Review:HIBC – Laws and Policies of Foreign Investment in China

HIBC – Laws and Policies of Foreign Investment in China

As China’s economy continues to grow, more and more people are looking towards this industrious country to take advantage of its investment prospects.

Entrepreneurs and investors alike are crowding to park their wealth here and get in on the high growth opportunity. Hosting this event seemed to us like the perfect opportunity to help interested parties learn more about how to make this desire a reality.

Thank you to all the business professionals and aspiring entrepreneurs who took advantage of the valuable information provided by Anita Wang and her team of highly skilled legal consultants. Much was learned from the hour long presentation on legal policies foreigners must recognize prior to business set up in China, business cards were exchanged while new alliances were created during the networking session, and those questions that have been keeping you up at night were finally answered during the Q&A segment. Some key takeaways from this event include; best practices for setting up WFOE, labor laws and tax considerations.

Our guest speaker, legal expert Anita Wang, is a Senior Partner Lawyer at P.C. Woo and Zhonglun W.D. LLP. She graduated with a Masters in Law and is a Certified Tax Agent practicing in Guang Dong Province. The insights she provided during this event were extremely relevant to anyone serious about setting up business in China. The following points are just a summary of the information received during the event. If you have any questions about how this information relates to your business; more detailed information can be received by reaching out to our supportive team here at HIBC. Our door is always open!

What type of business entity is usually best for foreign investment? Well… a WFOE of course! With the right guidance, WFOE setup can be easy as there is currently no capital requirement for setting up this type of business, except in  some special fields like banking or insurance industries relating with finance.  We suggest having a minimum of 100 – 150 thousand RMB available for your business endeavor to give yourself adequate room to operate, but you do not need to have these funds in your Chinese business bank account all at once. One common misunderstanding of the WFOE is that a Chinese partner is required for incorporation, which is untrue as a WFOE can be set up without a Chinese national. But maybe you do have a Chinese friend you know would make an excellent business partner… Great! The other common type of business structure that many foreigners also undertake and with a Chinese person is a Joint-Venture. Now that you have your business structure set up, it’s time to think about hiring the right people for the job.

Another major area touched on by Anita was labor law, where she raised some interesting points one must acknowledge. A commonly overlooked requirement of a Chinese labor agreement is that an employer must provide social security insurance for all employees. Anita noted that if you want to end a labor arrangement, you are responsible for paying the employee a severance of [n+1 (n= years)]. For example, if an employee works for the company for 3 years, to legally terminate the employment contract, you must pay the employee a severance of 4 months wages (3+1). Anyways, the severance is up to 13 months wages (12+1).   So now you have your business structure in place AND you have a team behind you BUT are you operating within policies set in place by the government?

The final key point Anita discussed with the group was tax considerations. As she points out, the majority of businesses are taxed at an Enterprise Income Tax rate of 25%, unless operating as a Micro business enterprise or certifited Hi-tech enterprise. Other major taxes to consider are the Value Added tax and the Withholding tax. Failure to comply with appropriate tax obligations can result in some severe punishments, such as lifelong imprisonment and enormous fines. HIBC can help set up and operate your business legally to ensure proper tax obligations are met so that you can focus on what you do best, expanding your business and brand.

The Q&A session was particularly constructive as attendees raised their concerns with Anita and Cassie (Founder of HIBC). The duo took turns filling the audience in on their areas of expertise, and often the whole group converged on a topic together. These are some of the questions that were answered during this productive session.

