June 29th, 2021 by Vivian Au
June 24th, 2021 by Vivian Au
Hong Kong is a business powerhouse.
Its free economy and limited regulations combined with its proximity to the Asian market make it a hotbed for some of the most productive, and profitable, businesses in the world.
Hong Kong’s economic keystone is its limited government intervention.
For example, incorporating in Hong Kong – the most Western-like economic region of Hong Kong – involves a corporate tax rate of around 16%, which is a fraction of the rate companies typically pay in Western nations.
In today’s economic climate where many companies are struggling to simply stay afloat, paying 5% less in taxes could mean the difference between weathering the storm and being forced into liquidation.
Either way, there are plenty of good reasons to register your company in Hong Kong, but how does it work?
What are the requirements, how long does it take, and is there anything that you should be aware of?
Will you be able to afford it, given that registration is a requirement of doing business in the world’s second-largest economy?
Australia’s Legal Perspective
Australia’s government is happy to see its corporate citizens registering in other countries.
This is because such registration is essential to operate legally in other countries, and this leads to Australian prestige and prosperity (and tax revenue).
Note that registration is not the same as incorporation – if you’re looking to dodge Australian taxes, consider incorporating your company in Hong Kong instead of merely registering.
Registering your Australian company in Hong Kong is essentially saying, “Hi, Hong Kong.
I’m an Australian company, I’m here, and I’d like to legally operate a business, pay taxes, obey the laws, et cetera.”
This is not the same as incorporating.
When you incorporate your Australian company in Hong Kong, you are creating a new entity (or changing the “citizenship” of an old one).
In effect, you are making a Hong Kong company – even though it may not be owned or even operated by any Hong Kong citizen.
This allows you to take advantage of cheaper corporate taxes in Hong Kong, but again this is very different from registration.
Hong Kong Registration Requirements
Hong Kong has made no secret of its desire for foreign investment and trade, and the Hong Kong financial system is a perfect example of how far Hong Kong is willing to go to get investments.
Hong Kong enjoys a variety of regulatory and tax advantages that make it an attractive location to register your company in Hong Kong, and registering in Hong Kong has very few requirements.
The Hong Kong Company Registry Office explains registration requirements here, but in general, companies registering in Hong Kong must:
- Have a valid name (this should be simple, but as Apple discovered with its iPads in Hong Kong, you never know). Hong Kong’s Company Register Office released a pdf with naming guidelines to help.
- Decide whether or not your company will be limited by shares or guarantees. The difference is explained on the Hong Kong Company Registry website as the following:
- Company limited by shares – the liability of members is limited by the articles of association to the amount unpaid on the shares respectively held by them.
- Company limited by guarantee – no share capital and the liability of members is limited by the articles of association to the amount that the members respectively undertake to contribute to the assets of the company in the event of its being wound up. Non-profit-making organizations are usually registered as guarantee companies.
- Register the following forms electronically (or deliver them in person):
- Form NN1 – Application for Registration of a non-Hong Kong company
- Your certified business charter or equivalent
- A certified copy of the company’s Certificate of Incorporation or equivalent
- A certified copy of the company’s latest published accounts
- Notice to the Business Registration Office (IRBB2)
- Collect their Certificates of Registration if their registration is approved. This can be done electronically or in person.
Once all of these requirements are met, registration typically occurs within a week.
Answers to some additional questions can be found in the Hong Kong Company Registry Office’s FAQ.
Additional resources can be found on the Hong Kong Companies Registry such as this useful registration guide, this price guide, and this business registration fee and levy table.
Logistics and Conclusion
Now you know the basic requirements and reasoning behind registering in Hong Kong.
Technically, you can undertake all these tasks on your own, but many companies in Hong Kong specialize in helping foreign companies register or incorporate there.
These companies are highly specialized, and they can guide you through registration, incorporation, and a wide variety of other legal loopholes.
They often offer additional services such as providing a legally permissible building for a corporate office, providing corporate secretaries, etcetera.
This guidance can be invaluable because registration in Hong Kong can be logistically challenging as you might have guessed.
Additionally, their expertise and experience can guide you through any unexpected you encounter along the way.
Registering in another country is a major legal action necessary to grow into a multinational.
You should always consult a lawyer or legal team before making any major legal decisions on your own.
In Hong Kong all businesses will require a company secretary that will help facilitate incorporation.
Register with Air Corporate today and get your business registration approved in less than 48 hours.
June 22nd, 2021 by Vivian Au
Hong Kong is one of the fastest-growing financial hubs in the world and the 7th largest trading entity.
Companies see various benefits expanding to Hong Kong with its investment-friendly climate, limited government intervention, and a favorable tax system.
However, when hiring and compensating employees, Hong Kong’s payroll policies can seem quite complicated.
So, how should companies approach payroll in Hong Kong?
What are the main challenges, and how can they be overcome?
The Employment Ordinance
The Employment Ordinance seems to be the greatest guide in Hong Kong when it comes to the different types of employment and the minimum entitlements of every employee.
These entitlements include severance pay, sick pay, maternity leave to name a few.
The two types of employment contracts in Hong Kong are the employment contract and the continuous employment contract.
Employees are considered to be on a continuous employment contract if they work 18 hours a week for more than four weeks for the employer.
Such a contract guarantees more rights to the employee.
Employers must also inform the Inland Revenue Department of any new hires within three months from when they begin employment by the employer.
Employers are also required to keep records of their employee’s wages and all payroll records for the past seven years.
Compensation and Working Hours
Compensation packages in Hong Kong are extremely flexible and are stipulated in the employment contract.
The employment contract also stipulates work hours and days required of the employee.
While a typical working week usually lasts from 9 am to 6 pm, Monday to Friday, there are no statutory working hours.
The Employment Ordinance only prescribes a minimum of 1 rest day in a period of 7 days.
Furthermore, employees can be compensated in many ways, from a salary to a range of benefits.
There are no limitations to the way employers can compensate their employees.
However, employers must pay their wages by the end of the last day of the wage period.
If employers take seven days longer than the last day, they must pay interest on the delayed wages or face legal reprimands.
There is currently a corporate tax rate of 16.5% on every business in Hong Kong.
