January 11, 2023
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Hong Kong Offshore

Running an international business will sometimes have you going through so many tax payments. If you are not careful, you might end up with nothing to show for it. For this reason, you need to come up with a way you can reduce all these costs. One of the easiest ways to go about this is to have an offshore company.

People with offshore companies in Hong Kong pay less tax and can be exempted from more depending on where they set it up and what business they choose. Hong Kong has many prospects, and here is everything you need to know.

Hong Kong offshore company setup

The one thing that scares many people opening offshore accounts is the procedure they might have to follow, just so the business can be up and running. Many times, the processes are so long that most people give up along the way.

To help you figure this out, here are the steps you need to follow when setting up an offshore company in Hong Kong. The good thing is most of the steps are so easy, and you can still do them online without having to travel.

  • Choose a company name and have it registered and approved. Once the name is approved, get an agency that will ensure your company gets incorporate, these procedures take around a day or two to complete.
  • File the necessary documents with the company registry, then open a bank account for your business. Ensure it is a corporate bank account
  • Get your business registration certificate from the Inland Revenue Department, and then get a business license if you plan on conducting your business in Hong Kong as well.
  • File your income tax.

These procedures might seem many, but they will take not more than two months to complete. Once you are done with those, you can go ahead and start operating your business.

The one thing you need to remember as you file for these processes is to have the necessary paperwork and documents. Without them, your registration process and setup will take ages. Here are the documents you need to have to set up the business.

  • Passport copy
  • Official documents showing your country of residence
  • Personal bank statement 
  • Hong Kong offshore company articles
  • Copy of parent company documents if you are a shareholder.

Hong Kong offshore company advantages

With all these procedures, one can be tempted to ask whether there are any perks of starting an offshore business in Hong Kong. Here are some of these advantages:

Easy to setup

Based on the fact that this is a full offshore business, it is quite simple to set up a business in Hong Kong. The steps are well outlined, and there is little back and forth during the registration process. You will not feel like they are stalling you, and if you have the proper paperwork, you will do it in no time.

No taxes

While you will need to show that you file your tax returns in your area of residence, Hong Kong will not charge you for taxes in their country if the business is offshore. It goes a long way to ensure that the money spent on taxes is significantly reduced.

They speak English

The one thing people are skeptical of when they open a business in a foreign country is they will not be able to communicate with their staff. You do not have to worry about this when you come to Hong Kong. The second official language is English which means you can communicate with almost everyone in the area.

Fast registration

If you are on a timeline to get the business up and running, then Hong Kong is the place to be. Any people who have tried registering business elsewhere do admit that the procedure in Hong Kong is not only straightforward, they are also short and to the point.

Good base for business

The financial environment in Hong Kong is very healthy, and there are signs of even further growth. You do not have to worry about your business not thriving if you see it up there.

Fast-growing economy

Although Honk Kong already has a stable economy and is the heart of Asia’s business community, it still has a lot of room for improvement. It is also a free economic zone, meaning it keeps attracting investors all year round. Stock investors also love participating in the Honk Kong Exchange (HKEX) since it’s a stable firm for global investments.

Hong Kong offshore center

Hong Kong has been recognized as one of the leading offshore financial centers in the world for over 20 years. The area boasts of thriving and vibrant work culture. Businesses that are set up there are exempt from local tax, and that is what adds to its appeal. There is also readily available labor with people who have a variety of skillset.

Opening an account in Hong Kong is also pretty easy. All you need is to have at least $140, and you get to open the account. If it is a corporate or joint account, only one of the members should be present during the opening of the said account; it takes a maximum of three business days to open. Hong Kong’s offshore financial center has made strides in putting itself on the map.

How to open an offshore company in Hong Kong

If you want to open an offshore company in Hong Kong, worry not. You are not alone. All you need to do is get the necessary paperwork and follow the procedure for the offshore company setup.

You can either do it yourself or get someone to help you with the whole thing. As mentioned, it should not take you more than two months from start to finish for your business. Just ensure you do your due diligence when it comes to market research and how your business idea will come to play. This will reduce the back and forth significantly.

hong kong offshore

Hong Kong offshore tax exemption

If you have an offshore company in Hong Kong, then you qualify for a tax exemption. The only thing you need to do is ensure you fill the necessary paperwork.

You need to file a letter with the Hong Kong Inland Revenue Department to assess your company. The procedure might take a while, but it is not less than six months once the letter of approval comes from IRD. You can then ask for a refund on any taxes that you might have paid up to 18months.

Since this procedure takes a longer time than registration, it is recommended that you apply for this as soon as your company gets approved and registered. In doing so, you do not have to spend a lot of time waiting for approval. Once it comes through, you can go ahead and get exempted. If you do not get the exemption from IRD, you will have to pay taxes just like every other company in Hong Kong.

Comparison of the Top 5 Offshore jurisdictions

Hong Kong offshore company tax

If you have been thinking of setting up a company in Hong Kong, then chances are you have no idea how to go about filing for the exemption. Here are the steps you will take. They will act as a guide and ensure you can operate without the costs of running the business in your own country.

The one thing you need to remember is that certain factors determine whether your company can get a tax exemption or not. Here are the main requirements for your offshore company to be exempted from tax.

  • The company does not have any workers or suppliers in Hong Kong
  • The company must operate entirely out of Hong Kong
  • The company does not offer any services to businesses or the people in Hong Kong
  • The company is not in Hong Kong, and the owner rarely visits Hong Kong

While these might seem like strict rules, they have to be that way, so no company operating in Hong Kong tries to act as an offshore entity. Many times, some companies work this way to try and get exempted from tax, when in an actual sense, they are based and owned by the locals. It is the main reason why the IRD is very strict on the requirements and the paperwork filed. They will take their time and ensure that you follow through with everything they have said.

In Conclusion,

Running an offshore company in Hong Kong might seem like a lot of hard work, but it pays out in the end. The one thing you need to remember is to have all your paperwork with you. Research other offshore companies and see how they have managed to succeed. If you are unsure of the regulation of a country, it would also help if you got a financial advisor on board. They will go a long way in ensuring that you are on the right track and not miss out on the essential details.

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Steven Author of gostartbusiness

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