Digant Lakhani (Manager at Kiran Gems) asked:  “When can we inform employees if we want let them go before their contract ends?”HIBC: The employee can be fired anytime during probation, if they breach the rules of the contract such as: they are found to be doing another job that seriously impacts their formal work as a consequence or they commit a crime. Due diligence must be performed to make sure the employee cannot perform the job as specified. 
Pavel Drbalek  (Purchase Manager at Evrazio Center) asked: “Is it okay to register a WFOE with a virtual office?”HIBC: If the virtual office space can provide a leasing certificate (known as Red Book), as proof that business is operating within governmental jurisdiction. At HIBC, we provide the leasing certificate to purchasers of our virtual office space, giving your business a legitimate registered address from which to operate from. 
Mathew (Founder at Pandora Parties) asked: “Can my business be registered in Qian Hai Free Trade Zone but my office location be in another area?”HIBC: Yes, this is legal for companies registered in the Qian Hai Free Trade Zone as registration in this particular area provides special allowances. Setting up business in districts such as Luohu or Futian is perfectly legal despite the business being registered in Qian Hai.
Pax (Office Manager at BM1 Trading) asked: “Why do you need a Fapiao?”HIBC: A Fapiao is proof that a transaction took place and the tax has been paid. Unlike a regular receipt that anyone can write up, a fapiao contains the official seal of the government and registers that transaction within the tax system.
Yogev (Vice-general manager at Yuan Quan Hui) : “Why have I been advised that I should first register my company in Hong Kong and then use that company as the investor company to open a WFOE in China?”HIBC: Setting up a company in Hong Kong provides many benefits which include ease of startup, proximity to mainland China, a business-friendly tax system and the ability to easily receive payments from overseas. HIBC provides business setup services for both Hong Kong and mainland China. 

Remember that laws and policies in China are constantly changing, so be sure to stay up to date when new information is available or hire qualified professionals that will keep your business in compliance so that you can focus on what you do best. At HIBC, we strive to provide our customers with a work space tailored to fit their needs and provide the best possible resources to promote and grow their business. We are happy to provide our members with exclusive events that integrate with global business trends and client interests. We hope to see more of you entrepreneurs with exceptional motivation to succeed at one of our upcoming events. Stay posted for information regarding our upcoming events by following our official WeChat account.

At HIBC, we aim to create an inclusive ecosystem that acts as a catalyst for your business. With people from diverse backgrounds and sectors all under one roof, special ideas turn into special projects. We are proud to host unique events for our members that dive deep into the latest social, cultural, technological, and business developments. That way, our community constantly stays informed and at the front of the pack as well as becoming connected with new friends and partners that attendWe hold your start-up’s hand every step of the way and supply all the tools necessary for it to grow; from company set up,  tax accounting, IP rights and strategic partnerships.

    What we do:

– Co-working space/ Serviced Office/ Co-living space

– Relocation service

-Company Registration ( WOFE & HK company)

-Accounting and Tax

-HR Service

-Law Advice

Please scan the QR code to contact us!

Contact:

Tel/联系方式:+86-755-23823860

Email/邮箱:info@hibcsz.com

Web/网址:www.hibcsz.com

Weibo/ 微博:弘夏国际HIBC

Add/地址:

Room 3807~3809/1601, Block A, Xintian CBC building, Fumin Road, Futian,

深圳市福田区福民路新天世纪商务中心A座38楼3807~3809/1601

HIBC promotion 

Prmotion 1

Co-working Space Buy 1 Get 1 Free

HIBC Co-working Space

Limited Time Special Offer

Buy One Get One for Free!

1500rmb/desk/month

√ Pay for 1 desk get another desk for free.

√ Pay for 1 month get 1 month for free.

(you can enjoy one of the promotions above.)

 Promotion 2

Private office for 3 desks

¥4,800

Now is only ¥3,680/month  ALL FEES INCLUDED

( can provide Rental Certificate)

Prmotion 3 

20% OFF Address for registration &WOFE registration

 (All fees included + Rental Certificate)

Come here, you can make friends with people from different industries all over the world. We will hold an international business event regularly to make you work and networking together.

√ Futian CBD location, 1 min to 2metro lines, close to coco park

√ Large window, bright light, amazing view

√ Brand new western decoration,fully furnished

√ Free coffee, tea, High-speed Wifi support

√ 24/7 access

√ Flexible lease term, all fees included

√ One-stop expat business services: registration, administration, finance and tax, translation services.

Difference Between an Accountant and a Bookkeeper

 

This article is originally found here: https://www.globalfromasia.com/accountingandbookkeeping/

All too often we can’t wait to get our Hong Kong limited open.

You’ve been enjoying the Global From Asia podcast and blogs here on the site. Now you are looking into what are the ongoing costs.

We had a popular post for the Upkeep for HK company, today we are going to focus specifically on:

What is the difference between an accountant and an auditor?