However, there is no income tax withholding at the source via payroll throughout the tax year.
This means that the employee has to file and pay their own taxes to the Inland Revenue Department.
However, the employer is required to notify the Inland Revenue Department if an employee intends to leave Hong Kong one month before the intended leaving date.
The Inland Revenue Department will withhold any salaries or payments to that employee until a ‘letter of release’ is issued.
This will be after they have recovered the reinvent tax owed by that employee.
All employees and employers in Hong Kong must contribute to the Mandatory Provident Fund (MPF), a pension fund put in place by the government.
The MPF applies to all employees in Hong Kong who have a contract of employment of more than 60 days and all self-employed people between the ages of 18 and 65.
Additionally, certain exemptions exist, such as foreign citizens only working in Hong Kong for less than 13 months.
Both the employer and the employee must contribute 5% of the employee’s relative income subject to minimum and maximum relative income levels.
For example, for an employee paid every month, a minimum of $7,100 up to a maximum of $30,000 must be contributed to the MPF.
You can learn more about paying your employee’s MPF here.
Reporting is an extremely important aspect of payroll and is required both on a monthly and yearly basis.
On a monthly basis, a remittance statement must be submitted on the 10th of each month.
This can be submitted both electronically and manually.
The Mandatory Provident Fund Payment is also required on the 10th of each month.
In addition, at the end of every tax year, forms BIR56A and IR56B must be submitted.
These are essentially the annual returns that the employer must submit that report employee remuneration and pensions.
You can find out more information about the Inland Revenue Department forms here.
Setting up a Business in Hong Kong
Haven’t quite opened your business in Hong Kong yet?
You can set up a business in Hong Kong through the following ways:
- A representative office
- A branch office
- A registered subsidiary company
Registering a company and establishing a legal entity in Hong Kong is a very simple process.
All applications for company incorporation and business registration alongside their respective fees are available online and processed within an hour.
You can learn more about setting up a business in Hong Kong here.
A company does not have to pay employees through an in-country bank account.
When it comes to paying employees, companies are more than welcome to make payments using bank transfers.
These payments may, however, take longer as international transfers can take up to 7 days.
However, companies are required to have corporate bank accounts in Hong Kong.
Additionally, payments made to the Mandatory Provident Fund (MPF) must be made through an in-country bank account.
Here is what you should keep in mind:
- Employers do not need to withhold income tax but must withhold social security contributions.
- Employees are responsible for reporting their own income and filing their own taxes.
- Employees must contribute 5% of their salaries to the MPF, and employers must do the same. These contributions can be from a minimum of $7100 to a maximum of $30000.
- Reporting to the Inland Revenue Department is essential and must be done regularly on a monthly and yearly basis.
- Payroll in Hong Kong can be quite complicated, and understanding the legislation is essential to structuring employment contracts and capitalizing on expanding into Hong Kong.
- Many outsource their payroll to global payroll providers who ensure compliance with payroll legislation, pay employees promptly and keep appropriate records where necessary.
Want to ensure your company complies with payroll legislation?
Register your company in Hong Kong with Air Corporate today so we can handle all your payroll needs!
Focus on your business. We focus on the rest.
June 17th, 2021 by Vivian Au
Over the years, Hong Kong has become a kind of business mecca, offering an attractive tax system for corporations, a diverse city life, and a heady mix of high tech and old culture.
When it comes to working in Hong Kong, the toughest part is getting a job.
The competition is high amongst Chinese nationals and foreign transplants, with highly skilled bankers and finance professionals as the most desirable hires.
However, once you’ve secured a job in Hong Kong what comes next?
What requirements are there for expats to work in Hong Kong?
Applying for a Hong Kong Work Visa
While the requirements for a Hong Kong visa are comparatively tough, the good news is that if you meet the requirements the process itself is both quick-moving and free of charge.
To move to Hong Kong for work, you must apply for a work visa under the General Employment Policy (GEP) either by mail or in person.
There are, however, certain qualifications that should be met before applying.
- Having already secured a position with a financially stable employer based in Hong Kong
- Present unique qualifications and relevant work skills
- Your offered salary is comparable to local standards
- The company can show that your position is not fillable by comparable local talent
- You can demonstrate that you are financially stable
With this type of visa, there is no quota system in place that limits the number available, so if you have the proper qualifications and a job offer, you’re in a good position.
These visas are issued for a one-year period with the option to renew.
When you have your qualifications lined up, it’s time to submit paperwork.
There is a required set of paperwork from the hiring company, so be sure that they have this lined up.
An applicant can then visit the Immigration Department Headquarters official website www.immd.gov.hk., and to find and submit the following:
- ID 990A Visa Application Form
- Copy of valid passport with personal information
- Copies of academic records, certifications, and/or relevant work experience
- Copy of proof of overseas residence
Once all documentation is received, the visa process itself takes from two to four weeks.
Even with all of the appropriate documentation, the director of immigration has the right to reject any application.
There are several other pathways to obtaining a visa in Hong Kong.
These include admission schemes for professionals, entrepreneurs, or working holidays. We’ll take a brief look at the requirements for each.
Professionals Working in Hong Kong
For those who possess certain valuable skills or work experience, it is possible to apply to work in Hong Kong under the General Employment Policy.
While there are no restrictions in place as far as job type, there are three requirements that must be fulfilled.
The applicant must have secured a job that is not fillable by local workers, have a good educational background (at least an undergraduate degree, with preference to graduate degrees) or a comparable work experience, and their offered remuneration package must be on par with current market rates.
For those with capital looking to establish a business or join up with an existing business in Hong Kong, an employment visa is available if the applicant meets the following requirements:
- Proof that they can make a significant contribution to the economy of Hong Kong
- A strong educational background, business experience, or technical qualifications
- Special preference will be given to those who are looking to join their start-up venture with an existing government-backed program
It is also important to be able to show the numbers behind the plan.
Have the following things ready for assessment by authorities:
- A solid business plan
- The number of expected jobs to be created
- Investment sum,
- Financial resources
- The skills or tech will be introduced through your start-up.
