ESTABLISHING A HONG KONG TRADING COMPANY AS A PLATFORM FOR BUYING IN CHINA
ABC Ltd from Europe is sourcing products from China and many other Asian countries and reselling to large retail chains in their home market and other third party destinations.
With the growth in business, ABC Company is looking for an effective way to manage this process while giving them an international presence, and enabling their larger customers to buy FOB from an Asian port, and expand their sales into new markets around the globe.
Accordingly, the ABC Ltd is required to:
- Centralize their sourcing function in Asia
- Have better control
- Have better control over receipts and payments
- Sell on FOB Asia terms
We recommend the following structure:
ABC Ltd now has an international business with a local presence in Hong Kong, they retain control of their expanding business and its costs, and the profits are retained in their Hong Kong Company – usually tax free under Hong Kong’s territorial tax system.
Benefits of the structure:
- Potentially low or no taxes in Hong Kong
- Increased flexibility to sell FOB
- One more layer of protection on the interest of the parent holding company
- Easier to change shareholding structure
- More developed trading infrastructure
- No foreign exchange control
- Sell directly from HK to worldwide clients without involving the headquarters and without goods burdening the warehouse – Free up capital financing on inventories
- Transferable Letter of Credit possible
- Offshore RMB centre with cross-border trade settlement