How To Start a Freight Forwarding Business in Singapore, Hong Kong and China

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Posted on 12 February 2025
Fidinam Hong Kong Business Consultancy International Business Expansion Asia Pacific

The logistics sector in the Asia-Pacific (APAC) region is flourishing, fueled by globalization and enhanced trade routes.

If you're looking to establish a logistics company or brokerage in Singapore, Hong Kong, or China, it's crucial to understand the incorporation process and tax landscape for smooth operations and long-term success.

Each jurisdiction has specific requirements, procedures, and licensing needed to operate legally and distinct tax policies.

This article provides a summarized guide to help you navigate the incorporation process and taxation in these key logistics hubs.

 

Singapore

The freight forwarding sector in Singapore presents a wealth of opportunities for growth and innovation. Here are some compelling reasons to consider launching a freight forwarding business:

  • Singapore's strategic position as a major global trade center
  • Strong infrastructure coupled with top-tier port facilities
  • Increasing demand for effective logistics solutions
  • Chances to utilize technology for more efficient operations
  • Opportunities for lucrative contracts with international clients

 

Specific License: Freight Forwarding License

A freight forwarding business acts as an intermediary between shippers and transportation services, organizing the movement of goods across international borders. Freight forwarders handle logistics, documentation, and customs clearance, ensuring smooth and efficient transportation of cargo.

In Singapore, a freight forwarding license is obtained through the Maritime and Port Authority (MPA).

Company Incorporation and License Application Process

  1. Name Approval:
    Submit your proposed company name to the Accounting and Corporate Regulatory Authority (ACRA) for approval.

  2. Incorporation:
    File the incorporation application with ACRA through the BizFile+ portal, along with the necessary documents, including the company constitution, identification documents of directors and shareholders, and proof of local address.

  3. Obtain the Freight Forwarding License:
    After incorporation, apply for the freight forwarding license from the MPA. This involves:
    • Completing the application form.
    • Providing details about your business operations, including types of services offered.
    • Submitting financial statements if required.
  4. Compliance Check:
    The MPA will conduct a review of your application to ensure compliance with regulations, including financial stability and operational capability.

  5. License Issuance:
    Once approved, you will receive your freight forwarding license, allowing you to legally operate in Singapore.

  6. Open a bank account:
    After incorporation, open a corporate bank account in Singapore.

 

Requirements

  • Business Structure: Common choices include a private limited company (Pte Ltd)
  • Local Director: At least one director must be a resident of Singapore.
  • Company Name: Must be unique and not infringe on existing trademarks.
  • Registered Address: A local business address is required.
  • Minimum Capital: The minimum paid-up capital for a private limited company is SGD 1.

 

Hong Kong

The freight forwarding sector in Hong Kong is a vital component of the region's robust logistics and supply chain industry. With its strategic location, advanced infrastructure, and strong regulatory framework, Hong Kong serves as a key gateway for international trade.

Specific License: Freight Forwarding License

Starting a freight forwarding business in Hong Kong requires obtaining a freight forwarding license. Here’s an overview of the process, requirements, and considerations involved in securing this license. A freight forwarding license is essential for businesses that facilitate the movement of goods on behalf of clients.

In Hong Kong, this license is regulated by the Customs and Excise Department, which ensures compliance with local laws and international trade regulations.

Company Incorporation Procedure

  1. Name Reservation: Request name reservation through the Companies Registry.

  2. Documentation: Prepare essential documents, including:
    • Articles of Association
    • Identification documents of shareholders and directors
    • Proof of registered office
  3. Incorporation Application: Submit the application via the e-Registry or in person at the Companies Registry.

  4. Business Registration: Obtain a Business Registration Certificate from the Inland Revenue Department.

  5. Obtain the Freight Forwarding License

 

Freight Forwarding License Application Process in Hong Kong

  1. Submit Application:
    Complete the application form for the freight forwarding license and submit it to the Customs and Excise Department.

  2. Provide Supporting Documents:
    Along with the application, include necessary documents that demonstrate your business's compliance with industry standards.

  3. Pay Fees:
    Pay the required application fees as outlined by the Customs and Excise Department.

  4. Await Approval:
    After submission, your application will be reviewed. The processing time can vary, so be prepared for potential delays.

  5. License Issuance:
    Once approved, you will receive your freight forwarding license, allowing you to operate legally in Hong Kong.

Requirements

  • Business Structure: Private limited companies are most common.
  • Local Director: At least one director must be an individual (not necessarily a resident).
  • Company Name: Must be unique and include "Limited" or its abbreviation.
  • Registered Office: A physical address in Hong Kong is required.
  • Share Capital: No minimum capital requirement, but at least one share must be issued.

China

The freight forwarding business in China is a crucial component of the country’s logistics and supply chain industry, benefiting from China’s status as a global manufacturing powerhouse and a major player in international trade. Here’s an overview of the key aspects of the freight forwarding sector in China.