Working Holiday Visa
For passport holders between the ages of 18 and 30, it is possible to obtain a working holiday visa.
This program was created to encourage cultural and educational exchange and to strengthen bilateral relationships.
Those who are visiting the country for pleasure may apply so that they can take short-term employment or participate in a training course in Hong Kong.
This program does have a quota attached and works on a first come first serve basis.
A Few Other Things to Consider
If you’ve procured a visa based on the employment for professionals scheme, your visa is directly tied to your employer and non-transferrable.
If you want to change employers, you must first apply through the Immigration Department using an “Application for Change of Employment” form.
A visa must be renewed according to the schedule set down by your employment.
It typically follows a 2-2-3 year pattern, and you have to be sure that your application is completed a full month before the visa is set to expire.
If you have a spouse and/or dependent children and want them in Hong Kong, you have to file an application for each family member.
The length of stay inherent in each family visa is tied to the length of time on the professional visa.
While residing in Hong Kong, family members are permitted to work or study as they wish.
Applying for Permanent Residence
For those who have entered Hong Kong under an employment scheme and resided in the city for at least seven years, eligibility opens for “Right to Abode” or a permanent residency.
If the applicant is able to meet all criteria (as found on the official immigration website), they can be approved to make Hong Kong their permanent home.
While jobs can be competitive, visas in Hong Kong are not too difficult to obtain for those with excellent educational or professional credentials.
Just be sure to have all of the required information ready, and work through the process step-by-step with your hiring company to ensure a smooth transition into Hong Kong worklife.
Collecting Your Hong Kong ID
Remember to collect your HKID once you’ve been awarded an employment visa.
You’ll have 30 days from landing in Hong Kong to do so under your new visa.
Own a business and need help getting visa applications for your foreign employees?
It pays to have a good company secretary to get your back.
Register your business with Air Corporate today and get a full suite of business services including Visa application support.
June 15th, 2021 by Vivian Au
All foreigners living in Hong Kong are required to register for a smart Hong Kong identity card.
Regardless of the length of your stay, if you plan to live in Hong Kong, you will need to apply for one within the first 30 days of landing in Hong Kong.
Not only is having an HKID a requirement for residential reasons, but it is also a key document required for business transactions and incorporating a company in Hong Kong.
This article will outline everything you need to know about getting a HKID and why you need one.
What is a HKID?
A HKID is a smart identity card legally required by all non-permanent residents in Hong Kong.
It is a form of identification issued by the Immigration Department of Hong Kong.
Every HKID has a microchip inserted that functions as both a form of identification and used for other purposes such as a library card, medical card, etc.
While the document does not replace other traditional forms of identification and immigration documents, all Hong Kong residents must carry their HKID with them at all times.
What does it look like?
An HKID is about the size of a credit card and has a microchip inserted in it, which stores data regarding your immigration status, biometrics, and other personal information.
It is a smart identity card with multiple technological features, including card durability and the chip technology already described.
Why do you need a HKID?
- You are required to have an HKID to stay as a non-permanent resident in Hong Kong and are expected to carry it with you at all times.
- The data stored on the HKID through the microchip helps prevent cards from being stolen, lost, or tampered with.
- You can use an HKID to make non-immigration-related applications as well.
- You can use the HKID for all electronic government services such as the Automated Passenger Clearance System and Automated Vehicle Clearance System.
- You can open a bank account through a HKID.
- You can use the HKID to look and apply for jobs, and it is an important identification document during the recruitment process.
Who can apply for one?
An HKID is mandatory for all residents from the age of 11 and above who have resided in Hong Kong for more than 180 days.
The HKID is issued to residents who have the right of abode (ROA) in Hong Kong.
It is mandatory to have an HKID within 30 days of turning 11 years old or within 30 days of your arrival date in Hong Kong.
HKID and Residency
Having a Hong Kong ID is the physical proof of your residency in Hong Kong.
There are different levels of residency in Hong Kong, but the two you only need to know about are Permanent and Non-Permanent Residency.
Generally speaking, if you are a foreigner and do not have any family sponsorship in Hong Kong, you will first begin your HK residency as a Non-permanent Resident.
This is a restricted version of Hong Kong’s regular Permanent Residency status.
Both residency statuses require a HKID.
The difference between them is generally that Non-permanent Resident HKID holders require a visa to support their legal stay in Hong Kong, whereas Permanent Residents do not.
Non-permanent residents are however generally treated the same as permanent residents in Hong Kong with some minor differences.
Non-permanent Residents cannot:
- Partake in elections
- Apply for housing subsidy (unless given approval)
- Have the Right of Abode
- Hold public office
Non-permanent Residents most commonly become permanent residents by either staying in Hong Kong legally for 7 years, marrying a permanent resident, or naturalizing themselves as Chinese citizens.
One unique benefit of being a non-permanent resident in Hong Kong versus many other countries is that even as a visa-holder with a foreign nationality, HKID holders may use their HKID to enter Hong Kong customs and immigration border control with only their ID card.
How to make an application:
Step 1: Book an appointment online or in-person
- Avoid queues by making an appointment online with the Hong Kong Immigration Department.
- You can only register a maximum of four people for a single appointment. (For dependents and children of dependents)
- It is advised to make an appointment earlier to your visit as the appointment booking period is 24 working days.
Step 2: Collect all the necessary documents.
- Submit your application form and provide the necessary details
- Bring valid travel documentation, including your visa, which proves that you have legally entered the country and are permitted to reside in Hong Kong.
- Provide a birth certificate of all children from the ages of 11-17 years old
Step 3: Visit the Registration of Persons Offices
- Obtain and fill out the application form. You can find and complete one at the Office or download the application form here.
- Make sure you have all the required documents before applying.
- The HKID is ready within ten working days.
How long is a HKID valid for?
Hong Kong Identity Cards themselves have no expiration date, but you may be requested to retrieve a new card when newer, updated cards are released.
As a non-permanent resident, your HKID is only valid during your Visa’s length of stay.
What happens if you lose or damage your HKID?
It is extremely important to take care of your HKID, keep it in a protective holder and make sure not to bend, break, tamper with or test it with a magnet.
