Doing Business in Hong Kong for Travel Businesses

Doing Business in Hong Kong for Travel Agents, Tour Operators, and DMCs

A Practical Guide for 2025–2026

Hong Kong remains one of the most misunderstood travel business jurisdictions in Asia. On paper, it often looks easy. No VAT. No capital gains tax. Fast incorporation. Deep banking infrastructure. Proximity to mainland China and the Greater Bay Area. Many Antravia clients speak to us about setting up in Hong Kong. In fact, we are currently in Hong Kong, so thought this would be the perfect time to write this article.

In practice, Hong Kong appears to reward operators who understand regulatory intent, operational substance, and how money actually moves through the system. It penalizes assumptions, shortcuts, and models copied from other markets.

For travel agents, tour operators, and destination management companies, Hong Kong in 2025–2026 offers opportunity, but only if entered with a clear understanding of licensing, tax sourcing, payments, payroll, and cross-border execution. This article therefore sets out how Hong Kong actually works for travel businesses today, with figures, thresholds, and friction included.

Market context: recovery without returning to the old model

Inbound travel to Hong Kong has rebounded strongly since border reopening, driven primarily by mainland China and short-haul regional markets. Mainland visitors continue to account for the majority of arrivals, reflecting the city’s role within the Greater Bay Area and the gradual expansion of Individual Visit Scheme quotas.

Total arrivals remain below the 2018 peak of approximately 65 million visitors, but policy targets and industry forecasts indicate a return toward those levels by 2026 rather than a full structural decline. More importantly, spend patterns have changed. For example, data shows that average length of stay has shortened. Premium FIT, MICE, educational travel, and high-frequency repeat visitors now account for a disproportionate share of value. This matters for travel agents and DMCs because margin is increasingly driven by execution quality rather than volume.

Hong Kong’s tourism policy focus for 2025–2026 reflects this shift. Official planning documents emphasise large-scale MICE events, Greater Bay Area integration, halal tourism certification, and themed study tours rather than mass shopping tours alone.

Incorporation is fast. Permission to trade is not necessarily.

Hong Kong company incorporation remains straightforward. There is no minimum share capital requirement. Foreign ownership is unrestricted. Directors and shareholders do not need to be Hong Kong residents, so a private limited company can typically be incorporated within days through the Companies Registry, with a Business Registration Certificate issued concurrently.

This simplicity often creates a false sense of progress.

In the travel sector, incorporation has almost no bearing on whether a business is allowed to operate. The real gatekeepers are licensing, banking acceptance, and operational substance.

Branch offices are sometimes used by overseas groups testing the market, but they attract closer scrutiny around profit sourcing and transfer pricing. Representative offices cannot generate revenue and are unsuitable for travel agents, tour operators, or DMCs beyond market research. In practice, serious operators use a Hong Kong private limited company and focus their effort on regulatory approval rather than corporate mechanics.

Travel Industry Authority licensing is unavoidable

Anyone carrying on travel agent business in Hong Kong must hold a licence issued by the Travel Industry Authority under the Travel Industry Ordinance (Cap. 634). This requirement applies to inbound, outbound, and combined models and covers selling, arranging, advertising, or holding oneself out as providing travel services. DMCs are not exempt. Inbound ground handling, itinerary arrangement, and destination services fall squarely within the scope of regulated activity.

The licensing framework is principles-based rather than checklist-driven. There is no single statutory figure that guarantees approval. Instead, the TIA assesses all of these together:

• financial standing
• operational readiness
• governance and controls
• staffing and experience
• premises suitability

Financial standing may be demonstrated through paid-up capital, net assets, or bank guarantees. In practice, guarantees commonly range from HK$100,000 to HK$500,000 depending on turnover, client money exposure, and business model. Paid-up capital expectations for travel businesses frequently sit around HK$500,000, but this is not a fixed legal requirement.

Key personnel must be assessed as fit and proper. This usually means at least two years of relevant industry experience, genuine availability to manage operations, and a clear employment or visa position. Nominal appointments are increasingly challenged.

