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Hong Kong SAR, China

The consumer

Consumer Profile

The population of Hong Kong enjoys the world’s longest life expectancy, with men living on average 81.3 years and women 87.3 years. However, Hong Kong also has one of the world's lowest birth rates (0.24% in 2020, with the median age of the population being 46.5 years (CIA). 21.6% of the population is below 25 years of age, 42.6% is between 25 and 54, 17.2% is between 55-64 and 18.5 is 65 or older. Additionally, there are 86 male every 100 female. The population is mainly ethnically Chinese (93.6%), and non-Chinese ethnic groups representing less than 7% of the population. Of these minorities, Filipinos are the biggest group (2.5%), followed by Indonesians (2.1%). According to the Census and Statistics Department of Hong Kong, households tend to be small with 20.1% of households made up of one person, 28.5% of two people, and 22.9% of three people. On the other hand, households with four people only represent 17.8% of all households, while those with 5 people represent 7.4%, and houses with over 6 people account for a mere 3.2%. While Hong Kong has the third highest literacy rate in the world, only 30.8% of women and 35.1% men have post-secondary education. Public administration, social and personal services accounts for 30.3% of the workforce. They are followed by financing, insurance, and real estate (12.1%); professional and business services (10%); construction (8.3%); retail (7.5%); and accommodation and food services (6.5%).

Purchasing Power

GDP per capita in Hong Kong has been rising in recent years, reaching USD 62,375 (PPP) in 2019 (World Bank). The median monthly salary of employed persons is HKD 17,500 as of the second quarter of 2020 (Census and Statistics Department). Hong Kong’s disparity between rich and poor is currently the greatest it has been in 45 years, with a Gini coefficient of 0.539 in 2017 (Census and Statistics Department, latest data available). Lately, soaring property prices have pushed up rents and had a knock-on effect as businesses raise prices on goods and services, which made a big part of the population seek extra work. As the property market squeezes the city’s most vulnerable people, risks fuelling social tensions arise. Additionally, the wealthiest 10% of households earn nearly 44 times more than the poorest 10%. Women under the age of 20 earn slightly more than men of the same age group. However, women between 25-34 years earn 20% less on average than their male counterparts, and women between 45-54 earn 35% less than men do. Overall women are paid around 18% less than men. The gender pay gap widens with age because fewer women take up senior positions as more women leave the job market earlier than their male counterparts to take care of family. Ethnic minorities, particularly Pakistanis, have the lowest standard of living, given that they have the highest poverty rate in Hong Kong.

Consumer Behaviour

Hong Kong has the world’s most connected consumers. As such, e-commerce has been growing exponentially, and further growth is expected in the coming years. Not only does technology change how products are being sold, but also influencing and changing how products are researched, manufactured and marketed - affecting how consumers in Hong Kong shop and chose what they are buying. Additionally, e-commerce represents a notable facet of the overall consumer experience, especially among Millennials. Empowered by rising disposable incomes, consumers have become increasingly savvy and expect higher quality and first-rate customer service. Purchases are usually determined by the price, quality and technical specifications of the product, as well as after-sales service. Consumers look for high-quality products and competitive prices. Hong Kong consumers tend to prefer foreign products to domestic ones, given that they are highly influenced by Western trends. The Hong Kong market is particularly favourable to brands that are endorsed by Western celebrities, as well as Asian fashion icons. Consumers tend to be price sensitive but brand conscious, and they are particularly fond of luxury brands. In Hong Kong, face and social status are important, so brands that signal a high social and economic status are extremely popular, and consumers are happy to pay a premium. However, the retail and consumer products sectors are changing. Whereas previously flagship luxury stores dominated the shopping landscape in Hong Kong, fast fashion and lifestyle stores are increasingly prevalent. Additionally, the economic slowdown in China is rippling through the region causing a change in consumers’ choices and expectations, emphasising value and functionality of products. The purchasing power of millennial shoppers is increasing, shifting demand to new products that promote life experiences and healthy lifestyles, as well as shopping experiences that are more convenient. Rising health awareness is increasingly informing consumers’ shopping habits, particularly among the younger generations, so there is an increased demand for healthy and organic food. Hong Kong receives huge numbers of visitors from China every day, many of whom spend large amounts of money on the Island's many luxury stores. However, lately, the number of mainland tourists that go to Hong Kong to shop has been decreasing. For that reason, Hong Kong loosened its ‘one-trip-per-week’ cap on individual visits by Chinese tourists, invested on new tourist attractions, with the intention of drawing more visitors, and subsequently boost retail sales.