If you lose or damage your HKID, you need to apply for an HKID replacement to the Registration of Persons Office within 14 days of the loss/damage, and you will also be charged a fee of HK$370 for the HKID replacement.
Back to you
Here’s what you should keep in mind:
- A HKID is a smart identity card legally required by all non-permanent residents in Hong Kong.
- A HKID has a microchip inserted in it, which stores data regarding your immigration status, biometrics, and other personal information.
- A HKID is mandatory for all residents from the age of 11 and above who have resided in Hong Kong for more than 180 days.
- You need to book an appointment and submit your application to the Registration of Persons Office to apply for your HKID
- If you lose or damage your HKID, you will have to apply for a replacement card and pay a fee of HK$370
Are you looking to apply for a HKID? Register with Air Corporate today and get your HKID!
June 11th, 2021 by Vivian Au
The rise of digital nomads can be witnessed during the Covid-19 pandemic due to travel restrictions and remote working.
The quick adoption of technology has been the key factor in this rise, making digital nomadism even more free and flexible.
It has also been predicted that the number of digital nomads will increase to one billion by the year 2035.
This article will outline what to consider when selecting a country and list the 10 best countries to register your business as a digital nomad.
What is a digital nomad?
A digital nomad is an individual with a location-independent job that is usually conducted online through the use of telecommunication technologies.
They usually work remotely from a different country than the country where their business is registered.
The most common reason why people opt for this to earn a living is due to flexibility and financial independence.
Examples of digital nomads include entrepreneurs, bloggers, writers, developers, SEO and IT consultants, and digital marketing specialists.
What should I consider when selecting a company?
When deciding which country is best to register your business as a digital nomad, you need to examine your business and assess whether the country is suitable for the kind of business you have.
To do so, you should keep the following questions in mind:
- Do you have to pay income tax on the income earned to the country your customers and suppliers live in?
- Do you have to comply with any Controlled Foreign Corporation rules that require you to disclose your banking information which could potentially impact your tax liabilities?
- Is there a Double-Tax Agreement between the company country and your resident country protecting you from getting taxed twice on your income?
- Is the country politically and economically stable?
- Can you use an established, recognized payment aggregator to handle international payments to and from the company?
1. Hong Kong
The number of digital nomads setting up their business in Hong Kong has rapidly increased over the last few years due to the country’s numerous tax advantages.
The tax benefits include 0% income tax on offshore companies compared to the 16.5% income tax rates for domestic companies.
Hong Kong also has a great pro-business environment and low barriers to entry which makes it extremely easy to register your business.
Moreover, there are fewer restrictions on foreign businesses than most countries, along with low audit costs, no sales tax, and no CFC rules to comply with.
Additionally, capital gains and dividends received are, in most cases, exempt from being taxed.
Digital nomads also benefit from access to the Chinese market due to the Closer Economic Partnership Agreement between Hong Kong and China.
Lastly, the country has many approved payment aggregators such as Paypal and Stripe.
You can learn more about incorporating an offshore company in Hong Kong here.
Singapore attracts strong trade and investment opportunities due to the number of benefits of registering a company there as a digital nomad.
Firstly, the country offers numerous tax benefits that are ideal for a digital nomad.
This includes several tax incentives for companies, no corporate gains tax, and start-ups not required to pay some taxes for the first three years of business.
Additionally, the country offers a convenient company incorporation process, a wide range of banking facilities, a large market for investors, and a stable economy with the GDP being higher than most developed countries.
Registering your business as a digital nomad in Malta is an attractive opportunity as the tax rate can go down to 5% after applying all the grants and tax relief programs offered.
Additionally, digital nomads can benefit from the multiple banking opportunities and trade agreements with the EU.
Malta is also the cheapest country to get a transferable business license in the European Union (EU).
Lastly, there are no exchange controls imposed on companies registered in Malta.
Andorra’s new digital nomad law gives rise to greater investment opportunities, sustainability, and innovation to remote and digital businesses.
Not only is Andorra going through a major digital transformation, but the country also offers political, economic, and legal security alongside a competitive and internationally approved tax system which puts the country at a huge advantage compared to other European countries.
Additionally, when registering your business as a digital nomad in Andorra, you do not need to have any local shareholders, which allows the company to be completely foreign-owned.
5. United Kingdom
The UK is one of the most advanced e-commerce markets in Europe and has attracted many digital nomads setting up their e-commerce business in the country.
E-commerce is one of the most thriving industries where a business can function completely remotely and is not impacted by the pandemic.
The company registration process in the UK is also quite simple, with a fee of as little as 12 pounds giving you access to a competitive global market.
You can also set up a remote corporate bank account through any payment service provider.
The UK also places a comparatively lower tax burden on the owners and directors of a limited company than other European countries.
Additionally, the UK is a signatory to multiple double taxation treaties, which prevent you from getting taxed on your income twice.
6. The British Virgin Islands
The British Virgin Islands are a long-standing established offshore center and have also been recognized as the most reputable country to incorporate your company compared to any other offshore jurisdiction, especially if you are an internet entrepreneur.
A major benefit of registering your company in the British Virgin Islands is that you can pair your international business company with a corporate bank account in another reputable jurisdiction.
These jurisdictions include Hong Kong and Singapore.
Most importantly, nearly 41% of offshore companies worldwide have been incorporated in the British Virgin Islands, which speaks volumes of the country’s reputation and business confidence.
Things are changing in the BVI however.
Check out these 4 reasons why you might not want to register in the British Virgin Islands.
Denmark is one of the easiest countries to register your business in Europe.
The country offers great flexibility allowing you to easily change your employment structure which ultimately reduces the costs of scaling your business functions up or down.
This makes Denmark a great option for those within the consultancy and coaching industries due to the flexibility with hiring and firing.
Moreover, the incorporation process only takes a few days, and there are no residential requirements for company management, such as the CEO and company shareholders and directors.
Lastly, registering your business in Denmark as a digital nomad offers you flexibility and many tax benefits.
The biggest advantage for setting up a business as a digital nomad in Norway is that a corporate bank account and a business can be incorporated completely remotely, eliminating the requirement to travel to Norway.
