Hong Kong’s trade agreements
A free port with nothing to liberalise at home — and CEPA, which is where the value actually is
Hong Kong levies no customs duty on anything. Four commodities carry excise — liquor, tobacco, hydrocarbon oil and methyl alcohol — and they are taxed the same whatever their origin. It follows that none of Hong Kong’s nine free-trade agreements reduces the cost of bringing goods in: there is no tariff to reduce. Their value runs outward, and it is of three kinds — preferential entry for Hong Kong-origin goods into partner markets, market access and national treatment for Hong Kong service suppliers, and investment protection for Hong Kong companies operating abroad. One agreement is the exception that carries most of the commercial weight, because the counterparty does levy duty: CEPA, with the Mainland.
CEPA
The Closer Economic Partnership Arrangement was signed on 29 June 2003 and took effect on 1 January 2004 — the first free-trade agreement either the Mainland or Hong Kong had ever concluded. It is not a single instrument but a family, built up over twenty years.
| Component | Signed | In force |
|---|---|---|
| Main text and annexes | 29 June 2003 | 1 January 2004 |
| Supplements I to X | 2004–2013, annually | successively |
| Basic liberalisation of trade in services in Guangdong | 8 December 2014 | 1 March 2015 |
| Agreement on Trade in Services | 27 November 2015 | 1 June 2016 |
| Investment Agreement | 28 June 2017 | 1 January 2018 |
| Economic and Technical Cooperation Agreement | 28 June 2017 | on signature |
| Agreement on Trade in Goods | 14 December 2018 | 1 January 2019 |
| First amendment to the services agreement | 21 November 2019 | 1 June 2020 |
| Second amendment to the services agreement | 9 October 2024 | 1 March 2025 |
Until March 2025 a Hong Kong service supplier had to demonstrate three years of substantive business operations in Hong Kong before it could claim CEPA treatment on the Mainland. The second amendment removed that requirement across most sectors with effect from 1 March 2025.
For a European group this is a real acceleration of the standard structure. A newly incorporated Hong Kong subsidiary can now be put to work on the Mainland without waiting out a qualifying period — which used to be the argument for buying a shelf company with history, a practice that carried its own problems.
The same amendment also permits Hong Kong-invested enterprises on the Mainland to choose Hong Kong law and Hong Kong-seated arbitration in their contracts. To a European parent that usually matters more than any tariff line.
| CEPA in practice | What applies |
|---|---|
| Goods | Since 1 January 2006, all goods of Hong Kong origin meeting the CEPA rules of origin enter the Mainland free of duty. The exceptions are goods prohibited under Mainland law, goods prohibited under treaties the Mainland implements, and products covered by its special commitments elsewhere. |
| Services | The Mainland has fully or partly opened 153 of the 160 WTO services sub-sectors — 96 % — the widest opening it has granted any economy. |
| Origin | Wholly obtained in Hong Kong; or made exclusively from originating materials; or meeting the product-specific rule, or a value-content test of 30 % build-up or 40 % build-down. |
| Certification | A Certificate of Hong Kong Origin (CEPA), issued by the Trade and Industry Department or one of five approved certification bodies. Manufacturers must hold factory registration first. There is no self-certification — unlike the newer agreements, this remains a certification-body regime. |
| What it has been worth | Cumulative duty saved on Hong Kong-origin goods entering the Mainland had passed RMB 10.2 billion by the end of 2024; close to two thousand companies hold Hong Kong service-supplier status. |
| Clearance in the Greater Bay Area | The single e-lock scheme covers more than a thousand routes across 56 crossing points, with mutual recognition of authorised economic operators. Guangdong Customs added twenty further measures in May 2026, including a single filing serving both declarations. |
Hong Kong’s own agreements
Hong Kong is a member of the World Trade Organization in its own right and negotiates its own treaties as a separate customs territory. Nine agreements have been signed, and all nine are now in force.
