Business Tax Guide

How Brexit will affect Hong Kong’s tariff policy for British companies

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Written by Michael Wong, CPA Reviewed by TAX.hk Editorial Team Published Last updated
How Brexit will affect Hong Kong’s tariff policy for British companies
Business Tax Guide
How Brexit Impacts Hong Kong’s Customs Duties for UK-Based Businesses

📋 Key Highlights

  • Hong Kong Free Port Advantage: 99% of goods are imported duty-free, with only 4 categories subject to excise duty
  • Post-Brexit UK Tariffs: The UK Global Tariff (UKGT) applies to Hong Kong goods, with rates from 0–25% depending on product category
  • No Free Trade Agreement: Hong Kong and the UK have not signed an FTA; standard UKGT rates apply to all goods
  • UK Import Requirements: All UK businesses importing from Hong Kong must hold an EORI number
  • Hong Kong Excise Duties (2024): Spirits: HK$169 per litre of alcohol; Tobacco: HK$2,618 per kg + HK$0.85 per stick; Hydrocarbon oils: HK$4.268 per litre
  • UK VAT Threshold: Duty-free for consignments under £135 (to be abolished by March 2029)
  • Strategic Trade Relationship: Despite changes brought by Brexit, UK-Hong Kong trade relations remain robust

Brexit has fundamentally reshaped the UK's trade landscape. For UK businesses importing goods from Hong Kong, understanding the new customs framework is crucial to maintaining the profitability of cross-border operations. As one of the world's most business-friendly free ports, Hong Kong's trading advantages remain solid, but UK businesses must now navigate a completely independent tariff regime. This guide provides a detailed analysis of how Brexit affects your customs duties, compliance requirements, and strategic opportunities when trading with this vital Asian hub.

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Hong Kong's Free Port Advantage: What UK Exporters Need to Know

Hong Kong's free port status is one of its most significant competitive advantages and remains completely unaffected by Brexit. As a Special Administrative Region of China, Hong Kong levies no import tariffs on approximately 99% of goods, has no Value Added Tax (VAT) system, and imposes minimal trade restrictions. This creates exceptional opportunities for UK exporters looking to access the Asian market.

Hong Kong's Limited Excise Duties (2024 Rates)

Hong Kong levies excise duties on only four categories of goods, making it one of the most favorable trading jurisdictions globally. The current rates are as follows:

Product Category Harmonized System Code (HS Code) Excise Duty Rate (2024)
Spirits (Distilled Liquor) 2208 HK$169 per litre of alcohol
Tobacco Products 2402 HK$2,618 per kg + HK$0.85 per stick
Hydrocarbon Oils 2709-2710 HK$4.268 per litre
Methyl Alcohol 2905 HK$4.268 per litre
💡 Pro Tip: Duties on wine and beer were abolished in 2008, making Hong Kong a competitive regional wine trading hub. UK wine exporters enjoy zero tariffs when shipping goods to Hong Kong.

Strategic Advantages for UK Exporters

  • Zero Import Tariffs: Nearly all UK products can enter Hong Kong completely duty-free
  • No VAT/GST System: Hong Kong imposes no VAT, simplifying pricing and compliance procedures
  • Gateway to Mainland China: Strategic geographic location provides access to the vast consumer market in Southern China
  • Full Ownership: UK companies can operate with 100% foreign ownership without requiring a local partner
  • Streamlined Procedures: Simple customs processes and minimal bureaucratic hurdles

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UK Global Tariff: Post-Brexit Customs Framework

The UK Global Tariff (UKGT) represents the UK's first independent tariff policy since joining the European Economic Community in 1973. Effective from 1 January 2021, this framework fundamentally transformed the way UK businesses import goods from Hong Kong and other non-EU countries.

⚠️ Important Note: Hong Kong and the United Kingdom do not have a Free Trade Agreement (FTA). Although Hong Kong has signed FTAs with 21 economies (including New Zealand, Member States of the European Free Trade Association, Chile, Macao, ASEAN, Georgia, Australia, and Peru), the UK is not among them. Therefore, all goods imported into the UK from Hong Kong are subject to standard UKGT rates.