It is a common misconception that because Norway is not a part of the European Union, the country is disadvantaged.
However, the country still holds unrestricted access to the EU market as a member of the European Economic Area (EEA).
Moreover, all communication with the government can be done digitally.
Additionally, it is one of the wealthiest and most financially, economically, and politically stable countries globally, taking into account the Covid-19 pandemic.
Belize has been recognized as one of the most tax-friendly jurisdictions globally that offer asset protection through offshore banking.
The numerous benefits of registering a company as a digital nomad are guaranteed privacy and confidentiality, financial stability, and international banking.
It only takes 1-2 days to register a company in Belize along with a remote corporate bank account.
10. New Zealand
New Zealand is also considered to be one of the easiest countries to conduct business activity.
The number one reason why is that incorporating your business only takes one day, along with registering property in two days.
Additionally, the labor costs are low, although the workforce is highly qualified.
The tax benefits include no payroll, capital gains tax, or social security tax, allowing you to retain profits.
Despite the country not being assumed as a traditional offshore center or a specific country to register your business as a digital nomad, it still provides all the advantages of an offshore jurisdiction.
Additionally, New Zealand is not perceived by the OECD as a ‘harmful tax jurisdiction’ as it does not have a negative business reputation in terms of offshore banking.
There are also no foreign exchange controls in New Zealand, except for approval for specific investment types.
Here is what you should keep in mind:
- A digital nomad is an individual with a location-independent job that is usually conducted online through the use of telecommunication technologies.
- Where you register your company as a digital nomad is extremely important and depends on the type of business you have.
- There are a number of factors to consider when deciding where to register your company as a digital nomad.
Register your company in Hong Kong with Air Corporate and get to business quickly so you can start your nomadic journey.
Focus on your business. We take care of the rest.
June 9th, 2021 by Vivian Au
Once you have started a business venture in Hong Kong and have employees on the payroll, it is time to familiarize yourself with the obligations you must fulfill as an employer.
Making contributions to the Mandatory Provident Fund (MPF) is one of the key responsibilities an employer must discharge in Hong Kong.
In simple terms, MPF is a retirement investment plan to safeguard the interests of the employees once they retire.
The pension scheme is outsourced to a private trustee and is supervised by the Mandatory Provident Fund Schemes Authority (MPFA).
MPFA has an obligation to ensure that the approved trustees administer schemes properly.
Here’s a detailed guide to understanding how MPF works and what you need to do to contribute.
What is MPF, and who are the beneficiaries of MPF?
MPF was started by the Hong Kong government back in 1995.
The objective of MPF is to create a mandatory retirement savings scheme to support the retired workforce.
The beneficiaries of MPF include employees and self-employed persons in Hong Kong between the ages of 18 to 64.
Moreover, such employees should be employed for 60 days or more under a continuous employment contract, or work as casual employees hired on a day-to-day basis in the construction and catering industry, or for hired for less than 60 days.
There are different types of MPF schemes available.
As an employer, you must choose one and mandatorily enroll your employees.
While selecting a scheme, you should be mindful about:
- The fees and charges you’d need to pay under the scheme
- Type of funds each scheme provides
- Customer service provided by the trustee of a scheme
Employers are also encouraged to consult with their employees before locking in a scheme.
What are the different types of MPF schemes available?
- Master Trust Schemes: This is the most common type of MPF scheme, which involves pooling contributions from various employers and scheme members. The objective of the investment is to enjoy economies of scale and a better governance structure.
- Employer-sponsored Schemes: Employees of a single employer, including the subsidiaries and associated companies, can get the benefits under this scheme. This scheme works better for larger corporate entities. However, personal accounts are not permitted to be set up.
- Industry Schemes: This scheme is specifically meant for casual employees who work in the construction and catering sectors. Typically, such employees are hired on a day-to-day basis or a period of less than 60 days.
Are there any employees who are exempt from the benefits of MPF?
Yes. These include:
- Domestic employees
- Employees who are covered under other statutory pension or provident fund schemes
- Non-permanent residents of Hong Kong who reside in Hong Kong for less than 13 months or avail of the benefits under overseas retirement schemes
MPF Account Types
There are three types of MPF accounts:
- Contribution account: This is the account into which an employer makes the mandatory contributions.
- Personal account: This account of the employee receives the MPF transferred from the contribution account of the present employer and MPF from previous employers.
- TVC account: If you are a contribution account holder or a personal account holder under an MPF scheme, you can open a TVC account. The contributions made to this account are eligible for a tax deduction and can be made to the trustee directly.
As an employer, how much do I need to contribute to the MPF?
Both you and the employees on your roll need to make mandatory contributions of 5% of the employee’s relevant income.
In this context, the relevant income includes wages, allowances, commissions, bonuses, gratuities, perquisites or allowances, and tips.
This amount is deposited to the employee’s MPF account, subject to the relevant maximum and minimum income levels.
For employees who receive a monthly salary, the current maximum and minimum relevant income levels are HKD 30,000 and HKD 7,100 respectively.
Here’s a handy table to calculate your contribution:
||Employer’s Mandatory Contribution
||Employee’s Mandatory Contribution
|Less than $7,100
||Relevant income x 5%
| Between HKD 7,000 to HKD 30,000
||Relevant income x 5%
||Relevant income x 5%
|More than HKD 30,000
Employers also must deduct the contribution from the employee for a particular contribution period and deposit the same into the account.
If you pay your employees on a daily, weekly, or bi-monthly basis, then you need to calculate the minimum and maximum relevant income levels of the relevant wage period by accounting for the daily minimum and maximum relevant income levels of HKD 280 and HKD 1,000, respectively.
The contributions made are as follows:
|Relevant Income of Employee
||Employer’s Mandatory Contribution
||Employee’s Mandatory Contribution
|Less than the minimum level ($280 x number of days in the wage period)
||Relevant income x 5%
|Between the minimum and maximum levels
||Relevant income x 5%
||Relevant income x 5%
|More than the maximum level ($1,000 x number of days in the wage period)
||Maximum level x 5%
||Maximum level x 5%
What happens if the employer fails to make a contribution to MPF?
