Investment for digital nomads in Hong Kong sounds like a dream?
Let us show you why it’s not.
Read the below article and if you have any further questions or need help with setting up the right legal foundation for your investments, then reach out to us any time for a free consultation call.
Notice: All our consultation calls are conducted by an experienced CPA whose knowledge is based on legal sources. There is not a salesperson without proper domain knowledge and just hoping to close a deal.
Introduction:
Investing as a digital nomad can sometimes be troublesome due to
- not being able to open bank accounts anywhere due to lack of residency
- not being able to invest in properties as locals
- not being able to invest in stocks
However, a digital nomad can undergo these problems with an entity such as a Hong Kong company.
In this article, we explain 6 advantages a Hong Kong company can have for your investment.
Most digital nomads may know Hong Kong for its 0% offshore tax that promises zero tax on foreign incoming money. Yet many are unaware that the 0% capital gain can be used to your advantage with the right investment strategy.
What sets Hong Kong apart is that the 0% capital gains benefit applies universally to all Hong Kong-registered companies, regardless of the shareholders’ citizenship. Whether you’re a foreigner living outside Hong Kong or a resident, you can benefit from this favorable tax treatment. This inclusivity makes Hong Kong an attractive choice for investors worldwide.
Throughout this article, we’ll share practical examples from my professional journey to illustrate how these provisions work. We’ll explore the system mechanics and highlight the advantages through real-world scenarios. Join us as we uncover these key takeaways and reveal why investors worldwide prefer to invest in Hong Kong. Together, we’ll navigate the path to financial prosperity.
1 – Investment for Digital Nomads in Hong Kong: Benefit 1 – Tax Advantages.
Explanation:
One of the key advantages of investing through Hong Kong incorporation is the default tax system that provides a 0% tax rate on capital nature profits, including capital gains, dividends, and interest income. What sets Hong Kong apart is that this 0% capital gains to any Hong Kong company, regardless of the company stakeholder’s residence, citizenship, or living situation (digital nomads included). This tax advantage enables investors to maximize their investment returns. To illustrate this benefit, let’s consider a hypothetical example:
Example:
Imagine you’re French, residing in Thailand, and running an e-commerce business with a Hong Kong incorporation. You invested $100,000 in Apple Inc. through Interactive Brokers under the name of your Hong Kong-registered company on the US stock market. Throughout the year, your investment yielded a 10% return. The best part? You won’t bear any taxes on your capital gains. Under the 0% capital gains tax scheme in Hong Kong, your CPA will exclude it from your profits tax calculation. This tax advantage applies to all Hong Kong-registered companies, regardless of shareholders’ background.
Click here to read more about the tax advantages of Hong Kong companies for non-resident foreigners.
2 – Investment for Digital Nomads in Hong Kong: Benefit 2 – Financial In and Outflow Freedom.
Explanation:
Incorporating in Hong Kong offers a key advantage: The ability to transfer funds in and out of the city at any time, with any amount and unlimited frequency. This unrestricted movement of capital allows your company to efficiently manage and transfer funds as needed, enabling you to seize investment opportunities and respond swiftly to market dynamics.
Example:
Suppose you invest US$100,000 in a Hong Kong-incorporated global real estate fund. When you sell your investment and repatriate the funds for reinvestment in another market, such as your US LLC account, you’ll enjoy the seamless advantage of Hong Kong’s unrestricted capital transfer. Not only that, but you’ll also have the flexibility to travel your funds in and out of Hong Kong at your convenience. Whether you need to transfer funds monthly, daily, or anytime, there are NO limitations or other restrictions like tax reporting requirements, accounting compliance obligations, or restrictive bank rules to navigate.
3 – Investment for Digital Nomads in Hong Kong: Benefit 3 – Financial Infrastructure.
Explanation:
Hong Kong’s world-class financial infrastructure supports seamless investment transactions. With advanced banking systems and well-developed capital markets, it is easy to find reputable international banks and financial institutions, such as HSBC, Citi Bank, and Interactive Brokers, operating in Hong Kong. This enhances the stability, credibility, and accessibility of financial services, allowing investors to execute strategies with ease and confidence. Hong Kong offers an ideal ecosystem for capitalizing on global opportunities.
Example:
Suppose you’re an international investor looking to trade securities globally. You can directly open a corporate account for your Hong Kong-incorporated company in reputable banks and financial institutions, such as Interactive Brokers. This seamless process allows you to efficiently manage your investments and take advantage of the financial infrastructure available in Hong Kong.
Side note:
Before opening a bank account, make sure to read through the checklist of documents and make a comparison of which banks can suit your needs the best.
