Introduction
Recently, Hong Kong has become the hottest option for e-commerce businesses, especially after Dubai’s new tax policy in 2024 and the increasing problems of account bans with payment gateways under US LLCs for non-US residents.
Hong Kong offers a fertile ground for e-commerce ventures under the banner of “International Financial Hub.”
Who should read this article?
- E-commerce Entrepreneurs: If you’re running your e-commerce business under your personal name and are looking to scale up and find a corporate solution, this is for you.
- LLC Troubles: If you’re facing issues with your current e-commerce setup under different LLCs, you’ll find valuable insights here.
- Backup Plan Seekers: If you’re looking for a backup plan or considering a move for your e-commerce business, this article will help.
- New Entrepreneurs: If you’re just starting out and looking for the right opportunity to launch your online business, read on.
1 – Payment Gateway Hong Kong: Benefits of Hong Kong for E-Commerce Business Owners.
Before diving into the specifics of payment gateways, it’s crucial to understand why Hong Kong is an attractive hub for e-commerce businesses:
- Strategic Location: Situated at the gateway to China and other Asian markets, Hong Kong offers unparalleled access to a vast consumer base.
- Favorable Taxes: With low taxation (even 0% tax exemption) and no VAT, businesses can maximize their profitability.
- Ease of Business Setup: Setting up a business in Hong Kong is straightforward, with fewer bureaucratic hurdles compared to many other regions.
- World-Class Financial Infrastructure: Hong Kong is home to a robust financial infrastructure with most world-class payment gateways, such as PayPal, Stripe, and Payoneer, specifically servicing Hong Kong-registered companies. This ensures seamless transactions and reliable financial services tailored to e-commerce success.
2 – Payment Gateway Hong Kong: What is the best payment provider?
The short answer is: It depends on your customers.
To cater to a global audience, choosing the right payment gateway (payment service providers) is crucial. To make the right choice, we suggest dividing the process into two steps.
Step 1: Which payment methods do you want to offer?
Before answering which payment service provider is best for you, you first need to ask yourself which payment methods you want to offer in your online shop. There are options such as:
- Credit Cards (Visa, Mastercard)
- Debit Cards
- PayPal
- SEPA, Klarna, Sofort (for the EU)
- Google Pay
- Apple Pay and many more
Depending on the regions your customers are from, they may prefer different payment methods.
Further reading:
Read these statistics about which payment methods are used in which regions.
Step 2: Which payment service providers to choose for which payment method?
Disclaimer:
This is not a sponsored article, and these are real-life options commonly chosen by clients.
These are the questions that you want to have answered when looking at the payment service providers:
- How many of my needed payment methods does the payment gateway offer?
- How much does the integration cost you (you need to ask your developer)?
- How much are the fees (per transaction, percentage or flat) for the payment provider?
Each of these payment service providers has its unique advantages:
Stripe:
Known for its versatility and ease of integration, Stripe supports a wide range of currencies and payment methods, making it ideal for businesses targeting an international customer base. It is best used for credit cards, US debit cards, and SEPA. Stripe won’t let you integrate with PayPal.
PayPal:
If you have many customers who want to pay with PayPal, it can make sense to integrate PayPal separately as a payment method and
Airwallex:
Particularly beneficial for businesses looking to minimize transaction costs, Airwallex offers competitive exchange rates and is designed to support cross-border e-commerce seamlessly.
Shopify Payments:
Integrated within the Shopify e-commerce platform, this service simplifies the payment process for both merchants and customers, providing a streamlined shopping experience.
PingPong:
Perfect for businesses that deal with multiple currencies, PingPong focuses on simplifying international transactions and reducing overhead costs.
Payoneer:
Offering comprehensive cross-border payment services, Payoneer is another excellent choice for Hong Kong-based e-commerce businesses looking to expand globally.
Note: All these payment gateways are available to Hong Kong companies. The location of business operations or the directors or shareholders does not play a role.
Once your business is open to the global market and your company is registered in Hong Kong, you are eligible to apply for these services.