If you fail to deposit the mandatory contribution, the trustee will report the default to MPFA, who is free to issue a default notice to recover the amount plus 5% default interest.
If you fail to rectify the default, MPFA can impose a penalty or initiate legal proceedings on behalf of your employees to recover the contributions and surcharges.
Choosing an MPF Provider
Here’s a list of the approved MPF trustees (as on date) that you can choose from.
Since the scheme is for the benefit of your employees, always opt for a trustee who can provide the relevant services that suit their needs for commensurate fees.
The suitability of the fund for your organization is a critical factor and the quality of service delivered.
Enrolling Employees in MPF Schemes
Every employer must enroll all full-time and part-time employees between the age of 18 to 64 and be employed continuously for 60 days or more in an MPF scheme.
The enrollment should be completed within the first 60 days of their employment, starting, from the first day of the employment as per the calendar.
For example, if Mr. X’s first day of employment is 20 June, then his enrolment in an MPF scheme should be completed by 18 August, the 60th day from the first day of employment.
You must provide an enrolment form for the relevant scheme to the employees.
The following details should be filled up in the form:
- Particulars of the MPF fund selected
- personal details of the employee
- Self-certification about whether the employee is a tax resident outside Hong Kong
- Specimen signature of the employee
The duly filled forms should be submitted to the trustee to initiate the account opening process.
Usually, employers provide the employees to read through the details of the funds offered by a specific MPF scheme and decide which ones they would like to invest in.
If the employees don’t choose one, employers can make contributions as per the default investment strategy.
Failure to enroll the employees within the specified timelines attracts action from MPFA.
When to Pay MPF Contributions
If your employees are paid on a monthly basis, you should make your contribution on the 10th day of each month.
For example, the contribution for June should be deposited to the account on or before July 10.
A record of the monthly contribution should be provided to every employee within seven working days.
Additionally, an annual benefit statement should be provided to the employees within three months from the end of a financial period.
You can make the contribution either through Direct Debit Authorisation from your account or deposit a cheque.
Please note that while your obligation to pay your contribution kicks in from an employee’s first day of employment, they enjoy a 30-day contribution break.
This allows them to not make any contribution for the first 30 days of employment.
Do I need to contribute if I am terminating an employee?
You would still need to pay the last contribution before the services are terminated and report it along with other contributions to the trustee.
You will also need to notify the MPF trustee about the termination in writing.
Can I claim a tax deduction against employer contribution to MPF?
Every Hong Kong company can claim tax deduction not exceeding 15 percent of your employee’s annual income under Profits Tax.
You’ll need to file the relevant forms with Inland Revenue Department.
Need help with setting up your Hong Kong Company?
Setting up a brand new corporate entity in Hong Kong is easier than you think.
With Air Corporate’s super-efficient Remote Company Incorporation services, you can rest assured about opening a company in Hong Kong from any part of the world.
Our team of experts is here to address all queries about starting and running your own business in Hong Kong, including how to choose the suitable MPF scheme.
So don’t wait up — get in touch right away!
June 4th, 2021 by Vivian Au
Have you ever considered offshore banking or wondered how you could legally lower your tax rate?
Did the Panama Papers leak make you question the legality of offshore companies?
Are you worried that you might be doing something illegal?
This article will debunk common misconceptions and answer all your questions regarding the legality of offshore company formation in Hong Kong.
Hong Kong offers the greatest incorporation benefits within the Asia Pacific region, as residency and high taxes are not a limitation.
You can learn more about the benefits of registering your company in Hong Kong here.
As a result of benefits, including its strategic location and pro-business environment, Hong Kong has become an extremely popular country to set up an offshore company.
What is an offshore company?
An offshore company is one that is set up to operate outside the jurisdiction and location of its operation and ultimate ownership.
Essentially, the company is registered in a different country from the country of residence of its stakeholders, whereas an onshore company is a domestic company that operates within the borders of the country of its incorporation.
Therefore, an offshore company allows you to hold assets in overseas countries, and such assets can range from real estate, financial investment, and company shares.
There are four different types of offshore companies:
- International Business Company
- Private Limited Company
- Limited Liability Company
- Global Business Company
Where individuals or corporations choose to set up an offshore company depends on the company’s objectives, business goals, and size.
For example, larger and more varied companies may benefit from registering in Hong Kong or Singapore due to access to better business opportunities.
On the other hand, a smaller company or start-up may have different interests and may be more inclined to set up in a country with fewer accounting requirements and lower tax rates.
What is offshore banking?
A common misconception is that all offshore bank accounts are associated with hiding or stashing money abroad.
However, there is nothing illegal about using the services of a bank outside your home country for legitimate reasons.
People also often assume that engaging in offshore banking is simply for the wealthy.
However, there are foreign banks that require as little as $300 to start an account.
An offshore bank is simply one that you have in a country you do not reside in.
They operate as any normal bank, allowing you to make and receive payments, set up current and savings accounts, and invest in different countries.
Some foreign banks are also limited to only doing business with particular foreign clients due to compliance requirements set out by organizations such as the Organisation for Economic Cooperation and Development and the World Trade Organisation.
However, how countries comply with these requirements is extremely relative, and some may even choose not to comply at all.
Why do people have offshore companies?
Many people and corporations choose to use offshore companies for various legitimate reasons such as benefiting from tax optimization, political and economic stability, more opportunities for international investment, greater privacy, and easy transfer of property ownership.
A major advantage of setting up an offshore company is its tax benefits—foreign countries have better tax systems for investors who wish to hold assets.
In addition, if you hold an offshore company, you can reduce your corporate tax liabilities by paying little to no tax on your earnings from dividends, royalties, interests, and capital gains.
Political and economic stability
Another major advantage of keeping money in foreign jurisdictions is that you can benefit from that nation’s political and economic stability.
For example, if you live in a country in a state of civil war or a country facing a huge recession, incorporating your business overseas may be beneficial in terms of asset protection.
International investment and global trading
Holding an offshore company allows you to benefit from more international investment and global trading opportunities as you operate in a foreign country at a minimum cost.
Guaranteed privacy and confidentiality
If privacy and confidentiality are key to your business, setting up an offshore company is right for you.
