Overview
GDP in 2020: HK$2,844 billion (about US$366.96 billion).
Profit Tax: 8.25% (if profits below HK$2 millions) / 16.5%
Remarks: No VAT, Capital gains tax, Dividends tax, nor Estate tax
As a uniquely global business city at the heart of Asia, Hong Kong plays host to a wide variety of business sectors. Other than financial services, Hong Kong is a leading education hub in the region, encompassing the whole spectrum ranging from playgroups and kindergartens to international schools and higher education institutions, from leisure learning to professional and vocational training centres, as well as emerging education technology ventures.
Hong Kong is a major market for the executive search and human resources consulting business. This is further boosted by the strong pool of local talent and business-friendly immigration policies that make it simple to recruit overseas professionals. And over 70% of international law firms, including more than half of the Global 100 have presence in Hong Kong.
With the active manufacturing and export activities in Mainland and the neighbouring Asian countries, Hong Kong has provided high levels of integrity and creditability as the preferred location for testing and certification operators. The accreditation services in Hong Kong are recognised internationally.
Policy (Belt and Road)
The Silk Road Economic Belt and the 21st Century Maritime Silk Road (the Belt and Road (B&R) Initiative) is an important national development strategy which promotes co-operation among countries and regions in areas of policy co-ordination, facilities connectivity, unimpeded trade, financial integration and people-to-people bond. As a key link and the prime platform for the B&R, and with the Central Government's support, Hong Kong can capitalise on its unique advantages to connect the Mainland with other B&R regions, in areas such as the international project financing, offshore Renminbi (RMB) business, professional services, as well as economic and trade co-operation.
Hong Kong signed the "Arrangement between the National Development and Reform Commission and the Government of the Hong Kong Special Administrative Region for Advancing Hong Kong's Full Participation in and Contribution to the Belt and Road Initiative" in December 2017. The Arrangement focuses on six key areas: 1/finance and investment; 2/infrastructure and maritime services; 3/economic and trade facilitation; 4/people-to-people bond; 5/taking forward the Guangdong-Hong Kong-Macao Greater Bay Area Development; and 6/enhancing collaboration in project interfacing and dispute resolution services. A Joint Conference mechanism has been set up as a regular and direct communication platform.
Hong Kong has signed some 40 Comprehensive Avoidance of Double Taxation Agreements, including with a number of B&R countries. Arrangements with B&R-related economies and other trading partners including the Mainland of China, India, Korea, Singapore, Thailand, Malaysia, Japan, Australia, New Zealand, Israel and Canada have been signed to mutually recognise respective "Authorized Economic Operator" Programmes to facilitate customs clearance.
International Rankings
Freest economy: World’s No.1 since 1996 (Fraser Institute, Canada), World’s No. 1 (1996-2019) (US-based Heritage Foundation)
Economic openness: World’s No.1 (Legatum Institute: Global Index of Economic Openness 2019)
Business-friendly taxes: World’s No.2 business-friendly tax system (PricewaterhouseCoopers LLP and the World Bank Group: Paying Taxes 2020)
Competitiveness: Among the world’s top 5 (International Institute for Management Development: World Competitiveness Yearbook 2020); Worlds’ No.3, East Asia & Pacific’s No.2 for global competitiveness (World Economic Forum Global Competitiveness Report 2019)
Easiest place to do business: Worlds’ No.3 (World Bank: Doing Business 2020)
Industries' Envirnoment
Advanced Manufacturing－The Government in recent years has been pushing to revitalise manufacturing to divert its reliance on service industries. The $2 billion Re-industrialisation Funding Scheme (RFS) has been rolled out to subsidise manufacturers to set up new smart production lines in Hong Kong. The Advanced Manufacturing Centre (AMC), slated to open in 2022, will provide agile production facilities. Advanced manufacturing industries will bring new economic growth.
Art and Culture, Design－Initiatives such as the West Kowloon Cultural District, Tai Kwun, PMQ, BODW (Business of Design Week) and the recently revamped HKMoA (Hong Kong Museum of Art) have taken art and culture to the next level. The region is now one of the largest export markets for design services with networks of well-established supply chains and enhanced inter-cities collaboration opportunities in the Greater Bay Area.
Aviation－The Hong Kong International Airport is one of the world’s busiest airports in terms of passenger and air cargo throughput, as well as air traffic movements. The industry will continue to benefit from the commissioning of the third runway in 2022, the infrastructure connectivity to the Greater Bay Area, and the integration of Mainland aviation network of the Zhuhai Airport with the international network of the Hong Kong International Airport to achieve greater synergy. Besides, Hong Kong has established a concessionary tax regime since 2017 for qualifying aircraft lessors and aircraft leasing managers to a tax concession under which only 20% of the net lease rentals are assessed. This regime reduces the profits tax from 16.5 percent to 8.25 percent in regard to aircraft leasing.
Big Data & Analytics – The city has long been positioned as a data hub for its pillar industries including finance, logistics, trade and retail. The Government has opened up government data for public use with a dedicated data portal while the Hong Kong Hospital Authority launched HA Data Collaboration Laboratory (HADCL) and is open for applications by local academic institutions to conduct health data collaboration projects.
Cloud Technology – Hong Kong is a leading hub for cloud technology and acts as a launchpad for expansion into Mainland China and international markets. The city enjoys high demand for cloud-based services, especially from the finance and manufacturing industries. Further demand has been driven by the Government’s proposal to deliver e-services and information via cloud computing.
