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HK inc + bank, will I be accepted?

T

thatIT

New member
Oct 11, 2020
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#1
I've been looking at starting a HK limited by shares, I read that it's extremely difficult to open a "regular" bank account in HK but that there are some fintech companies that are more lenient. I run an IT company (cloud hosting) that also accepts paypal and bitcoin. Our current bank barclays gave up on us due to the UBO being Ukrainian (this was changed from a EU citizen who was the previous UBO)

Now of course I can put the company on my name (EU passport holder) but prefer my wife for undisclosed reasons, but she's Ukrainian and it's darn difficult to get a bank account currently.

Are there still banks/fintechs IN HK that would accept her as a customer? The company is not offshore and will pay the 8.25% tax (under 200K profit)

OR

Do you guys have any other recommendations? The issue is that paypal does not accept any offshore banks linked, only banks that are in the same jurisdiction as the incorporation/paypal account. Or, is it still possible to link an offshore debit card and withdraw to your card?

If you know any other jurisdiction with low corporate tax ~8-10% that support paypal, stripe and bitpay do let me know.

If all fails I guess we'll go for Cyprus but they're also scared of Ukrainians due to the Russian scandal some years ago.
 
#5
Opening an LLC in UAE costs $7000+ is that correct? We're paying the same now for an company in the EU, not sure where the improvement cost wise is. And why not opt for a cheaper freezone structure?
 
#8
thatIT said:
Not if you already pay taxes in the jurisdiction and it has a tax treaty with the home country... That's why a tax haven is not an option but paying some taxes will lower your own taxes at home.
Click to expand...

No, you are misinformed.

If that was true, you could just choose any country with a tax treaty and pay the taxes there. Then everyone would incorporate in Malta or Hong Kong or some other country with low corporate income taxes and not pay the tax at home. To avoid that, all high-tax countries have implemented rules that make this impossible. It only works when you can prove that the work is only done in the other country, when there is a physical office and local employee(s) that earn a regular salary - which makes the whole thing much more expensive. It does NOT work when the company is actually run from your home country. Once your home country finds out, they will tax your company and probably hit you with a large fine or even put you in jail for tax evasion. But if there is a tax treaty with the other country, they should at least refund you most of your taxes, so you can pay them in your home country instead - to avoid double taxation.
If you don’t believe me, you should read a tax treaty, especially the articles about residency, permanent establishment and the taxation of business profits.

Do yourself a favor and talk to an accountant in your home country before incorporating an offshore company.
 
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#9
Currently the company offers services in the local jurisdiction and meetings/decisions are taking place in the same country, so it is a local resident company not offshore and I want to continue it to be like that.

Your point is valid, still in that case I wonder what would be the point in establishing an offshore company in the first place if it is managed from your home country you have to pay taxes there anyway and if you're unlucky and there is no DTA in place you pay taxes twice unless it's in a 0% jurisdiction. I can only think of one reason why people open a business in a 0% tax jurisdiction, and that is not something that I do. It's better to pay some taxes then none cause the tax man will find out, maybe not in 1 or 5 years but in the end they will. The climate is changing incredible rapidly, electronic sharing of tax information between countries, banks not trusting anyone these days because they are scared to lose their USA banking licenses yet the multi billionaires can get away with anything and the small man that pays their taxes is being hold back because of their nationality... (in my case)
 
#10
thatIT said:
Currently the company offers services in the local jurisdiction and meetings/decisions are taking place in the same country, so it is a local resident company not offshore and I want to continue it to be like that.
Click to expand...

That’s good, but have you verified that your home country will accept that?

Even if they do, if work is done in your country as well, you will (most likely) still have to pay corporate income tax in your home country for any work performed there because they will simply say there’s a second office (permanent establishment) in your home country.

To give a simple example, imagine that an Emirati-owned company (leaders actually living in the UAE) rents some space in your home country, starts hiring a local chef and local employees and opens a restaurant that serves Middle Eastern food. The management is clearly in the UAE, they did not register a local company for the restaurant. I guess you can imagine that the restaurant profits are taxable in your home country. The same would go for a Hong Kong company that opens a Chinese restaurant - or an IT company from Hong Kong that generates revenue from somebody in Europe.

So you will have to pay corporate income tax in both countries and the tax treaty will determine where what amount of tax will be paid. That will probably mean a lot of paperwork.

Of course you can also get lucky, your local tax office might never look too closely into where the work is done. But if they do, you’d have a problem.

thatIT said:
Your point is valid, still in that case I wonder what would be the point in establishing an offshore company in the first place if it is managed from your home country you have to pay taxes there anyway
Click to expand...

That’s a very good question. To do this correctly and legally is usually very expensive. That’s why large multinationals employ lots of tax lawyers.

Therefore many people in this forum go with an illegal setup and simply try to hide from their home country that they have anything to do with the company. Obviously that’s tax evasion and I really don’t think it’s worth the risk. But many people in this forum do it anyway.

One other option would be to only outsource part of your operations, for example customer service. But also then you’d have to prove to your home country that such a setup was not purely chosen to avoid taxes.

Whatever you do, talk to a tax lawyer in your home country, before you register an offshore company.
 
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#12
JustAnotherNomad said:
The same would go for a Hong Kong company that opens a Chinese restaurant - or an IT company from Hong Kong that generates revenue from somebody in Europe.
Click to expand...

To be exact, it usually wouldn’t apply if it’s a single low-level employee working from their home for the HK based company.
But if it’s either a substantial presence (like a restaurant, or generally having many employees in the country) or if the person has the authority to enter binding agreements on behalf of the company, then it’s a different situation.
The physical location of your servers can also mean a lot for this. If you’re a cloud service provider, it’s probably safe to assume that your company will be taxed where the servers are physically located.
So definitely talk to an expert from your country, the critical term here is permanent establishment, in addition to the effective place of management and corporate tax residency. CFC rules can also play a role.
 
#13
JustAnotherNomad said:
No, you are misinformed.

If that was true, you could just choose any country with a tax treaty and pay the taxes there. Then everyone would incorporate in Malta or Hong Kong or some other country with low corporate income taxes and not pay the tax at home. To avoid that, all high-tax countries have implemented rules that make this impossible. It only works when you can prove that the work is only done in the other country, when there is a physical office and local employee(s) that earn a regular salary - which makes the whole thing much more expensive. It does NOT work when the company is actually run from your home country. Once your home country finds out, they will tax your company and probably hit you with a large fine or even put you in jail for tax evasion. But if there is a tax treaty with the other country, they should at least refund you most of your taxes, so you can pay them in your home country instead - to avoid double taxation.
If you don’t believe me, you should read a tax treaty, especially the articles about residency, permanent establishment and the taxation of business profits.

Do yourself a favor and talk to an accountant in your home country before incorporating an offshore company.
Click to expand...

100% Correct.

I swear there should be a button in the forum that just pasts "Google what is CFC" as a reply
 
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#16
I currently hold a HK limited and succeeded opening a Swiss bank account at CIM. however their policy changed a couple of days ago and indeed i need to rent a local office + have employees working from HK. I am looking for a solution at the moment.
I personally would not go ahead with Neat, since they operate as a mediator for DBS bank. Its similar to Revolut / N26 / Paysera etc.
 
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#17
thom038 said:
I currently hold a HK limited and succeeded opening a Swiss bank account at CIM. however their policy changed a couple of days ago and indeed i need to rent a local office + have employees working from HK. I am looking for a solution at the moment.
I personally would not go ahead with Neat, since they operate as a mediator for DBS bank. Its similar to Revolut / N26 / Paysera etc.
Click to expand...
Did you find a solution?
 
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