Note that more and more foreigners opt for fintech banks rather than traditional on-site banks due to less flexibility (on-site meetings), stricter rules for opening an account (KYC verification), and more outdated apps and technology.
4 – Investment for Digital Nomads in Hong Kong: Benefit 4 – High Safety of Investing.
Explanation:
Hong Kong is known for its robust financial system and investor protection measures, ensuring a high level of safety for investors. The Hong Kong government operates a deposit guarantee scheme called the Deposit Protection Scheme (DPS), which protects eligible deposits held in banks incorporated in Hong Kong. The DPS guarantees repayment of up to HKD 500,000 per depositor per bank in the event of a bank failure. (It’s worth noting that, fortunately, such a failure has never occurred in Hong Kong’s recorded history.)
This deposit guarantee policy instills confidence in investors, assuring them of the safety of their funds and further enhancing Hong Kong’s reputation as a secure investment destination.
Example:
Let’s say you have a Hong Kong-incorporated company with funds deposited in a local bank. If the bank were to face financial difficulties and be unable to repay your deposits, the DPS would step in and provide compensation of up to HKD 500,000 per depositor per bank. This safety net ensures that your investments and funds are protected, giving you peace of mind and further bolstering the attractiveness of Hong Kong as a secure investment hub.
5 – Investment for Digital Nomads in Hong Kong: Benefit 5 – Access to Global Markets.
Explanation:
Hong Kong’s status as an international financial center provides unparalleled access to global markets.
Through Hong Kong incorporation, you gain exposure to a wide range of investment opportunities, e.g.
- stocks,
- bonds, and
- other financial instruments.
For instance, the Hong Kong Stock Exchange, one of the world’s largest stock markets, offers access to numerous international companies and facilitates cross-border investments.
This lets you diversify your portfolio and capitalize on emerging trends and markets worldwide.
Example:
Imagine you’re interested in investing in the largest stock market in the world, such as the US stock market, and specifically want to invest in companies like Apple and Tesla. By incorporating in Hong Kong, you can easily access the Hong Kong Stock Exchange, which offers various investment products such as exchange-traded funds (ETFs) and derivative products tracking major US stocks. Through these investment vehicles, you can indirectly invest in companies like Apple and Tesla, gaining exposure to their performance and potentially benefiting from their growth. This access to global markets via the Hong Kong Stock Exchange allows you to diversify your portfolio and capitalize on the success of renowned international companies.
6 – Investment for Digital Nomads in Hong Kong: Benefit 6 – Low-Cost Investing.
Explanation:
In addition to the tax benefits, Hong Kong offers low-cost investing opportunities. The stamp duty on stock transactions in Hong Kong is relatively low compared to other jurisdictions. Currently, the stamp duty rate for trading Hong Kong stocks is 0.1% of the transaction value.
Example:
Let’s consider a scenario where you want to trade Hong Kong stocks with a transaction value of US$20,000. In this case, the stamp duty cost would be US$20 (0.1% of US$20,000). If you were to trade the same Hong Kong stocks using a US company, the cost would likely be higher due to potentially higher transaction fees and taxes imposed by the US market.
You can read more about how to open a corporate bank account for your firm here.
7 – Conclusion for Hong Kong as an Investment Hub for Digital Nomads.
By incorporating in Hong Kong, investors gain access to a favorable tax environment, financial freedom, global market opportunities, low-cost investing, a robust financial infrastructure, and a high level of safety. These advantages make Hong Kong an attractive destination for investors looking to optimize their investment strategies and expand their global reach. Whether you are an individual investor or a multinational corporation, Hong Kong’s business-friendly environment and extensive financial services ecosystem provide the necessary tools and resources to achieve your investment objectives.
Questions other readers have asked
1 – Do I have to live or work in Hong Kong to be able to invest in Hong Kong?
No, you don’t.
You can also invest as a non-resident, but you still would need some kind of entity (e.g. Hong Kong company) through which you invest your money.
2 – Are my investments safe in Hong Kong?
Yes.
The reason: Hong Kong is known for its financial stability both in terms of banking, but also its reputation around the world which easily gives you access to broker accounts (e.g. Interactive Broker).
3 – What kind of investments can I make in Hong Kong?
All sorts of investments, e.g.
- investment for interest rate,
- investing in stocks (ETFs) or
- silver and gold
are one of many possible ways.
4 – What makes Hong Kong different from other countries?
It depends on the country you invest it in.
Compared to Western countries: You pay lower taxes and if done correctly even 0%.
Compared to other Asian countries: Apart from Hong Kong and Singapore, most Asian countries do not have a reliable financial banking system. Compared to Singapore, Hong Kong offers better tax opportunities and lower costs of company and investment maintenance.