Mainland E-Commerce Sellers Rushing to Register Hong Kong Companies?

Following China’s intensified crackdown on cross-border e-commerce tax evasion, a striking trend is emerging: Mainland e-commerce sellers are rapidly registering Hong Kong companies.

Data shows that Hong Kong company registrations reached a historic high in the first half of 2025, and over 60% were from Mainland cross-border merchants. Hong Kong is quickly becoming the preferred jurisdiction for Mainland sellers.

This article explains why Hong Kong companies are increasingly favored, covering tax advantages, business models, compliance requirements, and risks.

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I. Three Strategic Advantages of Hong Kong Companies

Hong Kong is the top choice for Mainland sellers mainly due to its unparalleled financial and tax advantages.

1. Free Capital Flow for Efficient Global Management

   • No foreign exchange controls: Funds move freely without Mainland annual conversion limits.

   • Multi-currency accounts: A Hong Kong corporate bank account can receive USD, EUR, GBP, and more, enabling centralized treasury management and reducing FX risks.

2. Highly Competitive and Simple Tax Regime

   • Territorial taxation: Only profits arising in Hong Kong are taxable; offshore profits are generally exempt.

   • Low profits tax: Two-tier rate —

     • First HKD 2 million: 8.25%

     • Remaining profits: 16.5%

   • No VAT, GST, capital gains tax, or other complex taxes.

   • Offshore tax exemption: If profits can be proven to arise entirely outside Hong Kong, businesses may achieve zero tax in Hong Kong.

3. International Compliance & Double Taxation Protection

   With global enforcement of CRS and economic substance laws, Hong Kong stands out as a high-transparency, internationally trusted jurisdiction. Hong Kong has signed over 45 Double Taxation Treaties, providing enterprises with stable and predictable tax certainty.

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II. Choosing the Right Company Type

Type	Nature	Liability	Best for	Requirements
Private Limited Company	Non-public, closed structure	Limited liability	SMEs, cross-border sellers	1 director + 1 shareholder + HK secretary/address
Public Limited Company	Can raise funds publicly	Limited liability	Companies seeking listing	Must meet listing rules
Company Limited by Guarantee	Non-profit	Liability limited by guarantee	Charities, associations	No share capital
Unlimited Company	Not a legal entity	Unlimited liability	Small family businesses	No capital requirement

Private Limited Company is the top choice for cross-border sellers:

• Risk separation: Protects owners’ personal assets.

• Flexible structure: Allows single shareholder/director; no minimum capital.

• High credibility: Globally recognized corporate form.

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III. Substance Requirements & Ongoing Compliance

Hong Kong’s tax authority focuses on “economic substance”. Two core elements:

1. People & Premises

• Hire staff in Hong Kong (employment contracts, payroll records required).

• Maintain a real office with a proper lease specifying “office use”.

2. Evidence of Business Operations

Maintain a complete documentation trail:

• Overseas warehouse contracts

• Local employment records

• Foreign bank statements, logistics documents, customer contracts

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Ongoing Compliance Requirements

• Annual audit: Mandatory for all Hong Kong companies, regardless of activity level (first audit due within 18 months of incorporation).

• Bank account activity: Keep accounts active; avoid long periods without transactions.

• Offshore exemption renewal: Must re-submit supporting documents every 3 years.

• Timely filings: Director/shareholder changes must be filed within 30 days.

• Avoid sensitive transactions: Large transfers from HK company accounts to Mainland personal accounts raise red flags.

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IV. Offshore Tax Exemption Review Focus

Hong Kong tax authorities now conduct substantive reviews, not just document checks.

Common pitfalls:

1. Insufficient Substance

Companies with no staff, no office, or whose directors operate entirely from Mainland China are often rejected.

2. Incomplete Documentation

Businesses failing to provide full proof of overseas operations (contracts, invoices, shipping records) may face back taxes.

3. Missing tax proof from operating jurisdiction

Authorities may request proof of tax paid where the income was generated.If none is provided, Hong Kong may require tax payment.

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Conclusion

For Mainland cross-border sellers, registering a Hong Kong company is more than a tax solution —it is the foundation for:

• building an international brand

• managing global capital efficiently

• achieving long-term, sustainable, and compliant growth

But the right structure, substance setup, and compliance planning are essential.

Hong Kong company registration and compliance involve complex commercial, legal, and tax considerations. If you are planning cross-border expansion or evaluating offshore tax exemption, Oceanus Strategic can provide tailored consultancy and full-cycle support.