Why starting an online business in Hong Kong as a foreigner?
We have interviewed over a thousand foreign clients from Europe, North America, and Asia and asked them why they have incorporated in Hong Kong. This resulted in 13 reasons.
Introduction
It is easy for us as a Hong Kong accounting firm to list advantages, but let us be honest:
There is a conflict of interest if we do so.
That is why:
It is much better to hear the opinions of others who are in the same boat as you.
Reason 1 for starting a business in Hong Kong: Taxes.
Many of our clients incorporate in Hong Kong to reduce corporate taxes and dividend taxes.
Some of them pay 8.5 to 16.25% per year and some of them pay 0% depending on
- their preference (yes, some of them want to pay taxes – we discuss this in reason 2)
- their business model (offshore or not offshore company model)
If you want to know how much the likelihood is for you to also grant the 0% corporate tax, book a free consultation with one of our tax consultants.
Further reading:
Read more about the prerequisites for obtaining the 0% tax exemption on corporate tax.
Reason 2 for starting a business in Hong Kong: Tax certificate.
Some of our customers want to receive a tax certificate from the tax authorities in Hong Kong to show their home country upon return that they have been paying taxes for the last few years.
Especially, customers from the Western hemisphere in Europe (Germany, Netherlands, France) seem to be the ones who like this option.
Reason 3 for starting a business in Hong Kong: Banking infrastructure/Asset protection.
European customers live in South Eastern Asian countries (Vietnam, Philippines, Malaysia or Indonesia).
Often the big banks or fintech companies that they know from their home countries do not operate there (Wise, Revolut, HSBC, etc.).
Also, some want to use a payment gateway (PayPal, Stripe) for more seamless payments in an e-commerce store without needing bank transfers. Again, some of these are not available in the above-mentioned countries.
Further reading:
Read more about
- how to open an online business bank account in Hong Kong and
- how to protect your assets in a US LCC for non-residents through a Hong Kong LLC.
Reason 4 for starting a business in Hong Kong: Good Reputation.
Customers living in Southeast Asian countries fear that companies in those countries may not be very reputable when doing business with companies in Australia, Germany, or the UK.
Some of them tend then to choose another company in Hong Kong or Singapore.
Reason 5 for starting a business in Hong Kong: Business with China.
A small percentage of our customers do business with China.
They sell and receive goods from China and prefer to have a Hong Kong company to facilitate the transactions and acknowledgment of invoices.
Note:
China and Hong Kong tax and legal legislation laws are under separate legislation, and China does not influence the Hong Kong legal system.
Reason 6 for starting a business in Hong Kong: Good English skills.
In Southeast Asian countries, it becomes hard to manage a company when dealing with tax accountants or bank employees due to limited English.
In Hong Kong, on the other hand, most people speak English, especially in more academic fields. This is also due to the colonization by the British in the past.
Reason 7 for starting a business in Hong Kong: Less red tape.
In some countries, like Vietnam, there is a lot of bureaucracy when opening and maintaining a company.
Whereas in Hong Kong, there are also certain yearly accounting and bookkeeping tasks, but it is very strictly documented and very straightforward.
Further reading:
Read more about how fast and straightforward it is to open a Hong Kong LLC as a non-resident.
Reason 8 for starting a business in Hong Kong: Foreigners are treated equally to locals.
In some Asian countries (Thailand, Vietnam) a foreign-owned company is more under the radar of the authorities, which also raises difficulties in paying out dividends or moving money.
In Hong Kong, there is no two-tier system between local and foreign-owned companies, and foreigners can enjoy the same rights and privileges as locals do.
Reason 9 for starting a business in Hong Kong: Western working culture
Most foreigners like to still enjoy the efficient communication, detail-oriented, and punctual work style that they know from back home.
Although Hong Kong is located in Asia, many people in Hong Kong have very similar work ethics to foreigners.
In other parts of Asia (Thailand, Vietnam, and Cambodia) these work ethics may be different from the West.
Reason 10 for starting a business in Hong Kong: Freedom of money movements.
Moving money in and out of the country is relatively easy without any questions asked by authorities if it is within the law (dividends, invoices, etc.).