Drink so coffee (or tea) and don’t sleep on me here. Yes, this stuff can get dry – but the more we understand it, the better business owners we can be!

Accountant Definition

What is an accountant?

Think there are 2 cases.

Case one is the accountant as a bookkeeper. He or she will receive all your financial statements, either by paper or online access. They will setup your books and chart of accountants. You will then watch in awe as they classify your transactions in different income and expense accounts.

Bookkeeping should be upkept throughout the year. Ideally real time. Of course there are many of us with not tons of activity on a daily basis and we can’t afford to have a full time accountant. So I recommend weekly.

It’s not just for the work, but also for you as a business owner. To look at the numbers, the reports, the summary and see your business as a dashboard.

So this type of accountant is a bookkeeper.

The second option is the accountant as a tax form filing specialist. They specialize in a certain geography / government. Let’s say for here its Hong Kong. They know what all the different tax forms are, how to fill them out. Also, if they have experience, they will be able to tell you how to best keep the forms filled out. How to optimize your tax strategy.

This type of accountant is I believe what most of us think of when we hear a tax accountant. Having a good grasp of that government’s tax law and advising clients how to file for their personal and/or businesses.

Auditor Definition

Auditor, for many Americans (myself included) will cringe. We all hear about an IRS tax audit. The mental picture I get is a group of government officials in suits pounding on your office door to do a sudden check on your books. The business owner rushing to shred all the documents before they break the door down.

Do you get such a dramatic mental picture as that?

Well, that isn’t what we’re doing here – at least in the Global From Asia – Hong Kong tax sense. An audit here is one you pay a Hong Kong CPA (certified professional accountant) to check your books.

This auditor is the same as those who are rummaging through your shredded documents but this time you pay them to do it. Or at least you’re required by the Hong Kong Internal Revenue Department (IRD) to do so.

They will not enter your transactions into an accounting system or excel. That you should have done already. What they will do is check over your financial statements such as your profit and loss statement and balance sheet. They’ll see if it makes sense. Such things as your margins, your expense account sizes in comparison to your revenue numbers. Are you hiding something.

They are to snoop around in your financial statements, and your transaction history looking for things that may not add up.

This is their job. And they are using their expertise – AND LICENSE – to do it.

You may ask yourself, why would they dig into it if I’m the one paying them. Wouldn’t they want to keep me as the paying client happy?

You would think so – but the Hong Kong government gives them a license. Their job is on the line. If they don’t do their job and the IRD checks it later and feels the CPA was negligible, they jeopardize their license.

Make sense?

An Accountant Can Also Be An Auditor

You can use the same person to do both of these tasks. They will accept it, because it means more money for them!

It may make sense too. They will understand the books as they have been working with you on entering the transactions and speaking to you throughout the year on questions you have. You should have a good regular communication flow with your accountant. Alert them of new products, services, and other financial related changes in your business. Taking a new business loan? Might be a good time to alert your accountant, so they can add that as a new account in your bookkeeping system.

Will You Save Money If You Use An Accountant As Your Auditor?

I’m sure you’re wondering, will you save money if you combine your accountant and auditor? I would say yes. There are a few ways you can say it will save you money:

1) They can give you a lower bundle price than separating the services.
2) They can save time in the audit as they know the books already.
3) You will spend less of your own time re-explaining the situation 2 times.

But, you also need to remember, for a Hong Kong company audit, you need a Hong Kong local accredited CPA. Hong Kong, as we have found out from these blogs in the past, is not the cheapest. Check out cost of living in Hong Kong article for examples. So of course those costs will reflected in your pricing.

You can use an accountant anywhere in the world. you may save money on the accounting side if you outsource or have your own staff do it. Then you only use a local Hong Kong CPA to check over the books and submit the auditor’s report.

Doing that may save money as a total bundle price – but dollar for dollar – the coordination and back and forth of your own time may drag you down a bit.

It comes down to how well organized you can be.

What To Look For In An Accountant for your Hong Kong Books

So we discussed the differences, now what should you look for in an accountant. I’ve seen some people I have worked with who use an American based accountant to do it.

You can use an accountant based anywhere in the world.