3 – Payment Gateway Hong Kong: Before and after using a Hong Kong Company as an E-Commerce business owner
3.1 – Case Study 1: The Shopify Store Owner with a US LLC who got banned by Stripe USA.
Background
The client operated a thriving Shopify store specializing in drop-shipping, originally registered under a US LLC as a non-US resident.
His business model was heavily reliant on Stripe for payment processing.
However, complications arose when Stripe and Shopify suspended his account, citing insufficient documentation, verification of social security number, and billing. This sudden disruption not only halted sales but also jeopardized the business’s viability.
The Challenge
The suspension of the Stripe and Shopify accounts underlined a critical vulnerability in the client’s business operations. The primary challenges he faced included:
- Urgency for Continuity: The need to quickly find a stable and reliable alternative to avoid significant business disruption.
- Regulatory Compliance: Ensuring that the new business setup met all legal and regulatory requirements to avoid future complications.
- Global Payment Management: Managing multi-currency transactions efficiently while minimizing transaction fees and handling payments to suppliers and freelancers globally.
The Shift to Hong Kong
After evaluating various global jurisdictions, the client reached out to us.
We concluded that a Hong Kong Company can solve its challenges.
- Fast business registration: We assisted the client in registering a new Hong Kong limited company in 2 working days.
- Setting up Shopify and Stripe payments: Leveraging Shopify’s seamless integration capabilities, he set up his e-commerce platform with Shopify Payments under the Hong Kong company and got activated in just 5 working days.
- Integrating PayPal: To further diversify his payment gateways and reduce dependency on a single provider, he integrated PayPal HK, enhancing his business’s credibility and reliability.
- Setting up the virtual banking: We linked up the client and opened an Airwallex account, which was activated in only 5 working days. The fast activation is one of many reasons why our clients choose virtual banks over traditional banks in Hong Kong.
Airwellex’s local accounts are well integrated with both Shopify payment and PayPal, receiving EUR, GBP, and also USD with 0% bank charges. Pay suppliers in China, and handle freelancer payments in the USA and the Philippines via the global account functions with very low transaction fees and real-time currency conversion.
The Outcome
The transition to Hong Kong provided the client with several immediate and long-term benefits:
- Stability and Reliability: With multiple payment gateways and a reliable business structure, the client no longer faced the risk of sudden account suspensions.
- Regulatory Compliance and Documentation: The comprehensive business documentation in Hong Kong, including tax returns, audit reports, and tax assessments fortified the business’s legitimacy and operational transparency in front of payment providers.
- Enhanced Financial Efficiency: The use of Airwallex significantly reduced the overhead associated with foreign currency transactions and supplier payments.
Client Testimonial
“I am thrilled with my decision to relocate my e-commerce business to Hong Kong. Finally, I feel safe and stabilized in my operations. Hong Kong’s strategic advantages have transformed how I manage my global transactions,” the client remarked.
3.2 – Case Study 2: Vietnamese E-commerce Entrepreneur Overcoming Local Challenges
Background
Our client, a Vietnamese entrepreneur, operated an e-commerce business selling a variety of consumer goods online. Initially, his operations were centered in Vietnam, but as his business grew rapidly during the COVID-19 pandemic, he encountered numerous challenges that hindered further progress.
The Challenge
As his business scaled, several pain points emerged, threatening the sustainability of his operations:
- Payment Processing: Local payment gateways, such as MoMo and ZaloPay, struggled to handle the surge in international transactions. These platforms often experienced frequent downtimes and transaction failures, which led to a loss of sales and frustrated customers.
- Currency Conversion: High conversion fees and unfavorable exchange rates offered by local banks and payment services significantly eroded profit margins. For example, local banks like Vietcombank and Techcombank imposed high fees on currency exchange, making it costly to convert VND to USD or EUR, which are commonly used in international transactions.
- Logistics and Shipping: Limited options for reliable international shipping made it difficult to maintain delivery timelines, impacting customer satisfaction. Local shipping providers such as VNPost and Giaohangnhanh (GHN) had limited international reach and often faced delays, making it challenging to meet the expectations of global customers.