Premises must be suitable for handling client matters. There is no published minimum square footage, but purely virtual offices are frequently rejected. The expectation is exclusive use, secure access, and genuine operational capability.

Licensing timelines have improved following digital submission and verification, but approval still depends on how realistic and complete the application is. The fastest approvals tend to come from applicants who understand regulatory intent rather than attempting to minimise footprint artificially.

TIA licensing in practice: where applications actually fail

In Hong Kong, most problems arise not from misunderstanding the Travel Industry Ordinance (Cap. 634) itself, but from underestimating how the Travel Industry Authority (TIA) applies it in practice. The definition of “carrying on travel agent business” is deliberately broad and captures inbound operators and DMCs arranging transport, accommodation, or itineraries in Hong Kong, even where clients are entirely overseas.

TIA focuses heavily on financial standing and operational substance, not just paperwork. Applications regularly stall over insufficient net assets, poorly structured bank guarantees, or premises that exist in name only. While there is no statutory minimum paid-up capital, TIA commonly expects to see financial resources in the region of HK$500,000, supported by a bank guarantee that scales with projected turnover. Virtual offices and shared premises are increasingly questioned, particularly where client funds are involved.

Taxation: low rates, high scrutiny

Hong Kong operates a territorial tax system. There is no VAT, no sales tax, no capital gains tax, and no withholding tax on dividends. Only profits sourced in Hong Kong are subject to profits tax.

For travel agents, tour operators, and DMCs, this is where theory often diverges from reality.

Commissions and margins from tours arranged, sold, or executed in Hong Kong are taxable. Income from genuinely offshore activities may fall outside the tax net, but offshore claims are closely reviewed in the travel sector.

The Inland Revenue Department looks at:

• where contracts are concluded
• where pricing decisions are made
• where staff perform booking and operational functions
• where suppliers are managed
• where risk sits

So siimply routing bookings through offshore entities or payment platforms does not secure offshore treatment if substance remains in Hong Kong.

Recent changes to the foreign-sourced income exemption regime have reinforced this position. Economic substance now plays a central role. Staff, systems, and decision-making authority increasingly determine tax outcomes rather than contractual form alone.

The two-tier profits tax system continues to apply, with a reduced rate on the first HK$2 million of assessable profits and the standard rate thereafter. Annual concessions for small businesses remain modest but helpful.

What Hong Kong does not tolerate is informality. Returns must be filed on time. Positions must be defensible. Documentation matters. For cross-border travel businesses, tax outcomes are decided by operational reality rather than theoretical structure.

Profits tax sourcing: IRD looks at people, not contracts

So, to summarize, Hong Kong’s territorial tax system is widely misunderstood by travel businesses. While the Inland Revenue Department accepts that only Hong Kong-sourced profits are taxable, sourcing is determined by what actually happens, not where contracts are signed or payments are received.

For travel agents and DMCs, IRD looks closely at where booking decisions are made, where supplier negotiations occur, and where staff perform itinerary design and operational control. Businesses that claim offshore treatment while employing Hong Kong-based operations staff often find those positions challenged. Departmental Interpretation and Practice Notes (DIPNs) make it clear that fragmented booking flows and offshore contracting structures do not override operational reality.

This is particularly relevant for Greater Bay Area models, where Hong Kong entities coordinate mainland suppliers. In practice, many inbound operators overestimate how much income can be treated as offshore once Hong Kong-based staff are materially involved.

Banking and payments: operational friction still matters

Hong Kong remains one of Asia’s strongest banking centres, but corporate account opening is no longer automatic, particularly for foreign-owned travel businesses handling client prepayments.

Most operators open multi-currency accounts with international banks such as HSBC or Standard Chartered. While there is no statutory minimum balance requirement, banks apply relationship thresholds in practice. For travel businesses, maintaining HK$50,000 to HK$200,000 in balances is common, even if not explicitly stated.

Account opening timelines have improved compared to the immediate post-pandemic period, but due diligence remains detailed. Clear business models, identifiable counterparties, realistic transaction volumes, and transparent ownership materially affect outcomes.

