February 28th, 2022 by Vivian Au
February 21st, 2022 by Vivian Au
If you open a company in another country like the United States, you’ll end up paying 21% in corporate taxes. Or in Spain, you’ll pay 25%, 28% in New Zealand, or 31% in Canada.
And this doesn’t include the duties you need to pay for goods and services sold.
Running a business is undoubtedly expensive, and depending on where the business is operating, it definitely remains expensive because of local tax rules.
So it’s no surprise when we hear about companies moving their registration, or even their whole operations, to what we know as, Tax Havens.
Tax havens are a great way for businesses to minimize the amount of taxes.
At the same time, they can maximize the profits they make by taking advantage of the low tax regime that other countries offer.
It sounds simple enough, right? Who could say no to saving money?
One of the most popular tax havens in the world is Hong Kong.
It doesn’t tax corporate profits made outside the territory.
The local government encouraged foreign investment.
And the companies that choose to do business in Hong Kong will find a generous 0% VAT on goods and services sold.
However, while commonly known as a tax haven, Hong Kong is much more than that.
What is a tax haven?
Understanding how Hong Kong is more than a tax haven starts with understanding what really makes up a tax haven.
So, What exactly is a tax haven?
Essentially, a tax haven is an offshore country that offers foreign businesses extremely low to no tax rates.
Businesses registered in countries like Hong Kong, Luxemburg, or the British Virgin Islands usually don’t need to be physically present in these countries to enjoy tax incentives.
For example, if you register your business in Hong Kong, you will pay zero corporate tax if you don’t actually run your business from Hong Kong; or, if you do have operations in Hong Kong, you’ll only be paying between 8% and 16.5%.
Other than offering low tax liability, a tax haven must also have a politically and economically stable environment.
Why is Hong Kong considered a tax haven?
In 2020, accounting firm Price Waterhouse Coopers and the World Bank ranked Hong Kong as the world’s most friendly tax system, second only to Bahrain.
The corporate tax for companies goes from 0% for any business conducted outside Hong Kong, to a maximum of 16.5% for business in the territory.
There are no Value-Added Taxes on goods and services, no tax on dividends, and no customs duties on most imported goods.
In terms of salary tax, Hong Kong residents pay between 2% to 17% tax.
As well, any employees of a Hong Kong company who do not live in Hong Kong are not subject to salary tax in Hong Kong.
What makes Hong Kong different from other tax havens?
However, the anatomy of Hong Kong’s tax haven status comes from more than a simple tax reduction.
For one thing, Hong Kong is also well known for its ease of doing business, with companies registering their business in the territory without ever needing to go there.
As of 2021, Hong Kong has been ranked third in the World Bank’s Ease of Doing Business Index.
Hong Kong is also known as the gateway to China, and is a key port for goods to flow in and out of the biggest economy in Asia.
Generally speaking, foreign businesses who register in Hong Kong often times find it’s easier to set up a subsidiary company in Mainland China or other jurisdictions like Singapore or Vietnam.
Third, Hong Kong has one of the most friendly laws and policies for foreign investment.
In Hong Kong, foreigners are allowed to be the ONLY shareholder and directors of their company which a lot of countries don’t allow.
With more than 1.5 million companies registered and around 100,000 new companies each year for a population of only 8 million, the question is: what makes Hong Kong so special?
Well, the answer is simple – Hong Kong is more than just a tax haven.
Hong Kong is a go-to destination for businesses who wish to leverage the territory’s connections, influence, and status to drive their growth.
Let’s wrap up some major reasons Hong Kong is a popular business registration hub besides tax incentives:
- Hong Kong is located at the heart of China & Asia, situated as the gateway that allows foreign businesses to freely import and export goods without too many restraints. Registration in Hong Kong also serves to make further registration in nearby jurisdictions easier.
- Hong Kong is the only jurisdiction in Asia with no foreign exchange control system. What it means is that your company can easily receive and make payments in any currency and to any other country in just a few minutes.
- Hong Kong is home to many first-class banks and international fintechs. Options like our partners at Statrys often help new businesses open business accounts quickly, and remotely in just a few days.
- When new businesses just start in Hong Kong, they can then often enjoy the many subsidies and incentive programs provided by the local Hong Kong government.
- If you set up your company in Hong Kong, even if you never expect to do business there, you will end up sooner or later visiting the city. Hong Kong is a major air transit hub where many industries across the globe coalesce and put together some of the most important events and expos you won’t want to miss out on.
So is Hong Kong just a tax haven? Or is it more?
If you have a business idea that needs to get off the ground, start by registering your business in Hong Kong with Air Corporate today.
Our experts will walk you through the process, and with as little as $90, you could be taking advantage of all that Hong Kong has to offer.
February 9th, 2022 by Vivian Au
Offshore companies are business entities created outside of the jurisdiction of the United States. They can be used as an effective tool for avoiding taxes and regulations. They are also used by criminals to launder money and avoid prosecution.
Offshore Companies Pros
1) Tax-Free Income
An offshore company is a legal entity that does not have any physical presence in the U.S. This means it cannot pay taxes or file tax returns, so all its profits are passed on to shareholders without being taxed. The only income that may be subject to taxation is dividends from foreign subsidiaries.
2) Low Cost
Setting up an offshore company is cheaper than opening a traditional bank account. You do not need to open a checking account with a $10,000 minimum balance for example. Most of the time, the tax-free income alone makes it worthwhile to register in another country.
You own your company’s records; they are stored off-site, out of reach of the IRS. There is no way to link you to the company if there is ever a problem.
