasonable, maxing out at 17% for anything over $200,000, but with most income less than that being charged at 10% or less.

These exemptions and the lack of other taxes create a cost-effective environment for businesses, particularly those in retail sales.

Getting your business up and running is easier than in many other countries with more complex and bureaucratic processes.

Thriving Marketplace

Hong Kong is a major financial center with a high concentration of residents with significant disposable income, which means high total retail sales.

Its strategic location also offers access to a large and growing market in mainland China, with over 1.4 billion potential customers. With the strong growth of online retail sales in Hong Kong, businesses can reach a wide audience.

The given information translates to high consumer spending, making Hong Kong a prime location for strong retail sales.

Value of Retail Sales in Hong Kong

Based on the data from the Census and Statistics Department of Hong Kong, the total retail sales value in Hong Kong for the year 2023 reached approximately HK$406.7 billion [Hong Kong's retail sales value]. This represents continued growth, following a trend of strong sales figures: HK$349.96 billion in 2022, HK$352.95 billion in 2021, HK$326.45 billion in 2020, and HK$431.16 billion in 2019.

Note: Check the table 620-67001 to see the average monthly index.

Growth of Online Retail Industry in Hong Kong

People in Hong Kong are increasingly becoming digital-savvy, making them more receptive to online shopping. As of November 2021, it boasted a mobile penetration rate of 320% and an internet penetration rate of 93.1% as of February 2023.

In 2023, the revenue in Hong Kong's e-commerce market is projected to reach US$20.32 billion, reflecting an annual growth rate of 9.42%. Together, user penetration is anticipated to hit 80.9%.

Compared to other Asian cities, Hong Kong stands out as an early adopter of e-commerce. This distinction can be attributed to several factors, including high internet connectivity and the people residing in densely connected urban areas, which create an environment that helps the flourishing of e-commerce and online sales.

Excellent Retail Sales Potential

Millions of visitors each year create a vibrant marketplace and additional opportunities for your retail business.

World-class infrastructure, an efficient transportation system, and a reputation for safety make Hong Kong an attractive destination for tourists, many of whom come to shop and experience the city's unique culture.

The millions of visitors and the local population accustomed to spending create a lively retail sales market, and the sheer number of successful retail shops is a testament to the potential of Hong Kong's retail market. It demonstrates the strong consumer base and spending habits that can benefit your business.

Opening a Retail Business in Hong Kong

When registering, first consider what type of company makes the most sense for what you are trying to accomplish.

1. Register Your Company

The two options are “company limited by shares” and “company limited by guarantee.”

The simplest explanation of the difference is that a company limited by shares will have shareholders. In contrast, a company limited by guarantee has “members” who control the company but are not shareholders.

Generally speaking, if you are trying to open a business, you would want a company limited by shares. 

Companies limited by guarantee tend to be things like non-profit organizations.

Both types, however, will require you to have “articles of association.”

These articles aren't in a specific form but are instead drawn up by the company. 

These include anything the business wants to put in as well as some mandatory articles that the company is required to have.

It's a relatively short list of requirements (that can be found on the Companies Registry website for Hong Kong) and most of them are just associated with the kind of business you are forming (limited by shares vs limited by guarantee).

Once you have decided and crafted your articles, you'll need to choose a name for your company. 

There are essentially 3 requirements for naming the company that is as follows:

• You can register a company with an English name or a Chinese name but you can not register with a combination of English and Chinese.
• An English company name must have the word “Limited” at the end (for a company that sells blue hats they could be Blue Hats Limited) and a Chinese Company must end with “有限公司” (so “藍帽有限公司” for that same company name in Chinese).
• A Chinese company name has to be in Traditional Chinese characters rather than Simplified Chinese. 

There are some things that could prevent a name from getting approval – for instance, starting a company with a name that some other company already has – but many of them are up to the Registrar's discretion (though it shouldn't be too hard to name the company something that will work).

Keep it simple and google the name before you do it to make sure no one else has it.

2. Apply

Your next step is to deliver three documents and the fees associated with them to the Shroff in the Queensway Government Offices.

These forms can be submitted in person or electronically.

The three documents you will need are: 

• Incorporation Form – (if you are starting a business you'll likely need the NNC1);
• Articles of Association;
• A Notice to Business Registration Office.

Again, all of these forms and more detailed information can be found on the Companies Registry website at https://www.cr.gov.hk/en/home/index.htm

3. Get Certified

Once those forms have been submitted and your business application has been approved, you fill out another couple of forms called the “Certificate of Incorporation” and “Business Registration Certificate,” which is to be done personally in the Business Registration Office (BRO) or electronically.

These two together are often just referred to as “the Certificates.”

4. Become Licensed 

After that, it is just a matter of securing any relevant permits or licenses needed to run your specific business.

By visiting the Trade and Industry Department website (found here: https://www.tid.gov.hk/eindex.html) you can find information on the various licenses, permits, certificates, and approvals necessary for any business to operate in Hong Kong.

All in all, it is a relatively straightforward process and if you follow these steps you could be reaping the benefits of the projected economic growth.

The sooner you start filling out those forms, the sooner you can operate a successful business in an amazing and dynamic city.

Getting Started

Does all this registration, certificate approvals, and licensing sound like way too much paperwork for you?

Well in Hong Kong, all companies need a Company Secretary. They help you do literally everything necessary to open your business in Hong Kong with all the required documents you need.

Register your retail business in Hong Kong with Air Corporate today, and in 48 hours you'll have a new business ready for customers.