Yes, this is interesting, we have the same issues in HK.
@prof Indeed. I feel your pain. Additionally, they’ll likely charge you provisional tax too (if you made a profit and if they believe you don’t qualify for the exemption).
I’m actually winding down an old HK company of mine - it’s a 9 month process! Unbelievable…
Thought I’d just add to this in case anyone is searching and is wondering about the true cost of a Hong Kong set-up. I’ve just gone through all invoices and totalled it all up. All costs are in USD.
$1089 - Incorporation Costs with Registration / Secretary / Address
After 12 Months
$795 - Yearly Renewal / Secretary / Address Costs
$55 - Admin Fees for Director Resolutions to Withdraw Dividends
This isn’t too bad. But soon it begins to sting…
After 18 Months
$350 - Profit Tax Return Year 14/15 (NIL Value As < 18 months audit not required)
$1375 - Audited Reports with Profit Tax Return Year 15/16
$40 - Printing and Admin Fees
After 24 Months
$795 - Year Renewal / Secretary / Address Costs
$1375 (TBC)+ - Audited Reports with Profit Tax Return Year 16/17
$2500 - Offshore Profits Claim
The offshore profits claim is the biggest hit - the expense is for a tax advisor to justify it - but once it’s done it should be good for up to 5 years OR if your business nature changes.
And this is excluding the $40/month Xero subscription and all the hours of book-keeping and receipt collecting that goes with it.
Of course all these costs are variable. This is just my experience. I think my yearly audits are expensive, but I think the incorporation and renewal costs are relatively cheap by comparison.
If you can be approved on the Offshore Profits Claim and are making good money then after Year 2 things should be pretty nice I guess. But there’s definitely a whole bunch of costs in getting to that point that I’m not sure many people appreciate!
@prof Thanks so much for this summing up, truly useful.
What is going to happen if you just stop paying/auditing and drop your company? Any increased fee or law enforcement?
@homakov IRD will reach out and if things get really bad, they’ll commence civil proceedings against you. However, this does take time to go through the system. I wouldn’t recommend it - much better to go through the correct procedure to close the company (which is what I’m doing at present).
@prof Thanks for the breakdown - mine were considerably higher than that. In comparison, each offshore corp I own costs approximately $1000 (USD) per year to maintain. No audit/filing and I can keep simple accounts on a spreadsheet. The other annoying thing about HK is I would get periodic “surveys” to complete, with the threat of a fine if I didn’t return it in a timely manner.
@international_man Ha. Funny you should mention surveys. About 5 minutes ago I just opened my residential mailbox and received a letter from HSBC Hong Kong requesting an update business certificates held, various other documents, proof residence, passport scans and all the rest otherwise with threat of closure if not submitted within the next three months.
This is a pain, but I should be able to drum together all the documentation…
But what concerns me is in a month or so I’m planning to leave where I’m at now and travel for a few months. I will essentially have no permanent residence anywhere. So - I do wonder how it would be possible to maintain an account if you were perpetually traveling. Any thoughts?
@prof I’ve never heard of that before from HSBC… but doesn’t surprise me…
Get a virtual office address in Hong Kong and update the address held by HSBC, IRD etc to this. Then have the virtual office provider collate your mail and courier it to where you happen to be at the time.
@international_man Yeah it’s a KYC review apparently. They want residential address confirmation as well as business address confirmation so I’m not sure that would cut it.
I’m ok for now - just a bit of a concern for the future since it’s not always easy to get proof of address somewhere obscure if you’re only in short-term accommodation.
This month has been insane for business operation stresses like this. Can’t wait for it all to be over so I can get back to focussing on real business again.
Yes, I checked. It did for a client of mine with 2 HSBC business and 1 private account. Did it for you?
Did anyone thought of closing down a HK LTD before it becoming costly and to open a new one?
I have no clue what the HK authorities would do, but maybe not much…
It’s an unnecessary hassle. As I’ve mentioned elsewhere, HK is a crap jurisdiction. Set things up right so you can get on with the task of running the business and not worrying about admin.
What has been your experience opening bank accounts with your BVI corp? I successfully opened a OCBC Singapore account with a Belize corp, I had to fly there and present a bunch of documents and certificates.
BVI with DBS in Singapore. Set this particular one up October last year. Easy - flew there as well, chatted with the banker who appeared to show a genuine interest in what I was doing. As a banking flag, I don’t think you can wrong with Singapore.
I have worked with many tax advisors on this matter. They offer similar advices and services but fees vary significantly. My advice is, work with a trusted tax advisor with reasonable fees. If your company’s earnings justify, definitely worth doing so. After living and working in many different cities around the world, I still find Hong Kong is the best place to have your company to conduct business.
Hey Prof. Thanks for the breakdown. Great. Can you share some details of the accountant that u used in HK. Thanks. Would love to chat further about this also. Do you have an address I can get u on.
What time zone u in?
@rich there’s literally hundreds you could choose from. DM me and I can provide you with contact details for the accountancy firm I use.
just messaged you… but also replying for others who might see this… Yes there are hundreds of accountants, but it’s tedious to ask each for a quote and even then you don’t know which hidden costs they pile on later, so therefore asking for recommendations…
Many people think they will have to pay no corporate tax when they incorporate in HK, if you want a real opinion about HK, you should ask people who have at least a 2 year old company.
I know someone who thought he would not pay any corporate tax, during the offshore profits claim, he has been asked to provide local tax receipt of his local tax authorities as he was not a tax resident, he could not provide it and had to pay the 15,6% corporate tax. Furthermore, he had to pay the HK company for doing the paperwork 2400 euros. In Total, it was like incorporating in the UK, where corporate tax is 20% because i can count the paperwork has a type of “tax”. If we count the paperwork, local offshore company fees and tax, it was like 20% perhaps more.