While we can provide this service and would love to work with you on your case. Yet to be clear, your accountant can be someone you find on Upwork. You pay to have someone do your transactions entry in Xero or Quickbooks. Also we’re a Certified Quickbooks Advisor in Hong Kong, so look for that from others you may hire.

Some tips in looking for your accountant:

  • Multi-currency experience.

    The beauty of Hong Kong for your global business is the multi-currency accounts. But for accountants, that is an added complexity. Ask your accountant if he or she has ever done bookkeeping for someone who has a wide range of currencies, and multi-currency bank accounts.

  • Do you have multiple entities in other countries?

    Do you also have a USA company or mainland Chinese company? Maybe you have an outsourcing center in Philippines. Who is doing the accounting there? What is the relationship of those companies to this company? Will you have those books done by this same accountant, or will you have a separate bookkeeper for that country? This is something the accountant you are looking to hire will need to know.

  • Do you have a lot of transactions?

    Are you an online based business with a lot of Paypal and merchant account transactions? Especially in B2C, you will have a lot of small purchases. Do you expect your accountant to have experience with these e-commerce payment systems? Many accountants are not familiar with this and you should keep on top of this before it gets out of hand.

  • Do you expect them to be “online” based or “offline” based?

    As mentioned in point 3, many accountants still haven’t fully embraced the internet and computers. Don’t laugh! At least in Hong Kong, many still are getting a grasp of keeping on top of their email inbox! In your communication with the potential accountant, see what types of communication methods they prefer.

  • Can they work direct with your online banking systems?

    When doing the transaction entry, can they work direct with your online banking systems? Again, technology. I imagine if you’re reading this blog post – then you are tech savvy. More than many of the accountants you may find out there! I am not trying to make a jab. Spoken from experience, do you expect the accountant to be able to login to your online banking with their own logins? Will you be OK with sending them a bunch of PDFs? Heck, maybe some will even want you to mail them the physical paper statements!

This is just a small list. Of course you have to trust them! And you have to agree with the way to communicate. Don’t get into the deal to only get frustrated with them later on when they are slow to respond to your emails. The only way I can reach a lot of accountants is to call them and schedule an appointment at their office in Hong Kong!

The Traditional Flow of Accountant And Auditor in HK

So let’s put this into context. You have a new Hong Kong limited company, and it’s B2B import export trading. You opened the company and then got approved for an HSBC Hong Kong bank account.

Your agency got you to sign up for their bookkeeping service, and you may send them your bank statements. You don’t have too many transactions, so you just send it to them monthly when you get the statements.

They enter the transactions into their accounting software. Many of them do not use online based accounting software and it will be locally stored on their computers in their office. A lot of times it isn’t even on a computer but instead written down on paper! Yes, this blog post is being written in the year 2016!

After about a year, you fly into Hong Kong to do some banking updates, maybe go to a trade show or 2, and check in with your accountant. You hand them a stack of receipts and your paper statements that the bank has been sending you. If you elect to pay the extra fee for the paper statements rather than e-statements, or you can print them out.

They prepare the books, and the accountant may have a few questions about some transactions in your business. You also want to make sure that your accountant understands all parts of your business, and also any kind of shareholder loans or special cash accounts, etc. If they are good, they will give you some ideas on how to better maximize your tax preparation, and other tips to optimize your company financials.

The first year you have a few extra months to file your audit, so let’s say you wait until the 18 months past. The accountant can also act as the auditor (If they are an accredited HK CPA) and they will prepare the auditor report and profit tax return. They will present it to you and show you your tax liability. You’ll then accept it by signing off, and then submitting everything to the Hong Kong IRD (Internal Revenue Department)

Then you go about your normal business life for the next 12 months, until you need to repeat the process above.

Moving to More Online Based Accounting Flow

So, we’re all lovers of the internet age. We are reading this guide online, off our mobile phone, listening to a podcast while in an airport in Dubai.

The internet is good.

So we work with an accountant who is more online based. We find one online, not based in Hong Kong, and work out a monthly payment plan. Maybe they offer packages. You signup, and get a renewing credit card transaction agreement going.

Talking to an account rep on email, they tell you to pick an online accounting software of your choice. Xero, Quickbooks, or the many others. You will also need to get a plan that works with multiple currencies, so they are normally a bit more than the basic software. You’ll get setup and link your online banking (HSBC HK supports Quickbooks), Paypal, and other systems. This can be tricky, and hopefully the accounting agency can work with you to make sure it all syncs up.