Consumer Recourse to Credit

The Hong Kong consumer credit market continues to benefit from favourable economic conditions, including low unemployment, high labour force participation and rising wages. Millennials and Gen Z are the main borrowers, while the number of people from older generations who resort to credit has been declining. Consumers have wide access to card credit, with a total number of accounts reaching 19.7 million at the end of the fourth quarter of 2019 (+1.3% year-on-year, Hong Kong Monetary Authority). Thanks to the high financial literacy rate of its population, Hong Kong retains one of the lowest consumer credit default rates in the world.
After credit cards, unsecured personal loans and unsecured revolving lines are the most popular credit products in Hong Kong. One of the main reasons for consumers to take loans in Hong Kong is for the purpose of investment. Additionally, the Hong Kong Monetary Authority has recently welcomed applications for virtual bank licenses, a move to foster competition to consumer lending and make the whole process easier.

Growing Sectors
Banking, insurance, cultural and creative industries, tourism, trading and logistics, IT, healthcare, and environmental industries.
Consumers Associations
Consumer Council
 

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Importing & Distributing

Import Procedures
When a cargo arrives at the port, even before the importer has taken possession, the products are inspected and occasionally sampled by the customs authorities. Once approved, the importer collects a “release” letter.
It is to be noted that the importer should file an "import declaration" with the "Customs and Excise Department", within 14 days from the import.
Documents required to facilitate Customs clearance are:

  • manifests
  • import / export licence or removal permit (if required)
  • copy of detention notice (if applicable)
  • other supporting documents such as bill of lading, airway bill, invoice, packing list etc.

For more information, please visit the website of Hong Kong Customs and Excise Department.

Specific Import Procedures
Local importers should purchase a licence in case they import products that are subject to import duties. A licence should be purchased for each import.
Click here to consult the database of articles subject to import or export control in Hong Kong.
Distribution channels
Hong Kong is a major trading hub where buyers make purchasing decisions for a vast range of consumer-oriented products that are destined for Hong Kong and transshipped to Macau, Mainland China and other markets in Asia. Total supermarkets' retail sales reached around HKD 59.4 billion in 2020, while the sales value of other outlets in was approximately HKD 44 billion (Statista).

To meet their food needs, traditional street (wet) markets are popular for daily shopping for fresh grocery products in Hong Kong. Some, but not all, stalls in wet markets have freezers and chilling equipment to maintain food quality. Street markets competition with modern grocery retail outlets has intensified in recent years: supermarket sales erosion of traditional street markets market share is expected to continue as consumers seek convenience and high-quality options in larger stores. Convenience stores, such as 7-Eleven and Circle K are very popular in Hong Kong with more than 1300 outlets that offer drinks and snacks and some hot food options. There are more than 800 supermarkets, 1,300 convenience stores and over 100 traditional markets in Hong Kong (USDA).