Depending on your type of business, an offshore company allows you to benefit from further protection against company information leakages as there are strict rules on guaranteed privacy of company ownership.
Easy transfer of property ownership
Many people opt for an offshore company due to its flexible nature.
Therefore, instead of transferring properties or other investments by a person, it is a much easier process through an offshore company.
Additionally, through an offshore company, you might not have to pay stamp duty or inheritance tax on such property transfers, enabling you to maximize your profits.
When does it become illegal?
It is important to note that setting up or relocating to have an offshore company is completely legal.
However, the façade of an offshore company can often be used for tax evasion and fraud.
While tax avoidance is legal, tax evasion is not.
Tax avoidance is simply a legal way of taking advantage of existing loopholes in the system.
However, tax evasion includes hiding money, failing to report your earnings and the assets you hold to the shareholders of the company’s resident country government.
Moreover, as offshore companies provide a certain degree of anonymity, people can often exploit this benefit and use it for money laundering and tax evasion.
Although setting up offshore companies is completely legal, they have cost governments a significant amount of money in terms of lost revenue due to tax evasion practices.
Hiding your ownership from law enforcement authorities or engaging in corrupt practices, profiting from criminal activity such as money laundering, fraud, and financing terrorist activity are all illegal means of using an offshore company.
How can I make sure everything is legal?
Major banks such as Barclays have their own offshore departments that offer wealth management and corporate services to offshore entities.
Engaging with these banks will likely offer legal protections to you should any tax man be curious about your operations abroad.
Getting legal advice from an experienced lawyer in offshore laws and regulations is extremely beneficial.
Declaring offshore assets
Shareholders of an offshore company need to inform their home government about any offshore assets they own, as hiding their offshore business is potentially illegal.
Here is what you should keep in mind
- An offshore company is one that is set up to operate outside the jurisdiction and location of its operation and ultimate ownership.
- There is a huge difference between tax evasion and tax avoidance
- Holding money in an offshore bank account is not illegal, and it is also not completely tax-free
- Shareholders of offshore companies should inform their government about any offshore assets they own, as hiding such assets can lead to criminal liability.
Looking to open an offshore company?
Hong Kong is one of the most popular jurisdictions for opening a remote offshore business. Free taxes baby!
Register with Air Corporate today and get approved in under 48 hours!
June 3rd, 2021 by Vivian Au
Hong Kong is globally recognized as an international business hub.
Thousands of trading companies, professional services firms, and multinationals are registered annually in Hong Kong.
The city has the right facilities and resources for individuals and corporations seeking an overseas destination for their businesses.
While there are numerous reasons why companies register in Hong Kong, the city has attracted many foreign investors seeking to hold their assets offshore because of its low tax rate and tax exemptions.
If you’re wondering how to take advantage of the tax exemptions in Hong Kong, keep reading to find out.
Is Hong Kong tax-free?
Hong Kong is widely recognized as a tax haven by investors.
The city does not impose capital gains tax on the value of disposed assets or charge value-added tax or consumption tax on goods.
Import duties are also low and levied on a few goods.
However, Hong Kong is not tax-free as individuals and companies are required to pay income tax on their taxable income.
The good news is the corporate income tax rate in Hong Kong is between 8-16.5 percent which is lower than the tax rates in most jurisdictions.
But unlike many jurisdictions, taxable income in Hong Kong is restricted to profit derived from trading activities or businesses conducted in Hong Kong.
This has presented growing and large organizations with a juicy benefit – offshore tax exemption.
Offshore tax exemption in Hong Kong and how to take advantage of it
An offshore company is a company set up in a country other than where its shareholders are domiciled or where its parent company is registered.
Offshore companies may conduct business in that country or not.
Many offshore companies are asset-holding companies that do not derive any profit or engage in any business in those offshore countries.
In Hong Kong, offshore companies that do not conduct business in Hong Kong or derive profit from Hong Kong are eligible for tax exemptions.
Many foreign companies benefit and maximize profit from the offshore status conferred on foreign companies in the city.
If you’re thinking of registering an offshore company in Hong Kong or wondering how your offshore company can take advantage of the offshore exemption status in Hong Kong.
Here are two simple steps to follow:
Step 1: Register your offshore company
Registering your company is the first step you must take to become eligible for offshore tax exemptions.
Luckily, you can register your company digitally with us in less than 48 hours and you do not have to visit Hong Kong to do so.
You can register your company with a new name or use your company’s name as long as the name is available.
Your company’s directors and shareholders can be foreign individuals or foreign entities.
But, you’ll need to appoint a qualified and licensed company secretary which must be either a Hong Kong resident or a firm with a TCSP license.
Alternatively, you can appoint a digital company secretary and let them take care of it for you.
Step 2: Apply for offshore status with the Internal Revenue Department (IRD)
An offshore company seeking to claim tax exemption must apply for offshore status with the Hong Kong Internal Revenue Department (IRD).
The IRD issues tax exemption letters to eligible companies.
These tax exemption letters are popularly referred to as offshore claims.
Only companies with offshore claims can claim tax exemptions in Hong Kong.
The good thing is, the process of obtaining an offshore claim is quite straightforward.
When to apply for offshore status in Hong Kong
There is no deadline for applying for offshore status in Hong Kong and a company that has been registered for years can still apply.
It is however advisable to submit your application within the first 18 months of the company’s incorporation.
Newly incorporated companies in Hong Kong are required to file profit tax returns within 18 months of being registered. You’ll need to submit your profit tax returns with your application.
Therefore, if you want to claim tax exemptions on profit achieved within your company’s first years of incorporation, you’ll have to report it.
How to apply for offshore status in Hong Kong
To apply for offshore status in Hong Kong, you’ll need to file your profit tax returns and supporting documents.
The supporting documents usually include expense receipts, invoices, award letters, and other documents that prove that your company’s income was not derived from Hong Kong.
You’ll also need to submit your incorporation documents along with your application.
Once you’ve submitted your application, the IRD will consider your application. This typically takes less than 6 months.
To improve your chances of getting your application approved, it is advisable to consult a certified public accountant (CPA) in Hong Kong.
You can reach out to us for your offshore status application.
