General Tax Benefits for a Hong Kong company
This article is originally found here: https://www.globalfromasia.com/hkcompanytaxbenefits/
While I have been talking tons about all the business benefits of doing business in Hong Kong for your Asia business. Again and again people want to know about taxes!
Yes, corporate taxes – such a fun and juicy topic to discuss.
Today, grab a strong cup of coffee and let’s dig into some of the tax benefits of using a Hong Kong business. This post today will be a general overview for all kinds of business owners, from Americans to Nigerians, and Amazon Sellers to Language Coaches.
Don’t Worry, You Can Still Sell on Amazon USA Markets
Some of you may worry, if I move my company to Hong Kong from USA, Europe, or Australia, can I still tap into the gigantic American consumer market?
No problem! Using Amazon with the Payoneer option, you can have your sales proceeds sent direct to your Hong Kong bank account! When you configure your Amazon Seller Central, make sure that you put down Hong Kong and opt in for the Payoneer payout option.
Boom, now you’re all set with this, move on to the next step.
Corporate Tax is 16.5% Flat, To Start
So right off the bat the corporate tax is lower than most first world countries around the world. We’re talking 16.5% taxes.
This is for companies who have customers in Hong Kong, an office here in HK, or leveraging other services here such as a warehouse or doing business deals.
If you’re not doing any of that, then you can file for the offshore elect.
Can File for 0% Offshore Elect
So we’ve talked about this offshore in the past. If you want to build up your case to the IRD (Hong Kong’s tax department is the Internal Revenue Department) you can prove to them you’re doing business completely offshore and get out of the already low 16.5% tax rate.
This will be a longer process though, and be ready to get scrutinized by the tax department at least a little bit. If you want to read about the details, we have a full guide here and if you just want to skip and pay us to handle your offshore filing, our sales offer is here.
Still Operate in USD
You can still operate in USD. If you’re main market is USA or most clients are paying you in US dollars, you can still keep the proceeds and inward remittances in dollars without needing to convert.
You can operate in USD if you like. You may have some fees in local Hong Kong dollars, and if you get a Hong Kong credit card most likely that you will pay in HKD.
Heck, you can operate in Euros if you like. And when working with us, we can accommodate the currency of your preference too!
For Americans, You Can Defer Your Personal Taxes
Americans, yes, we’re a special breed. There are 2 main types of Americans as far as taxes goes – those who live in USA most of the time, and those who are living abroad most of the time. I’m not a USA tax expert but as an American, I know you need to be “living outside of USA”. This is outside of the border 330 days out of the 365 days. Or I can be a resident elsewhere. I’m currently a resident in Mainland China, but I’m also outside of the USA more than 330 days in a year too.
If you qualify for that, then you don’t need to pay taxes on your salary for about 100,000 USD.
But that still is for a USA company or a company “offshore” from USA, such as Hong Kong.
So what’s the reasoning behind HK then? Well, having money in a foreign corporation, a US person could defer paying the taxes until they take the profits out. So if you draw the salary or the dividends out, you’ll pay your personal taxes (unless you have the exemptions for being outside of USA for the 330 days a year). You can also live off your personal savings and not draw any money from the business. You can re-invest that cash back into buying inventory from Chinese suppliers so you can grow your Amazon business, for example.
Then later, when you are ready, you can cash out of the business and take out a ton of profits. This will be when you need to deal with the taxes on it. Make sense? But please, speak to an established American tax attorney and don’t take my free guide post here as professional tax advice on your specific situation, it’s a complex one!
Use Hong Kong and Travel The World
Another one for me at least, is the HK banks don’t think its weird that I am logging in from another country. They don’t think its weird that I have money coming to my bank account from Finland. Because it’s such a small territory, they know almost all the business owners need to do business with other countries.
Contrast that with larger countries, and the banks may think it is weird that you are doing business with other countries. Or traveling. They may flag your credit card or ATM card. But in Hong Kong, they know you’ll be traveling around and buying and selling in all kinds of currencies.
A place that is open to international business and doesn’t flag you as strange for doing business around the world. Wow, beautiful if you ask me!
Legitimate Reason To Set Up in Hong Kong
You may wonder if there are other places in the world to set up shop – sure! All countries have different pros and cons for setting up there.
Doing business with China? For example buying from factories for your Amazon business or other e-commerce related activities? Then it is 100% legitimate to explain to the “world” that you need a Hong Kong company. But if you’re setting up a BVI or other offshore island company, it’s pretty clear there is 1 reason, and 1 reason only you are going there – that is tax evasion.
I’m not sure who is proud putting “I avoid paying taxes and use a BVI company” on the contact page or about us page of their corporate websites. Most of these people are hiding in the shadows afraid to tell anyone their business exists.
You can be proud to say you have a legitimate business in Hong Kong, and at the same time enjoy great tax savings!
Leverage the Power of Hong Kong, Taxes + Global
Sure, today we talked about the tax benefits. It’s my least favorite reason to tell someone to establish their business in Hong Kong or anywhere. Those reasons may change, maybe another country will be better one day. Or laws may change.
I like to say Hong Kong is a great place because its international. So close to Mainland China, yet a great legal system and English language in all the government agencies. And they will be with you for all your international business needs.
But ya, they’re already great for taxes, and maybe that is all you care about!
I’d love to work with you on your Hong Kong company setup. Already have a HK company? You can also transfer over your company upkeep with us – please consider talking to us and we’d love to see if we can cooperate!