Innovative products that offer sustainable production and nutritional value at a reasonable cost with convenient preparation are in demand. Busy schedules and dual income families are driving the search for ready-to-cook and frozen options for home preparation and premium, healthy options in food service outlets. Consumers are increasingly interested in food's provenance and production background both at retail and restaurant levels and consider these aspects when making purchasing decisions.
Distribution market players
Hong Kong's supermarkets' landscape is dominated by two chains, Wellcome (over 320 outlets) and ParknShop (over 270 outlets), who have a combined market share of around 70% (USDA, 2018 - latest data available). Both chains expanded their premium and upscale outlets recently as consumers continue to seek high-quality, imported gourmet products.
Other supermarkets include DCH Food Mart (around 50 outlet), U-Select (46 outlet), CitySuper (21 outlet), CR Vanguard (17 outlet), AEON (9 department stores with supermarkets and 2 separate supermarkets), YATA (3 department stores with supermarkets and 8 separate supermarkets), SOGO and APITA.
Major convenience stores are 7-Eleven (more than 900 outlets) and Circle K (around 300 outlets).
E-commerce is fastly growing in the food retail sector, with platforms such as HKTV Mall providing a modern and alternative shopping experience consumers.
Retail Sector Organisations
Hong Kong Retail Management Association (HKRMA)

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Operating a Business

Type of companies

Sole Proprietorship
Number of partners: 1 person
Capital (max/min): No minimum capital.
Shareholders and liability: Individual entrepreneur is liable for debts of the enterprise on personal goods.
Company Limited by Guarantee
Number of partners: Minimum 2 partners.
Capital (max/min): No minimum capital.
Shareholders and liability: Their liabilities are limited to the amount of contributions made to the shares of the company.
Unlimited Company
Number of partners: Minimum 2 partners.
Capital (max/min): No minimum capital.
Shareholders and liability: Their liabilities are unlimited and joint.
Private Limited Company
Number of partners: At least 1 partner or shareholder with a maximum of 50.
Capital (max/min): No minimum capital.
Shareholders and liability: Their liabilities are limited to the amount of contributions.
Public Limited Company
Number of partners: At least 1 partner without maximum.
Capital (max/min): No minimum capital.
Shareholders and liability: Their liabilities are limited to the amount of contributions.
General Partnership
Number of partners: Minimum 2 partners.
Maximum 20 partners.
Capital (max/min): No minimum capital.
Shareholders and liability: Their liabilities are unlimited for the debts and obligations of the association.
Limited Partnership
Number of partners: Minimum 2 partners.
Maximum 20 partners.
Capital (max/min): No minimum capital.
Shareholders and liability: General partners are liable for all debts and obligations (unlimited liability). Liability of other partners is limited to the amount of contributions.
 
Setting Up a Company Hong Kong SAR, China East Asia & Pacific
Procedures (number) 2.0 7.3
Time (days) 1.5 29.7

Source: Doing Business - Latest available data.

 

Cost of Labour

Minimum Wage
According to the Hong Kong Labour Department, the minimum wage for non-domestic workers is HKD 37.5 per hour as of 2020.
Average Wage
According to the Hong Kong Labour Department, the gross median monthly employment wage is HKD 17,500 in 2019.
Social Contributions
Social Security Contributions Paid By Employers: Employers are required to deduct 5% and contribute a further 5% to the Mandatory Provident Fund (MPF), calculated on a maximum income of HKD 30,000.
Social Security Contributions Paid By Employees: For employees with monthly income above HKD 7,100, a 5% withholding tax (capped at HKD 1,500) is levied as contribution to the Mandatory Provident Fund (MPF).
 

Intellectual Property

National Organisations
Intellectual Property Department for patents and trademarks
Regional Organisations
Consult the list of the Intellectual Property Department
International Membership
Member of the WIPO (World Intellectual Property Organization)
Signatory to the Paris Convention For the Protection of Intellectual Property
Membership to the TRIPS agreement - Trade-Related Aspects of Intellectual Property Rights (TRIPS)
 

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Tax Rates

Consumption Taxes

Nature of the Tax
Not applicable
Tax Rate
Not applicable
Reduced Tax Rate
Not applicable
Other Consumption Taxes
Excise duties are levied on alcoholic beverages (liquor with an alcoholic strength of not more than 30% with the exception of wine that is not subject to excise duty), tobacco, methyl alcohol and hydrocarbon oil, regardless of whether they are locally manufactured or imported.
Stamp duties and special stamp duties are levied: 0.2% of the value of the shares transferred; maximum 8.5% on the sale and conveyance of non-residential property; 15% on residential property (exemptions apply), plus a special stamp duty ranging from 5% to 20% if the residential property is sold within 36 months.
A buyer's stamp duty at a flat rate of 15% is payable on the acquisition of Hong Kong residential properties by any person (including Hong Kong and foreign corporations) except a Hong Kong permanent resident.
No custom duties are levied in Hong Kong.
 