- Regulatory Hurdles: Navigating the complex Vietnamese regulatory landscape was time-consuming and cumbersome, diverting focus from core business activities.
The Shift to Hong Kong
After consulting with us, the client decided to restructure his business operations in Hong Kong, leveraging its robust infrastructure and business-friendly environment:
- Business Registration: We assisted the client in registering a new Hong Kong limited company in 2 working days.
- Payment Gateway Integration: PingPong and Payoneer: To streamline payment processing, we advised and introduced the client to PingPong and Payoneer as primary payment gateways. These platforms enabled efficient handling of multi-currency transactions, reducing fees and ensuring faster settlements.
- E-commerce Platform Setup: We guided the client in migrating his e-commerce platform to operate under the Hong Kong company. Using Shopify for its seamless integration capabilities, the setup was completed and activated in just 5 working days.
- Setting up the virtual banking: We facilitated opening an Airwallex account, activated in only 5 working days. This enabled the client to receive payments in various currencies (EUR, GBP, USD) with 0% bank charges. Additionally, Airwallex’s global account functions allowed for low-cost payments to suppliers in China in RMB, and Vietnam in VND, with real-time currency conversion.
The Outcome
The transition to Hong Kong provided the client with several immediate and long-term benefits:
- Stability and Reliability: PingPong and Payoneer provided reliable and efficient payment processing solutions, minimizing transaction failures and delays.
- Cost Efficiency: Lower currency conversion fees and international transaction costs significantly improved profit margins.
- Improved Logistics: Access to a wider range of international shipping options enhanced delivery reliability and customer satisfaction.
- Regulatory Compliance: The clear and straightforward regulatory framework in Hong Kong allowed the client to focus more on business growth rather than navigating bureaucratic hurdles.
Payment Gateway Hong Kong: Conclusion
These case studies illustrate that Hong Kong is not just a viable alternative, but a strategic choice for e-commerce businesses facing operational challenges in other jurisdictions.
The region’s advanced infrastructure, supportive regulatory environment, and sophisticated financial services provide a resilient platform for e-commerce entrepreneurs aiming to operate globally with efficiency and stability. For businesses looking to mitigate risks and optimize operations, Hong Kong offers a compelling solution that supports sustainable growth and global reach.
Questions other readers have asked.
Q1: What are the initial steps to setting up an e-commerce business in Hong Kong?
Start with registering your business with the Hong Kong Companies Registry, set up a corporate bank account, and choose the e-commerce platform and payment gateway suitable to your needs.
Q2: Are there any specific legal considerations for e-commerce in Hong Kong?
Yes. it’s crucial to comply with the Personal Data (Privacy) Ordinance (PDPO) for handling customer data and ensure that your business follows the Electronic Transactions Ordinance for online transactions.
Q3: Can foreign nationals own and operate an e-commerce business in Hong Kong?
Yes. Foreign nationals can wholly own a Hong Kong company, and there are no restrictions on foreign ownership or management.
Q4: Does Hong Kong impose VAT on e-commerce transactions?
No. Hong Kong does not impose Value Added Tax (VAT) or Goods and Services Tax (GST) on any transactions, including e-commerce. This is one of the key attractions for businesses looking to set up there.
Q5: If there’s no VAT, what tax obligations do e-commerce businesses face in Hong Kong?
It depends on whether the revenue is made from Hong Kong customers or not.
If yes (Hong Kong customers): E-commerce businesses in Hong Kong are subject to a profit tax of 8.25% on the first HKD 2 million of assessable profits and 16.5% on any part of assessable profits over HKD 2 million.
If no (no Hong Kong customers): Otherwise, there is an offshore claim exemption for the profits sourced outside Hong Kong.
Q6: How does withholding tax affect e-commerce businesses in Hong Kong dealing with overseas vendors or clients?
Hong Kong does not levy withholding tax on dividends and royalties paid to non-residents.