Once the initial setup is going, you have them enter the transactions manually that may not come from Paypal and online merchant accounts, such things as petty cash. You’ll also probably have times you need to explain certain transactions so they are classified correctly.

The year goes by, and you need to prepare for your HK audit.

Your Hong Kong company secretary will email you that you received a profit tax return from the HK IRD. You’ll have a few months to prepare your books and prepare the auditor’s report. This can be done with the referral of the company secretary, or you can use another accountant, CPA – auditor. Up to you.

The auditor will check the books, and ensure that you have properly accounted for revenues and outflows and he/she is willing to sign off that the books are legitimate. This is the risk of their certification and relationship with the HKICPA – Hong Kong Institute of Certified Public Accountants. If later the books seem “Cooked” – I’m sure the HK tax department will question the auditor on why they didn’t find this issue at the audit step.

Once you agree with all the books, the auditor report, you’ll need to sign and submit the profit and tax return. Write the check, and you’re done.

How Much Does This Cost? Comparison

So let’s think about how this all comes together. There are a few different things you need (recommended to get)

  • Accounting software.

    In today’s online world, and the fact that you’re reading this blog post off your computer monitor instead of a printed newspaper, you need software to balance things. Most choose Xero or Quickbooks. Maybe also better to ask your bookkeeper what they are familiar with. Cost – 20 to 40 US dollars a month. If you have an international business, you’ll need the more expensive multi-currency account options.

  • Bookkeeper.

    You can outsource this, with a HK accounting firm, with your own staff, or you can do it yourself! It is best to have someone on call in case there are questions or issues that arise later. Plus when there is a transaction you are not sure how to classify, the bookkeeper and accounting specialist is there to help out.Cost. Depends on how much activity you have. Let’s say from the $150 USD to $400 USD a month. Again, you can always opt to do your own bookkeeping, or have someone in your organization do it.

  • Audit.

    Yes, this is where people wonder how much will it cost. And online you won’t find anywhere that has a standard table of prices for a Hong Kong auditor’s report. Price depends on the amount of transactions, how many revenue streams, how good your books are kept, and how familiar the auditor is with your type of business.Cost – Depends on how many transactions, how active, etc etc. But I know you want a range. Low is 900 US dollars and high is up to $2,500 USD. The higher range is when you’re in the millions of dollars in revenue and it shouldn’t be as big of a cost as a percent of your profits. The lower range I have found is harder for the smaller businesses still finding their traction.

  • Signing and mailing the profit tax return

    This will need to be filled out and signed by you, or one of the directors.Cost. The courier fees from Hong Kong and back. This needs to be mailed to your Hong Kong address, and if you’re living and working overseas, it will need to be signed by you. Or you can always take a trip to Hong Kong for this process. I always recommend meeting your company secretary, accountant and auditor yearly. Make sure you are comfortable with everything. Check in with the year in the past, talk about the future year.

Remember – Accountant Can Be Anywhere, CPA For Audit Must Be in Hong Kong

So we have drove this topic home for you. You can do your bookkeeping and accounting data entry from anywhere in the world. This person should have experience balancing company books, general ledgers, and online accounting software.

You, as the overachiever entrepreneur, may want to learn to do this yourself. I respect that. Heck, I remember learning it on Sunday afternoons back in 2004 with my first e-commerce business! Taking a Quickbooks training seminar in NYC and trying my best to classify everything. It is a good skill to have, to understand the inflows and outflows of your business.

Yet I can imagine it may not be your favorite task to do. Find someone in your company, or a trusted accounting firm to take care of it for you.

But, as skilled and knowledgeable about this as you are – you cannot do your own audit. A Hong Kong licensed CPA must do it. And, I know it is frustrating – the price is not black and white. Budget around $1,500 USD for it, a bit more if you’re in the multi-millions in US dollar revenue.

Have the books as “Clean” and prepared as possible for the auditor. The price will be lower than if it is just a big pile of financial statements.

How About Your Experience?

How has your experience been dealing with accountants and auditors? Of course I’m more focused on Hong Kong today, but even if its in America or other places- any tips for dealing with these consultants?