Our team of accountants can advise you on your options and make your application process stress-free.
Are all offshore companies eligible for tax exemptions in Hong Kong?
Not all offshore companies are granted offshore claims by the IRD as the IRD can approve or reject applications for offshore status.
This is because not all offshore companies are eligible for tax exemptions in Hong Kong.
Only offshore companies capable of proving that their income was derived exclusively from locations outside Hong Kong are eligible for offshore tax exemptions in Hong Kong.
The IRD requires offshore companies seeking offshore tax exemptions to prove that they do not conduct business in the region or derive any income from the region.
Companies are required to answer questions and provide supporting documents to prove this.
Can onshore companies claim tax exemptions in Hong Kong?
Any company set up in Hong Kong can claim tax exemptions in Hong Kong on any part of its income that was not derived from Hong Kong.
Therefore, an onshore company can claim tax exemption if part of its income was derived outside Hong Kong.
However, it is important to note that this is a partial exemption as the onshore company will still be required to remit income tax profit derived from Hong Kong.
Many companies have benefitted from Hong Kong’s low-income tax rate and tax exemptions.
Setting up affiliate and subsidiary companies in Hong Kong to hold your company’s asset can help your maximize profit.
If you’re ready to take advantage of tax exemptions in Hong Kong, we’re ready to help you achieve your investment goals in Hong Kong.
Hong Kong is considered one of the most liberal economies in the world and therefore is a place that allows a fast and easy registration process.
Registration of a Singapore company in Hong Kong would be considered registering as a non-Hong Kong company, however you can register your company as a new entity in Hong Kong as well.
A non-Hong Kong company is required to register in Hong Kong if it is a corporate body and has an established place of business in Hong Kong.
The company must be registered before the place of business has been established for more than a month.
The process to register a Singapore company in Hong Kong is similar to registering any company anywhere.
To register a company, the required registered capital is 10,000 HKD.
Once the company has that, the process is generally a simple one.
The city of Hong Kong allows you to run the business from anywhere in the world.
All you need is a local secretary and registered office address, which can even be provided to you through a local agency if needed.
The rest of the process is as follows:
- Choose the type of company
- Company limited by shares: liability of shares is limited by the articles of association
- Company limited by guarantee: share capital and liability of the members is not limited by the articles of the association (nonprofit organizations are usually registered as guarantee companies)
- Choose the name of the company
- The name of the company must not be the same, or similar to, any other registered company name.
- Under the Companies Ordinance, the company name must be approved by the Registrar and is subject to rejection ordered by the Company Registry.
- The company can register under an English name, a Chinese name, or under both an English and Chinese name.
- Deliver the correct documents to the Companies Registry either electronically or in-person
- The Business Registration Office is located at 4/F Revenue Tower, 5 Gloucester Road, Wan Chai, Hong Kong. Hard-copy documents can also be sent to P.O. Box 29015, Gloucester Road Post Office, Hong Kong.
- Collect the certificates (upon approval)
- After the registration is approved, the Certificate of Incorporation and the Business Registration Certificate will be issued either electronically or as a hard copy.
- Approval time will vary on whether the documents were delivered electronically or in person.
- Both electronically and hard-copy certificates have the same legal effect.
- Obtain all other permits and licenses required
- Each type of company (and industry) will have certain permits and licenses that are required.
- Sign up for Employee’s Compensation, Insurance, and Mandatory Provident Fund (MPF) Schemes.
- Mandatory Provident Funds (MPF’s) is a system set up to help Hong Kong’s workforce save up for their retirement.
Once the type of company and the name of the company is chosen, the correct documents must be delivered to the Companies Registry.
The documents needed are:
- Incorporation form: Form NNC1 for a company limited by shares and Form NNC1G for a company not limited by shares.
- A copy of the company’s articles of association. Articles of association should be a form that indicates the following, along with other specifications:
- Company name
- Member’s liabilities
- Liabilities or contributions of members
- Share capital and initial shareholdings
- Name(s) of Founder Members
- Notice to the Business Registration Office
- Copies of any and all identification cards and passports
- The company’s most recent financial statements
How much does it cost?
The price to register a company varies depending on the type of company.
The pricing is as follows (paid with HK$):
- Incorporation of a company limited by shares
- Registration application delivered electronically cost $1,545, with a refund of $1,280 if the application is rejected
- Registration delivered in hard-copy form is $1,720, with a refund of $1,425 if rejected
- Incorporation of a company limited by guarantee
- With 25 members or less
- The application delivered electronically is $155
- The application delivered as hard-copy is $170
- With the number of members exceeding 25, but less than 100
- Electronically delivered application is $305
- Hard-copy form delivered application is $340
- With the number of members exceeding 100
- Electronic application is $305, plus $18 for every additional 50 members after the first 100
- Hard-copy form application is $340, plus $20 for every additional 50 members after the first 100
- Registration of a non-Hong Kong company
- Registration application delivered electronically cost $1,545, with a refund of $1,280 if the application is rejected
- Registration delivered in hard-copy form is $1,720, with a refund of $1,425 if rejected
The incorporation forms (Form NNC1 and Form NNC1G) have a varying price depending on whether you download it online or obtain a hard copy.
The price of these forms ranges from $16 to $30.
Annual auditing and reporting are required for any company in Hong Kong.
This reporting is referred to as annual returns, and with these annual returns, there are additional fees.
Why Hong Kong?
There are a variety of similarities and differences between registering a company in Hong Kong and Singapore.
If you are registering a Singapore company in Hong Kong, all rules and regulations that Hong Kong requires will need to be met.
One advantage to bringing a Singapore company over to Hong Kong and registering it is the corporate taxes.
The corporate tax payable is 16.5% in Hong Kong, compared to 17% in Singapore.
Another difference between having a company registered in Singapore compared to in Hong Kong is that to register a company in Hong Kong, at least one of the company’s directors must be a natural person.
In addition, there is no requirement for a resident director in Hong Kong; the director can be of any nationality.
Interested in registering your business in Hong Kong from Singapore?
Register with Air Corporate today and get a fully digital company secretary experience including a cloud-based document management platform, friendly services, and more.