Specific License: Freight Forwarding License

In China, freight forwarding services are primarily regulated by the Ministry of Transport (MOT) and local transport authorities.

A freight forwarding license allows companies to operate as logistics intermediaries, providing services such as transportation, customs clearance, and cargo handling.

Requirements

  • Business Structure: Foreign companies typically register as Wholly Foreign-Owned Enterprises (WFOEs) or joint ventures with local partners. A local legal representative is required to oversee operations.
  • Registered Capital: The minimum registered capital depends on the specific business scope of the New Company.

> To include international maritime cargo transportation in the business scope, the minimum registered capital requirement is RMB 5,000,000. 
> To include international air cargo transportation in the business scope, the minimum registered capital requirement is RMB 3,000,000.
> To include international land cargo transportation in the business scope, the minimum registered capital requirements of RMB 2,000,000. 

Finally, international freight forwarders in China must increase their registered capital by a minimum of RMB 500,000 per registered branch office engaged in international freight forwarding activities.

  • Documentation:
  1. Business plan
  2. Articles of Association
  3. Identification documents of shareholders and the legal representative
  4. Lease agreement for office space
  • Compliance with Regulations: Familiarize yourself with the regulatory framework governing freight forwarding in China, including customs regulations and international trade laws.

Approval Procedure in China

  1. Name Pre-Approval: Submit your desired company name to the local Administration for Industry and Commerce (AIC) for approval.

  2. Business License Application: After name approval, apply for a business license to the AMR, along with the required documentation.

  3. Obtain Freight Forwarding License: Apply for the freight forwarding license with the Ministry of Transport or the local transport authority. This step may require: 1) Detailed information about your business operations, 2) Proof of financial stability

  4. Customs Registration: After obtaining the freight forwarding license, register with the Customs authority to legally handle customs clearance for shipments.

  5. Await Approval: the review process can take several weeks to months. Be prepared for potential follow-up inquiries from regulatory authorities.

Tax Implications for Freight Forwarding Businesses in Singapore, Hong Kong, and China

Understanding the tax implications for freight forwarding businesses in Singapore, Hong Kong, and China is crucial for effective financial planning and compliance.

Each region has distinct tax policies, including corporate tax rates, GST/VAT, withholding tax and tax incentives. It’s important to know how these differences can impact profitability and operational costs.

Here’s an overview of the tax implications in each location.

 

Singapore

Hong Kong

China

Corporate Tax Rate

The corporate tax rate in Singapore is a flat 17%. However, new startups may benefit from partial tax exemptions and tax incentives.

 

Hong Kong has a two-tiered profits tax system. The first HKD 2 million of profits is taxed at 8.25% for incorporated companies, while profits exceeding this threshold are taxed at 16.5%.

The standard corporate income tax rate in China is 25%. However, eligible small enterprises and certain sectors may benefit from a reduced rate.

Goods and Services Tax (GST)

GST is set at 9%. Freight forwarding services may be exempt from GST if they are directly related to international transport.

Hong Kong does not impose a Goods and Services Tax (GST) or Value-Added Tax (VAT), making it advantageous for freight forwarding companies.

The VAT rate for logistics services, including freight forwarding, typically ranges from 6% to 13%, depending on the service type. Proper invoicing and compliance with VAT regulations are essential.

Withholding Tax

Withholding tax applies to certain payments made to non-residents, such as royalties and service fees. This could affect arrangements with foreign partners.

There is no withholding tax on dividends or interest payments, providing further tax efficiency.

Withholding tax applies to payments made to foreign entities, typically at a rate of 10% on dividends, interest, and royalties, unless reduced by a tax treaty.

Tax Incentives

The Singapore government offers various tax incentives for businesses, including the Global Trader Programme, which provides tax benefits for qualifying freight forwarding activities.

The Hong Kong government offers various incentives, such as the "Hong Kong Export Credit Insurance Corporation" that can help mitigate risks associated with international trade.

China offers various tax incentives for foreign investment in specific regions and industries, including tax holidays and reduced rates for certain qualified businesses.

 

Conclusion

Incorporating a Freight Forwarding Company in Singapore, Hong Kong, or China involves a series of steps, including understanding local regulations, preparing documentation, and obtaining the necessary licenses.

Additionally, the tax implications for freight forwarding businesses vary significantly across these jurisdictions. Singapore and Hong Kong provide relatively low corporate tax rates and favorable tax environments, with Hong Kong standing out due to the absence of GST. In contrast, China presents a more complex tax landscape with higher rates and VAT considerations.

Understanding these differences is crucial for optimizing operations and ensuring compliance.

Given the regulatory and tax complexities, consulting local experts can help streamline the process and position your business for success in the thriving APAC logistics market.

Need expert guidance on incorporating your freight forwarding business and navigating tax and compliance requirements in Singapore, Hong Kong, or China?

Contact us today via the form below - our experts are here to help you streamline the process and ensure full compliance with local regulations.

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