Corporate Taxes

Company Tax
A two-tiered profits tax rate is introduced in Hong Kong
Tax Rate For Foreign Companies
In Hong Kong, the tax residence of a company is generally irrelevant for profits tax purposes. The fiscal authorities only take into consideration if a company carries on a trade, profession, or business in Hong Kong and levies taxes on the income generated from such activities.
A company having a permanent establishment in Hong Kong will be deemed as carrying on a trade, profession, or business in Hong Kong.
Capital Gains Taxation
Long term capital gains are not taxed in Hong Kong. Nevertheless, capital gains deriving from the disposal of assets may be subject to profits tax if the disposal constitutes a transaction in the nature of trade (especially in the real estate industry).
Main Allowable Deductions and Tax Credits
Deductible expenses must be wholly, exclusively and necessarily included in the production of taxable income, including depreciation, debts, repairs to plants, trademark rights registration costs, etc. Other deductions that are allowed include mandatory pension contributions (up to 15% of the employee's total emoluments), self-education expenses, and donations of more than HKD 100 (capped at 35% of the assessable profits). Special deductions are provided for R&D expenditure (100%; or 300% deduction on the first HKD 2 million and 200% on the excess, according to the type of investment), payments for technical education, purchases of patent rights, rights to know-how, copyrights, registered designs and trademarks, capital expenditure on the provision of prescribe fixed assets including manufacturing machinery and computer software, etc. Capital expenditure, start-up expenses, internal expenditure and any other spending that is not incurred to earn income are not tax-deductible.
Net operating losses can be carried forward indefinitely, whereas losses carryback is not allowed. Capital losses are not tax-deductible.
For further information, consult the dedicated page on the website of the Inland Revenue Department.
Other Corporate Taxes
Stamp duties and special stamp duties are levied: 0.2% of the value of the shares transferred; maximum 8.5% on the sale and conveyance of non-residential property; 15% on residential property (exemptions apply), plus a special stamp duty ranging from 5% to 20% if the residential property is sold within 36 months.
A buyer's stamp duty at a flat rate of 15% is payable on the acquisition of Hong Kong residential properties by any person (including Hong Kong and foreign corporations) except a Hong Kong permanent resident.

A property tax is charged annually to the owner of any land or buildings in Hong Kong at the standard rate of 15% on the net assessable value of such land or buildings (minus a statutory allowance of 20% on the net assessable value for repairs and maintenance). The government also levies indirect taxes as privately owned land in Hong Kong is normally held by way of a government lease: the rate is generally 3% of the rateable value of the property.

Under the Mandatory Provident Fund scheme, employers are required to make a mandatory contribution for their employees that is equal to 5% of their monthly income (the relevant minimum and maximum income levels are HKD 7,100 and HKD 30,000, respectively).

Other Domestic Resources
Inland Revenue Department of Hong Kong
Consult Doing Business Website, to obtain a summary of the taxes and mandatory contributions.
 

Double Taxation Treaties

Countries With Whom a Double Taxation Treaty Have Been Signed
IRD
Withholding Taxes
Dividends: 0
Interest: 0
Royalties: 2.475% for the first HKD 6.67 million of gross royalty income and 4.95% for the remaining amount if the two-tier tax rates apply/4.95% if the two-tier tax rates do not apply/16.5% if paid to an affiliated non-resident and the IP was previously owned by a person carrying on business in Hong Kong

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