| Partner | Signed | In force | Note |
|---|---|---|---|
| Mainland China | 29 Jun 2003 | 1 Jan 2004 | CEPA, above |
| New Zealand | 29 Mar 2010 | 1 Jan 2011 | Closer economic partnership |
| EFTA | 21 Jun 2011 | 1 Oct 2012 | Iceland, Liechtenstein, Switzerland; Norway from 1 Nov 2012 |
| Chile | 7 Sep 2012 | 9 Oct 2014 | |
| Macao | 27 Oct 2017 | 27 Oct 2017 | Liberalisation measures from 1 Jan 2018 |
| Georgia | 28 Jun 2018 | 13 Feb 2019 | |
| ASEAN | 12 Nov 2017 | from 11 Jun 2019 | Fully in force 12 Feb 2021, with a separate investment agreement |
| Australia | 26 Mar 2019 | 17 Jan 2020 | Investment agreement of the same date |
| Peru | 15 Nov 2024 | 1 Sep 2026 | The newest of the nine |
Hong Kong applied to join RCEP immediately after it entered into force on 1 January 2022. It has the Central People’s Government’s support and, on the Government’s own account, unanimous backing from the ASEAN members. The RCEP Joint Committee adopted accession procedures in September 2024 — which is the machinery, not the decision.
As at the date of this note Hong Kong is not a member, and the Government has declined to publish a work plan or a target date. Any structure whose economics depend on Hong Kong being inside RCEP is depending on something that has not happened and has no announced timetable.
Investment protection, and the treaty network
Twenty-four investment promotion and protection agreements are in force. Ten cover European countries — Austria, the Belgium–Luxembourg Economic Union, Denmark, Finland, France, Germany, Italy, the Netherlands, Sweden and Switzerland — plus the United Kingdom, and Türkiye since 4 February 2026. Bahrain entered into force in March 2025.
Spain, Portugal, Ireland and Poland have no investment agreement with Hong Kong, and neither do most other European Union members outside the ten listed. Protection follows the jurisdiction of the investor, not the location of the investment: two European groups with identical Hong Kong subsidiaries can have entirely different recourse. It is a five-minute check that occasionally changes where the holding company goes.
On tax, close to sixty comprehensive double taxation agreements have been signed, of which the majority are in force. Norway signed in December 2025; the Türkiye treaty entered into force in January 2026. Several signed in 2025 and 2026 — Kyrgyzstan, Barbados, Cyprus, Nigeria, Rwanda, Jordan, the Maldives — are still awaiting entry into force. Check the status of the specific treaty rather than the headline count: signature and force are years apart in this network.
The substance question, which is where the risk has moved
The commercial case for a Hong Kong entity in a Mainland structure has not changed. What has changed is the standard of proof.
| Where | What is now tested |
|---|---|
| At the Mainland end withholding tax on dividends | The reduced 5 % rate on dividends paid to a Hong Kong parent, instead of the standard 10 %, depends on a beneficial-owner test. The authorities look past the paperwork to conduct: board decision-making, staff and their qualifications, premises, operating expenditure, and whether the Hong Kong entity carries real functions and risks. A company obliged to pass most of its income onward within twelve months, with a single passive director and no staff, is the textbook adverse case — and enforcement in this area has tightened rather than eased. |
| At the Hong Kong end foreign-sourced income exemption | Hong Kong’s own regime imposes an economic substance test on multinational groups claiming the territorial exemption on foreign dividends, interest, intellectual-property income and, since 1 January 2024, disposal gains. A pure equity-holding entity faces a lighter test — adequate human resources and premises; other entities need qualified staff and operating expenditure commensurate with the income and the risk. Outsourcing within the group is permitted, provided it is real and monitored. |
| Under CEPA | Here the movement is the other way: the three-year operating requirement for service suppliers was removed in March 2025. Access to CEPA has become easier at precisely the moment that tax substance became harder. The two should not be confused — qualifying for CEPA does not qualify the entity as a beneficial owner. |
What we check on a file
We separate the three benefits before anything else, because they answer to different tests: duty-free entry into the Mainland turns on the CEPA origin rules and the factory registration behind them; services access turns on Hong Kong service-supplier status, now obtainable without waiting three years; and treaty relief on dividends turns on beneficial ownership, which no certificate confers. We check which investment treaty covers the parent’s own jurisdiction, since a third of the European Union is not covered. We read the specific tax treaty’s status rather than the network’s size. And we plan the Hong Kong entity’s substance at the outset — board, staff, premises, expenditure — because it is far cheaper to build than to reconstruct when an assessment arrives.