Some travel businesses accept international bookings using cross-border payment platforms without a Hong Kong entity. These solutions can be useful for early-stage testing or limited offshore activity, but they do not remove licensing or tax exposure if services are actively marketed or delivered in Hong Kong.

Customer payment expectations have changed decisively. Mainland and regional visitors increasingly expect mobile and instant payment options. AlipayHK, WeChat Pay HK, UnionPay QR, and Faster Payment System transfers are now standard expectations rather than enhancements.

Government-backed initiatives are accelerating electronic payment adoption across transport and tourism services, including taxis. By 2026, cash-only operations are likely to feel operationally outdated, even if not formally prohibited.

For operators, the challenge is not access to payment rails. It is managing settlement timing, refunds, chargebacks, stored value exposure, and reconciliation in a way that remains compliant and commercially viable.

Client money and refunds: not regulated like the UK, but still scrutinised

Unlike, for example, the UK, Hong Kong does not impose statutory client trust account rules for travel agents. This often leads overseas operators to assume client money handling is lightly regulated. In practice, both TIA and banks focus heavily on refund capability and client money exposure.

Banks frequently ask how advance payments are treated if a supplier fails or a tour is cancelled. Where a business presents itself as agent but processes payments through its own merchant account, that inconsistency can create issues at onboarding or during account reviews. TIA also considers whether a business has sufficient liquidity to refund clients without delay, particularly during licensing and renewal.

The absence of formal trust requirements does not reduce risk. It shifts it onto operational discipline and financial resilience.

Employment and payroll: where errors can become expensive

Hong Kong’s tourism workforce is experienced and multilingual, but employment compliance is strictly enforced.

The statutory minimum wage increased to HK$40 per hour in 2025. The Employment Ordinance governs leave entitlements, termination, severance, and benefits, and non-compliance is routinely penalised.

Mandatory Provident Fund obligations apply to most employees aged 18 to 64 who are employed for more than 60 days. Contributions are capped at HK$1,500 per month (see below for more info) per side based on maximum relevant income of HK$30,000, but administration still requires care.

The government-led eMPF platform is being rolled out in phases through 2025 and 2026, gradually centralising MPF administration and reducing tolerance for manual errors.

Cross-border employment is where overseas operators most often misstep.

Guides or escorts based in Shenzhen or elsewhere in the Greater Bay Area may trigger Hong Kong MPF obligations, PRC social insurance obligations, or both, depending on contract structure, payroll location, and where services are deemed to be performed. There is no single exemption that removes this risk. Each arrangement must be assessed on its facts.

Recent changes also mean that MPF offsets against severance payments are no longer permitted. This materially increases termination costs and makes casual hiring decisions more expensive over time.

Some agencies use employer-of-record arrangements to manage peak demand or avoid immediate entity expansion. These arrangements can provide flexibility, but they shift compliance risk rather than eliminate it, and costs vary significantly depending on role, duration, and provider.

Employment and MPF

Hong Kong’s employment framework is often described as flexible, but MPF compliance leaves little room for error. Mandatory Provident Fund obligations apply to most employees aged 18 to 64 after 60 days, with 5 percent employer and 5 percent employee contributions capped at HK$1,500 per month each.

Problems arise most often with cross-border arrangements. Guides or coordinators based in Shenzhen or elsewhere in the Greater Bay Area can still trigger MPF obligations if employed by the Hong Kong entity or paid through Hong Kong payroll. Short-term secondments and contractor labels do not automatically remove exposure.

The abolition of the MPF offset against severance payments has materially increased termination costs. For tour operators with seasonal staffing models, this has changed the economics of hiring more than many anticipated.

Commercial reality in 2026: opportunity with pressure attached

Hong Kong’s tourism strategy is focused on value rather than volume. Greater Bay Area integration, MICE, educational travel, halal tourism, and premium short-haul segments dominate official planning.

For travel agents, tour operators, and DMCs, this creates opportunity alongside pressure.

Online platforms dominate volume. Commission compression remains real. Regulatory scrutiny has increased across licensing, payments, and partner relationships. Legacy shopping-tour economics continue to face structural headwinds.

Operators that perform best tend to specialize. Things like, niche itineraries, corporate groups, premium FIT travel, and complex cross-border execution reward operational discipline rather than scale alone.