I’d love to hear it, as well as other readers – so please leave your comments below!

Also, our company offers bookkeeping services and audit reports – we’d love to work with you!

Can You Get a Job from a Hong Kong Company Overseas?

This article is originally found here: https://www.globalfromasia.com/workingoverseas/

Do you have a job from a Hong Kong company full time? But living in America most of the time?

When did this insanity start?

Life used to be so simple. We would all stay in our own countries, have our address in the same town as the company we worked in, and pay taxes to that city / state / country.

Nowadays it seems so complex.

But it is awesome. And I get to hear great questions from readers like today’s post.

Let’s share the question here:

(Disclosure: we are not tax professionals, just making a conversation and thought process for your own situation and to ask your own tax professional before making decisions)

Today’s Question

The last two years or so I have been consulting for an American pump manufacturer. Helping them with supply chain and other issues in China, Hong Kong and even Vietnam and India (haven’t been to India physically though).They are now talking about hiring me full-time. It seems that for budget bucket reasons, they want to hire me via their 100%-owned Hong Kong trading company. I would be the first employee there. I really just have one big question set:

How much time would I need to spend in Hong Kong physically to be counted as an employee? And, of course, pay Hong Kong’s beautifully lower income tax rates. My wife and kid are now in California and I would want to spend time with them but if I could do that AND spend time in HK (for the lower taxes) that would be ideal. I am going to be going much more often too — so might as well place me as an employee over there.

Mike – I would really appreciate your time and thoughts on this. Let me know
(Reader’s name removed upon request)

Factors To Consider

As almost all advice, please do you own due diligence. I’m not a lawyer, and am sharing as best to my knowledge and research can provide. Disclaimer, don’t blame me if I am wrong!

Are You American?

I think first question is, are you a US citizen? Believe this will make things more complicated.

Especially if you are living and residing in California, the most expensive state in the United States. They will want your tax income. I believe you are still seen as a California resident, and have to declare this income to the state and pay taxes on it.

Tricky one, as it’s not a US based company.

Where Do You Spend Your Time? Where Do You Deliver The Work / Value?

So, where are you going to be most of the time? Still in California? If you are in USA more than 330 days a year, you fail the exemption status for foreign earned income.

If you are to be outside of America, especially California, for more than 330 days, as an American, this foreign earned income could be exempt from taxes.

But I can’t imagine the US tax department liking you getting paid offshore and sitting at your home office in California most of the time. Make sense?

The Hong Kong Company is Giving Your Proper Employment Contract

They intend to hire you full time, right? So then I would assume you would get an employment contract from them, in Hong Kong.

As an employee in Hong Kong, you would need to then get a Hong Kong ID card. That isn’t a bad thing, it has a lot of perks and advantages. But HK immigration will want the company to see if the company can hire someone in Hong Kong locally first. That is just normal immigration things, Hong Kong is seriously overcrowded and they are getting strict on who they allow to come into the region.

In Hong Kong, to get a job from a Hong Kong company, you’d need to get a proper employment contract as well as a HKID card.

Then, of course as an employee, you and the Hong Kong company hiring you would need to pay the associated taxes in Hong Kong. Which, you mentioned are much lower than in USA and most other parts of the world.

Hong Kong employment tax rates.

How Will The Hong Kong Company Pay You? HK Bank?

How will this company be paying your salary? I would assume you have to have, or setup, a personal bank account in Hong Kong. Then they would setup payroll and have the funds deposited to your bank account either every couple weeks or monthly.

Will you need to access these funds right away? Will you use these funds to pay for your cost of living in California, USA? If so, I would then imagine you’d have to wire transfer the money from Hong Kong into your American bank account.

That money would then be treated as income in America? You will put those transactions in your personal bank statement. At the end of the tax year you’d have to figure out how to classify that to your tax accountant.

But, to stress, you can’t hide your money in Hong Kong from the US tax authorities anyway. You were never supposed to, but nowadays it is impossible. So you’ll have to declare this income to the IRS and explain that it comes from Hong Kong and that you’re hired by a Hong Kong company.

If you are doing it this way, you’ll be paying monthly bank wiring fee, and then declaring taxes in America as, a sole proprietor? Not sure to be honest.

