Singapore LLC vs Hong Kong LLC – which is better for your private and business life? We took the time to analyze it for you (written by tax accountants).
Introduction
Many foreigners who live in tax-friendly countries such as Vietnam, Indonesia, or other Asian or South American countries may look for a company structure offshore for
- better investment possibilities
- asset protection
- tax reduction
- better banking and payment possibilities (paypal, stripe, etc.)
Two names often come into the race:
Singapore LLC and Hong Kong LLC.
Facts: How many registered companies in these two offshore hub?
Up to the end of Dec 2024, the number of private companies actively registered:-
Disclaimer:
We are Hong Kong tax accountants, but we will keep this article opinion-free and only share facts. You compare what you need most. If you need further information for your situation regarding a Hong Kong company, feel free to book a call with us.
Singapore LLC vs Hong Kong LLC: Tax rate
We will discuss the most important taxes for you:
- Corporate taxes
- VAT
- Dividend taxes (when paying yourself)
Singapore LLC: How much is the tax rate for a Singapore LLC?
Singapore LLC have 7% to 17% corporate tax depending on the amount of revenue.
But there is an offshore tax exemption of 0% if:
- you manage the company from abroad (meaning: You don’t live in Singapore)
- no local business bank account (meaning: No transactions going through Singapore)
- no economic substance in Singapore (meaning: suppliers, customers, employees, offices, warehouse, etc.)
There is no VAT for B2B services with clients abroad for a Singapore LLC.
This means if your clients are abroad in Germany and Switzerland, then there will be 0% VAT on the invoice.
Dividends are taxed 0% in Singapore if you live abroad. This means you will only taxed in the country where you live (in case they tax dividends from abroad – there are countries who don’t).
Hong Kong LLC: How much is the tax rate for a Hong Kong LLC?
This is very similar to a Singapore LLC with a few differences.
The corporate tax is 8.25% to 16.5% depending on the amount, so slightly less than Singapore if you make more money.
Hong Kong also offers 0% corporate tax if all of your clients are not from Hong Kong which has the requirements such as
- you manage the company from abroad
- no economic substance clients in Hong Kong (meaning: suppliers, customers, employees, offices, warehouse, etc.)
KEY DIFFERENCE ON OFFSHORE POLICY
You may have noticed that you certainly may have a local business bank account (HSBC or Airwallex) and still have an offshore exemption. Funds and transactions can be kept and processed within Hong Kong freely. This is a key difference with a Singapore LLC.
In terms of VAT, a Hong Kong LLC also has 0% VAT for B2B clients from abroad.
Hong Kong also does not tax dividends and has a 0%-policy.
Singapore LLC vs Hong Kong LLC: Mandatory requirements
Both Singapore and Hong Kong company are very highly regarded around the world due to their very strict due-dilligence of the business owner and mandatory requirements.
Singapore LLC: Mandatory requirements
A Singapore company can be only formed by having a
- shareholder
- local director
- local secretary
The shareholder and the director can be the same person if the person is a Singapore resident.
In case you are a foreigner living abroad and open a company in Singapore, this means that you can be 100% shareholder, but you cannot be the sole director. Instead, your company must appoint at least one local director no matter it is a nominee or real director
Other mandatory todos per year include:
- Tax filing
- Bookkeeping
- Financial statement filing
Hong Kong LLC: Mandatory requirements
In Hong Kong the company needs
- a shareholder
- a director
- a local secretary
KEY DIFFERENCE ON COMPANY STRUCTURE
The big difference to a Singapore LLC is that the shareholder and the director can be both a foreigner. This is one of the reasons why some of our clients chose a Hong Kong LLC over a Singapore LLC as they want to be the director themselves, especially when it comes to working in the B2B sphere.
The secretary has to be a person from Hong Kong, which must be a TCSP licensee like us. This is similar to Singapore.
Other than that also Hong Kong follows strict rules when it comes to maintenance such as tax filling, bookkeeping and audit.
Singapore LLC vs Hong Kong LLC: Costs
Both companies have two types of costs.
The setup cost and the maintenance cost (including audit, tax planning etc.).
Singapore LLC: How much does a Singapore company cost yearly?
A Singapore company costs for the setup around USD 1000 to USD 2000.
For the maintenance of a Singapore LLC, you are looking at USD 3000 to USD 5000 yearly costs.
Hong Kong LLC: How much does a Hong Kong LLC cost yearly?
A Hong Kong LLC costs the same for the setup.
For the maintenance, you may be looking around USD 3000 yearly.
The small difference may be due to the fact that in Singapore a local director and secretary is mandatory, whereas in Hong Kong only the latter (a secretary) is mandatory.
Singapore LLC vs Hong Kong LLC: How do I pay myself?
If you are a foreigner living abroad, it is probably advisable in both scenarios to pay dividends
Singapore LLC: Dividend payout
In Singapore, the dividend payout is quite strict and very much regulated.
Mostly it should be done in 6-month or yearly phases.
You could negotiate with the tax authorities to have it in 3-month phases.
Hong Kong LLC: Dividend payout
There are no rules or regulations about when and how many times you pay yourself the dividends, which is completely up to the management while there is no tax and banking implication
So you could basically pay yourself dividends monthly or whenever you need (almost as if it is salary but declared as dividends with tax benefits).
This is also what we recommend to our clients – if you want to how this can work for you, book a call with us, and we guide you through the process.
Singapore LLC vs Hong Kong LLC: Choosing the right service provider
In both Singapore and Hong Kong, there are many agencies (middle man) who are not tax accountants or legal experts who help you to open and maintain your company.
These agencies usually do not obtain the knowledge themselves and often outsource the tax-related work to subcontractors (tax accountants).
Often this three-way communication can lead to
- longer communication
- false portrait information
In both cases, you may want to also see whether a tax accounting firm is the better option for you.
In case, you need one in Hong Kong, feel free to contact us.