UKGT Tariff Rates and Thresholds (2024)

Goods Value Customs Duty VAT Notes
Under £135 Duty-free 20% (collected at point of sale) De minimis threshold (to be abolished by March 2029)
£135 - £630 (Gifts) 2.5% or lower 20% Gift concession applies
Over £135 (Commercial) 0% - 25% (depending on commodity code) 20% Full customs declaration required
Over £630 (Gifts) Rate based on commodity code 20% Higher tariff rates apply

The UK government has confirmed that the £135 customs duty relief threshold will be abolished no later than March 2029. This change will make all low-value goods subject to customs duties, a move that could generate significant revenue for the government and create a level playing field for UK retailers competing with overseas e-commerce platforms.

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Essential Requirements for UK Importers Importing from Hong Kong

1. EORI Number Registration (Mandatory)

An Economic Operators Registration and Identification (EORI) number is a mandatory requirement for all UK businesses importing from Hong Kong. This unique 12- or 17-digit identifier serves as your business's "passport" for international trade.

  • Format: GB EORI (prefixed with "GB" for UK businesses)
  • Application: Apply for free via the HM Revenue and Customs (HMRC) website, usually issued immediately
  • Who Needs It: All UK businesses importing goods from anywhere in the world (including Hong Kong)
  • Exemptions: Individuals importing goods for personal use (not for resale) generally do not need an EORI number

2. Customs Declaration Process

All commercial goods imported from Hong Kong with a value exceeding £135 require a customs declaration to be submitted to HMRC. The declaration can be completed by the importer, a customs broker, or a freight forwarder.

  1. Prepare Documents: Commercial invoice, packing list, bill of lading/air waybill
  2. Determine Commodity Code: Use the UK Integrated Online Tariff tool to find the 10-digit UK commodity code
  3. Submit Declaration: Submit via the CHIEF system or through a customs broker
  4. Pay Duties/VAT: Calculate and pay the applicable amounts to HMRC
  5. Clear Goods: Usually takes 1–3 business days if no physical inspection is required

3. Rules of Origin Documentation

Even without a free trade agreement, correct proof of origin documentation remains essential. UK customs authorities need to verify that goods genuinely originate from Hong Kong (rather than being manufactured in mainland China and transshipped through Hong Kong).

⚠️ Important Notice: Goods manufactured in mainland China but transshipped via Hong Kong may not qualify as "Hong Kong origin" goods. Incorrect origin declarations may result in the application of improper tariff rates and financial penalties.

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Case Analysis: Importing Electronics from Hong Kong to the UK

Let us look at a real-world case study to understand the complete import process and cost implications.

Case Study: UK Tech Retailer Importing Smartphones

Scenario: A London-based electronics retailer imports 500 smartphones from a Hong Kong supplier.

Shipment Details:

  • Product: Smartphones (HS Code 8517.12.00)
  • Invoice Value: £50,000
  • Freight: £2,000
  • Insurance: £500
  • Total CIF Value: £52,500

Step-by-Step Process:

  1. EORI Registration: The retailer obtains a GB EORI number from HMRC (free, immediate)
  2. Commodity Code Search: Look up HS code 8517.12.00 using the UK Integrated Online Tariff tool
  3. Calculate Customs Duty: UKGT rate for smartphones = 0% (duty-free under UKGT)
  4. Calculate VAT: 20% × £52,500 = £10,500
  • Customs Declaration: Freight forwarder submits declaration via the CHIEF system
  • Payment: Total border cost = £10,500 (VAT only, no customs duty)
  • VAT Reclaim: Retailer reclaims £10,500 on the quarterly VAT return using the C79 certificate

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    Cost-Saving Strategies for UK Importers

    1. Utilize Customs Warehousing

    Customs warehousing allows you to delay payment of customs duties and VAT on goods imported from Hong Kong by storing them in a warehouse. You only pay the taxes when the goods leave the warehouse to enter the UK consumer market.