Cosmetics & Personal Care － Hong Kong’s open regulatory environment for cosmetics has ensured significant market space for both cosmetics and personal care. Imports of cosmetics and personal care items amounted to over HK$47 billion in 2019. Sales channels include stand-alone boutiques, multi-brand retailers, online platforms and beauty salons. Cosmetics and personal care items are a favorite purchase category for both local consumers and international and Mainland visitors thanks to the attractive prices (no VAT, no import duties) and a wide global selection available in the city.
Data Centres – Many high-end regional data centres are established in Hong Kong thanks to the city’s sophisticated high-tech infrastructure, tech professionals, reliable power supply, and robust enforcement of data privacy and security. Companies from different industries outsource their data storage and management, creating opportunities for data centre operators.
ECommerce － Hong Kong is a great location to set up eCommerce fulfilment centre thanks to the city’s sophisticated logistics infrastructure and ubiquitous internet access with a range of payment options. Hong Kong is home to most leading financial institutions and major mobile wallet technologies. It is also possible to access millions of regional consumers through a presence on e-platforms, managed from a base in Hong Kong.
FinTech - An international FinTech hub characterised by a diverse, resilient, and dynamic landscape, Hong Kong is a deep market on the rise with a large number of financial institutions and FinTech startups looking to rapidly scale-up. Throughout the COVID-19 pandemic, the Hong Kong FinTech sector bucked the global trend as companies continued to grow, raise capital and hire more talent.
Food Trading – A free port combined with the ease of setting up a company with minimal capital investment makes Hong Kong ideal for trading.
Food Services – The culinary capital of Asia with 277 Michelin star restaurants (2021) offering a wide variety of cuisines and styles across all price ranges.
FoodTech – Food sustainability and healthy food, combined with the digital new normal of eCommerce give ample opportunities in R&D and technology application.
Hotel and Travel – World class infrastructure await visitors to come back while the city is also a great platform to set up an agency serving both inbound and outbound travellers.
Jewellery － Hong Kong also hosts many world class jewellery and gemstones trade shows and congress. Renowned auction houses and miners also hold auctions and tenders for rough and polished diamonds in the city. Retail of jewellery, watches, and valuable gifts amounted to over HK$66,000 million in 2019 with a robust second hand trading market to support as well.
Logistics－Combined with maritime and aviation industries and land freight transport, logistics plays a pivotal role in sustaining Hong Kong's economic growth. Increased trade with Mainland China especially the Guangdong-Hong Kong-Macao Greater Bay Area, and the continued growth in e-commerce, bolster the logistics development. As the industry continues to prosper, the adoption of smart technology will open up new possibilities. The Government has rolled out the Pilot Subsidy Scheme for third-party logistics service providers to encourage their adoption of more technology and IT solutions.
Maritime－Hong Kong has established itself as a premier international maritime centre that is home to one of the world's largest shipping communities, owning or operating around 10 percent of the world's merchant fleet. The presence of a vibrant maritime cluster provides a comprehensive range of maritime services. Hong Kong is the world’s fourth largest shipping register in terms of gross tonnage. To promote the Hong Kong Ship Register, the Marine Department has set up regional desks at the Economic and Trade Offices of London, Shanghai and Singapore, with more to come in North Asia, North America and Australia. Besides, to strengthen Hong Kong’s role as a global maritime centre, the Inland Revenue (Amendment) (Ship Leasing Tax Concessions) Bill 2020 was passed in June 2020 to introduce concessionary tax measures for qualifying ship lessors and ship leasing managers. Under the new scheme, which applies to revenue earned on or after 1 April 2020, the tax rate on the qualifying profits of ship lessors carrying out operating lease and finance lease activities is 0 percent. The tax rate on the qualifying profits of ship leasing managers is 0 percent or 8.25 percent.
Media and Entertainment－Hong Kong is a prime regional location for media companies including news agencies, TV broadcasters, OTT platforms, content creators and more. A liberal media environment with excellent communication networks allow companies to reliably transmit and receive information at low costs and high cellular speeds enable the effective delivery of rich digital content.
MICE – Some of the largest trade shows in Asia take place in Hong Kong, making it the perfect place for exhibitors and buyers to meet. A hybrid version of virtual and physical events will be burgeoning.
Personal Services – As a regional trendsetter, an increasing amount of tailored services are now available ranging from fitness programmes, gyms, yoga studios to other lifestyle services.
Retail － As the top shopping destination with world class shopping malls, high street locations and a variety of retail formats, Hong Kong is the ideal location to showcase any brands. Retail sales amounted to over HK$430 billion in 2019. Goods of particular significance include jewellery, watches, valuable gifts, clothing and footwear products of which sales at $120 billion, accounting for 28 percent of the total sales.
Software & Services – The industry is a key component of Hong Kong’s ICT sector and experiences strong demand from SMEs and multinationals. Many of the world’s leading software services companies base their regional operations in the city to mirror their client’s preferences. Hong Kong’s rigorous protection of intellectual property and tech-savvy consumers provide companies with the perfect testbed for Mainland China.
Sourcing － Many of the world’s biggest retailers have set up their regional or global sourcing operations in Hong Kong to leverage the city’s strategic business advantages, ease of travel, sourcing and merchandising talent and an ecosystem of world class trade shows, show rooms and suppliers. Hong Kong is also a popular place to set up Corporate Treasury Centre to manage capital flows and trade finance.
Telecommunications – Hong Kong’s telecommunications market has been liberalised and there are no restrictions on foreign ownership or limits to the number of market operators. Advanced infrastructure and a high take-up of services has placed Hong Kong at the forefront of telecommunications.
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