How Big Is This Company?

The next point to look at, how big is this company? And when I say company, I mean the entity registered in Hong Kong. Doesn’t matter if this company is a massive conglomerate registered in the UK. What matters is how big the company is in Hong Kong.

That means, how much revenue. How big is the “real office” (not a serviced address or virtual office). How many full time staff, located in Hong Kong, and a legal hiring with employment contracts are there. Also, there is a difference between how many local Hong Kong people have jobs as a percentage of how many foreigners have jobs.

Any company that has a lot of locals hired, and is doing a lot of payroll tax is contributing to the local economy. Governments love job creations – for their people.

So these kinds of figures will help in your case as a foreigner in a Hong Kong company.

This is a Local Hong Kong Limited Company (Not Offshore Elect)

I am assuming that this Hong Kong domestic company (as opposed to offshore elect) and paying the 16.5% corporate tax rate on earnings. If you think you can get the 0% offshore election option and you can still get a local job in the company, you’re a bit mistaken.

You can’t have your cake and eat it too.

If you’re an offshore company, that means you have no local Hong Kong operations. One of those factors being a Hong Kong employee – which you are trying to become.

What’s Your Salary? Above or Below Market Value?

Another thing the Hong Kong government looks at, as well as any government, is it is a fair salary? That means is your salary what a local Hong Kong person would be in this same position? If you’re the director of the company trying to give yourself a lower salary to avoid taxes, may not work.

Other cases are if you give a lower salary to yourself or your foreign staff in exchange for support on the employment visa. Some people are willing to take a lower salary just to be able to stay legally in Hong Kong. But this will also raise flags and be problems.

You need to pay what the market will bear for someone in your exact position, in Hong Kong.

Has The Company Tried To Hire a Local?

Are you trying to use this salary and income as a way to immigrate to Hong Kong? There may be instances where the immigration department wants to see if the company has put out a job advertisement to place this position in the job market. That means, give a chance to the local Hong Kong market to get this job if they are capable and willing to accept that salary level.

You may say, why does that matter, the owner and director of the company picked me! Again, this depends on the case of how hard it would be for the company to find a local person to do the same role as you. Maybe you’re so special that no one else in Hong Kong can do this job? There are of course cases where that is true, especially in computer programming and technical roles. There is a big shortage of supply in the job market for this job speciality.

So if you’re working in a position that is in short supply in the Hong Kong job market, you’ll have a better chance of this Hong kong salary scheme you’re working on.

What’s Your Long Term Goal with this Job?

So you need to ask yourself, you’re living in California, you’re American. Your family is there too, you’ll be flying back and forth between the 2 continents. Where do you want to spend your time?

Do you want to immigrate to Hong Kong? Bring your wife and kids here, go through the education system here? Or is this just a temporary income stream at the current employer. You want to use it to get more cash, save some taxes, and build some international experience on your resume.

Nothing wrong with either case. But of course, if your long term plan is to relocate to Hong Kong, going through these hurdles will be more logical. If it is a short term play, you may re-consider all the paperwork and hassles your employer and you will have to go through.

Do You Need / Care About a Hong Kong ID?

Another thing, from the email I got – it seems there is no interest in getting a Hong Kong ID (HKID).

A HKID is a pretty valuable thing to have, wherever you are in the world.

As a local resident in Hong Kong, you will get access to the medical system. Sure, public hospitals are not as good as private – but if you’re in a bind, you can always rely on public hospitals taking care of you.

Related: We talk about Hong kong medical options and insurance plans here.

You’ll also be able to cross into Mainland China much easier. Take it from me, as someone without a HKID, my friends who have it zip past me on the borders. If you’re an international business person going between USA, Hong Kong, and Mainland China – you’ll like to get this ID card if you can.

What Do you Think? Get The Job contract in Hong Kong?

So that covers my points. What do you think?

There are other options for how you’re compensated. You can always be an independent contractor and get paid in cash / wire transfer. You’ll file with your US taxes as an independent contractor and your US tax accountant will be able to classify this.

Disclosure, I am not a tax specialist, and this article is a general guideline and free help for those curious on the topic.

Feedback, comments, and hate mail is welcome!