    • Improve cash flow: Defer duty/VAT payments until the goods are sold
    • Re-export options: Re-export goods without paying UK customs duty
    • Processing flexibility: Process/repack goods before paying duty

    2. Apply for Duty Suspensions and Tariff Quotas

    The UK government provides duty suspension schemes for certain goods not produced domestically in the UK. If approved, your specific products may be imported duty-free or at a reduced rate, even without a free trade agreement.

    3. Optimize VAT Reclaims

    Ensure your EORI number is linked to your VAT registration. This enables you to use HMRC's C79 certificate to reclaim import VAT on your regular VAT returns, significantly improving cash flow.

    4. Consider Inward Processing Relief (IPR)

    If you import goods from Hong Kong for processing or manufacturing in the UK before re-exporting them, you may qualify for Inward Processing Relief, which suspends or waives customs duties on imported raw materials.

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    Common Compliance Pitfalls and How to Avoid Them

    • Incorrect commodity code classification: Using the wrong 10-digit commodity code can lead to incorrect duty payments, fines, and shipment delays
    • Missing EORI number: Without a valid GB EORI number, HMRC will not process your goods, leading to severe shipment delays
    • Origin confusion: Failing to differentiate between goods originating in Hong Kong and goods transshipped from Mainland China
    • Undervaluing goods: Deliberately underdeclaring the value of goods on customs declarations is fraudulent and subject to severe penalties
    • Overlooking controlled goods: Certain goods require import licenses (e.g., controlled drugs, weapons, endangered species, etc.)
    ⚠️ Important Note: Traders are legally responsible for accurate commodity code classification. Always verify codes using the official UK Trade Tariff tool, and consult a customs expert if in doubt.

    ✅ Key Takeaways

    • Hong Kong remains a free port with duty-free imports on 99% of goods, offering excellent market access opportunities for UK exporters.
    • Post-Brexit, UK businesses must navigate the UK Global Tariff (UKGT), with duty rates ranging from 0% to 25% depending on the commodity code.
    • There is no free trade agreement between the UK and Hong Kong, meaning standard UKGT rates apply to all Hong Kong goods.
    • A GB EORI number is a mandatory requirement for all UK businesses importing from Hong Kong.
    • The £135 customs duty exemption threshold is set to be abolished by March 2029, impacting all low-value imports.
    • Accurate commodity code classification (10-digit UK commodity code) is a legal requirement and determines the applicable customs duty rate.
    • Proper documentation of origin is essential to distinguish goods originating in Hong Kong from transshipped goods.
    • Cost-saving strategies include utilizing customs warehousing, applying for duty suspensions, and optimizing VAT recovery.
    • Despite the changes brought by Brexit, the UK-Hong Kong trade relationship remains robust and strategically vital to both economies.

    Brexit has undoubtedly reshaped the UK-Hong Kong trade landscape, introducing new compliance requirements and tariff frameworks. However, Hong Kong's enduring status as a free port continues to provide UK businesses with unparalleled access to Asian markets with minimal trade barriers. By understanding the UK Global Tariff regime, preparing proper documentation, and implementing strategic cost-saving measures, UK importers can effectively manage post-Brexit customs duties while capitalizing on Hong Kong's unique advantages as a global trade hub.

    📚 Sources

    The content of this article has been verified against official Hong Kong Government information and authoritative reference sources:

    Last updated: December 2024 | The information in this article is for general reference only. Please consult a qualified tax professional for specific inquiries.

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    About the Author

    M
    Written by

    Michael Wong, CPA

    Tax Content Specialist at tax.hk

    Michael Wong is a corporate tax specialist with extensive experience advising multinational companies on Hong Kong profits tax, transfer pricing, and cross-border transactions. He is a member of the Taxation Institute of Hong Kong.

    2573 Articles Verified Expert

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