Hong Kong remains commercially viable for travel businesses that understand why they are there and structure accordingly. It is less forgiving for those treating it as a low-effort regional outpost.

Antravia closing perspective

Hong Kong in 2025–2026 is a mature, regulated hub that rewards preparation and penalizes assumptions. For travel agents, tour operators, and DMCs, the critical question is whether the business model, compliance posture, and margin expectations align with how Hong Kong actually operates.

References

Regulation and Licensing

Hong Kong Government, Department of Justice.
“Travel Industry Ordinance (Cap. 634)”
https://www.elegislation.gov.hk/hk/cap634

Travel Industry Authority (TIA), Hong Kong.
“Licensing Requirements for Travel Agents”
https://www.tia.org.hk/en/licensing-and-regulation/travel-agent-licensing.html

Taxation and Public Finance

Inland Revenue Department, Hong Kong SAR Government.
“Profits Tax – Territorial Source Principle”
https://www.ird.gov.hk/eng/tax/bus_pft.htm

PwC Hong Kong.
“Hong Kong Tax Facts and Figures 2025–26”
https://www.pwchk.com/en/tax/hong-kong-budget-2025-2026/tax-facts-and-figures-en.pdf

KPMG Hong Kong.
“Hong Kong Budget 2025–26: Key Tax and Business Measures”
https://kpmg.com/cn/en/home/insights/2025/02/hong-kong-budget-2025-26.html

OECD.
“Global Anti-Base Erosion (GloBE) Model Rules (Pillar Two)”
https://www.oecd.org/tax/beps/global-anti-base-erosion-model-rules-pillar-two.htm

China Briefing (Dezan Shira & Associates).
“OECD Pillar Two and Hong Kong: Practical Implications”
https://www.china-briefing.com/doing-business-guide/hong-kong/taxation-and-accounting/global-minimum-tax-hong-kong

Banking, Payments, and Financial Infrastructure

Hong Kong Monetary Authority (HKMA).
“Faster Payment System (FPS)”
https://www.hkma.gov.hk/eng/key-functions/international-financial-centre/faster-payment-system/

Hong Kong Monetary Authority (HKMA).
“Oversight of Stored Value Facilities and Retail Payment Systems”
https://www.hkma.gov.hk/eng/key-functions/financial-infrastructure/oversight-of-payment-systems/

Hong Kong Monetary Authority (HKMA).
“Retail Payment Strategy and Smart City Payments”
https://www.hkma.gov.hk/eng/key-functions/international-financial-centre/retail-payments/

Employment, Payroll, and MPF

Mandatory Provident Fund Schemes Authority (MPFA).
“MPF System Overview and Employer Obligations”
https://www.mpfa.org.hk/en/mpf-system/employers

Mandatory Provident Fund Schemes Authority (MPFA).
“eMPF Platform Official Information”
https://www.empf.org.hk/

Labour Department, Hong Kong SAR Government.
“Employment Ordinance (Cap. 57)”
https://www.labour.gov.hk/eng/legislat/content2.htm

Labour Department, Hong Kong SAR Government.
“Statutory Minimum Wage”
https://www.labour.gov.hk/eng/faq/smw.htm

Tourism Strategy and Market Data

Hong Kong Tourism Board (HKTB).
“Tourism Development Blueprint and Work Plan 2025–26”
https://www.tourism.gov.hk/english/tourism_blueprint/

Hong Kong Legislative Council.
“Economic Development Panel Papers on Tourism Strategy 2025–26”
https://www.legco.gov.hk/english/panels/edev/papers/edev.htm

Euromonitor International.
“Tourism Flows in Hong Kong, China”
https://www.euromonitor.com/tourism-flows-in-hong-kong-china/report

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Profit from Asia in 2025: A guide for Travel Agents

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Content published by Antravia is provided for informational purposes only and reflects research, industry analysis, and our professional perspective. It does not constitute legal, tax, or accounting advice. Regulations vary by jurisdiction, and individual circumstances differ. Readers should seek advice from a qualified professional before making decisions that could affect their business.
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