In other Asian countries moving money can be very restricted where money entering the country is very easy, but money moving out is very hard.
Reason 11 for starting a business in Hong Kong: No yearly changing laws.
Hong Kong’s laws are very stable and the government and tax authorities do not apply yearly changing laws which could affect businesses.
In Vietnam, the government often opposes new laws for companies, and it will harm the business owner’s focus.
Reason 12 for starting a business in Hong Kong: No additional fees
In Hong Kong, you have a fixed yearly cost that you pay for your accounting service and fixed government fees.
In countries like Vietnam, the government opposes new fees within the year and this has to be paid by all businesses.
Reason 13 for starting a business in Hong Kong: Having a business credit card
Thanks to international banks and fintechs in Hong Kong, business owners of Hong Kong companies can conduct business expenses right from a business credit card while traveling, eating out for business purposes, or paying for Software subscriptions.
In some other countries, it becomes hard for non-residents to obtain a credit card, such as it is in a US LLC.
Further reading:
Read more about the differences between a US LLC and a Hong Kong LLC.
Starting a business in Hong Kong: 5 groups
To make life easier for you, just see whether you fit into these 5 groups of people and read through those reasons below in more detail.
We came up with five groups:
We will describe for each group their living situation, and the reasons for choosing a Hong Kong LLC.
Group 1: The Digital nomads
Living situation:
Digital nomads usually do not have a residence in any country, but still need a company to conduct business with their clients.
Why they incorporate in Hong Kong:
The reasons for choosing a Hong Kong company are mostly:
- Taxes (see reason 1 above)
- Banking infrastructure (see reason 3 above)
- Business credit cards (see reason 13 above)
Further reading:
Read more about the difference between a US LLC and a Hong Kong LLC, and between a Singapore LLC and a Hong Kong LLC.
Group 2: Expats who live in Asia
Living situation:
These are foreigners who have fallen in love with a particular developing country’s culture (or due to partner or family reasons).
Common countries are countries in Latin and South America (Mexico, Chile, etc.) and Southeast Asia (Vietnam, Thailand, Cambodia, etc.). So starting a businesses in Hong Kong is very well-suited for expats living in Asia.
Why starting a business in Hong Kong:
The reasons for choosing a Hong Kong company are similar to the ones of Digital Nomads, but even more:
- Taxes (see reason 1 above)
- Banking infrastructure (see reason 3 above)
- Business credit cards (see reason 13 above)
- Good reputation (see reason 4 above)
- Good English skills (see reason 6 above)
- Less red tape (see reason 7 above)
Group 3: Locals living in developing countries doing business with the West
Living situation:
These are locals living in their home country (Vietnamese, Filipinos) and for instance, they want to start an E-commerce business selling products to Western countries (Australia, Germany, France, etc).
Why starting a business in Hong Kong:
Their primary reason is to use PayPal and Credit card methods (via Stripe) on their website, which are not provided in their home country, so the reasons for incorporating are:
- Banking infrastructure (see reason 3 below)
Group 4: Foreigners/locals living in developed countries.
Living situation:
These are foreigners or locals living in a developed country that has some nice tax rules (Singapore, Portugal) where for example dividends from other countries are not taxed.
Why starting a business in Hong Kong:
They incorporate in Hong Kong for tax purposes (reason 1).
In certain cases, they can reduce their overall tax to 0% while still enjoying the infrastructure and life of the West.
Group 5: Foreigners doing business in Hong Kong or China
Living situation:
Foreigners who conduct business in Hong Kong or with China (suppliers or clients) like print shops or outsourcing of shoes, have daily business activities with Chinese.
Why starting a business in Hong Kong
As in reason 5 above, it facilitates invoicing and money movement.
Conclusions: What is the most common reason?
For most of our clients, taxes seem to be an exciting reason.
But truth be told: It is often a combination of the reasons above.
As taxes and costs are a major part of any business and a person, many other aspects need to be given so they together make it a nice package.
So we found the combination of these four reasons to be very common:
- Taxes: Less money to spend
- Banking infrastructure: More choices for international transactions
- Western working culture: More efficient collaboration and better communication
- Freedom of money movement: Because at the end of the money, the money is yours, and you choose what should be done with it.