4) Asset Protection
You own everything about your company – its name, address, bank accounts, employees, etc. No one has access to them except you. If something happens to your company, you lose nothing but time.
5) Ownership Flexibility
You can change the ownership structure whenever you want. For example, you might decide to sell your shares to another person after two years, when their credit score improves.
6) Limited Liability
If you set up an offshore company in Panama, you won’t face personal liability for debts incurred by the company.
7) Business Opportunities
An offshore company is an excellent way to start your own business because you don’t need to worry about complying with complicated local laws. It doesn’t matter where you live, since the company will operate legally anywhere in the world. However, speaking outside of just taxation, why not utilize the benefit of the offshore
However, keep in mind that offshore companies come with some disadvantages too. Generally speaking, the Cons will differ in a case-by-case situation.
Offshore Company Cons
1) Double Taxation
The country where the company is registered will impose corporate income tax on its worldwide income. In addition, the company will be required to report its worldwide income on its home country’s tax return.
The process of setting up an offshore company is more complex than establishing a regular corporation. It requires registering the company with the local government, finding a lawyer, and filling out numerous forms.
3) Compliance Costs
In order to comply with various rules and regulations, offshore companies incur extra costs. These include filing fees, annual accounting fees, and other administrative expenses.
4) Reporting Requirements
Companies must file reports with local governments and financial institutions such as banks. Failure to comply could result in fines or even imprisonment.
5) Lack of Control
Once the company is established, you have little control over how it operates. Any decision made by the board of directors becomes final.
6) High Fees
Fees charged by lawyers and accountants can add up quickly. However, these services are necessary for running a successful offshore company. There are some exceptions where governance aspects of your offshore company can be handled by legal entities such as Hong Kong’s company secretaries which handle all your corporate reporting to the government even if the company is not in Hong Kong.
7) Lack of Transparency
As mentioned earlier, offshore companies don’t have to disclose anything about their owners or operations. They also don’t have much information available online.
8) Non-Resident Status
Non-residents aren’t eligible to serve on the boards of directors of offshore companies. This means that non-resident shareholders may find themselves excluded from important decisions affecting the company.
9) Poor Reputation
Some people believe that offshore companies are used by criminals to hide money or avoid paying taxes. Others think they’re only useful for hiding assets.
10) Lack of Support
Many countries offer limited support for offshore companies. For instance, there are no reciprocal agreements between most countries and offshore jurisdictions like Bermuda, British Virgin Islands, Cayman Islands, Curacao, Isle of Man, Jersey, Malta, Netherlands Antilles, Panama, Seychelles, Singapore, Switzerland, USA, etc.
11) Limited Liability Protection
If you run into any problems while operating your offshore company, you won’t be able to sue anyone but yourself. You’ll lose everything including your personal possessions.
12) You’re Liable for Money Taken Out
Setting up an offshore company doesn’t provide any savings since you still pay tax on your worldwide income. If you want to reduce your global tax burden, you should consider establishing multiple companies instead of one offshore entity. Once you move money out of an offshore location, you will be liable for that income in your home country.
13) Difficult to Operate
The process of setting up an offshore company involves many steps so it might take months before you see results. It requires a lot of time and energy especially if you decide to do it yourself.
14) More Complexity
Offshore companies come with more complexity than domestic corporations. In addition to complying with foreign law, you must comply with foreign tax authorities. Even if the offshore location offers great or even no tax incentives, you still need to report to this country’s tax regime annually.
An offshore company allows you to receive benefits like privacy, confidentiality, asset protection, and ownership diversification without being subject to taxation or financial disclosure. The trade-off is that offshore companies incur fees, costs, and other cons.
However, if you plan to incorporate offshore, then you should know about the pros and cons of incorporating offshore. Every location and jurisdiction is different, and it’s difficult to really know the true efficacy of an offshore company for your business.
Hong Kong is one of the most popular offshore jurisdictions for a lot of companies. If you’re interested in weighing Hong Kong as an option, contact us for more information and one of our experts will walk you through Hong Kong as an offshore incorporation option.
February 7th, 2022 by Vivian Au
If you’re a business owner, then you know that managing your accounts receivable is essential to success.
But what is account receivables management? And more importantly, what can it do for your business?
We’ll discuss ar management in detail and explain how it can help you streamline your operations and increase profits.
What Is Accounts Receivable?
Before you can learn about ar management, it’s important to know what account receivables are.
Simply put, accounts receivable (AR) is the money that customers owe your business for products or services provided on credit.
This could include things like a purchase order from a customer who has yet to pay their invoice or an open payment term from another company that hasn’t sent in their bill yet.
Businesses use AR financing options so they don’t have to wait until all of their invoices get paid before they can receive funds back into their bank account and continue operating smoothly without interruption due to these fund shortages which would otherwise be caused by unpaid bills coming up short in cash flow.
If there was no such thing as ar management then companies would not have this option available to them!
And while many businesses choose not to use these financing options because they think it’s too risky, there are also those who feel like taking on a little more risk is worth paying off their bills sooner rather than later.
Why are Accounts Receivable Important?
Accounts Receivable are important to a company because they represent cash that is owed by customers.
This money can be used to pay expenses, fund day-to-day operations, and grow the business.
The Accounts Receivable account on your balance sheet shows you how much money is due from your clients at any given time in the form of invoices that haven’t yet been paid or settled with account credit.
You should keep track of these receivables so that you know which clients have outstanding payments and what their payment terms (i.e., how long until it’s due) are.
If you don’t have a good system for managing your Accounts Receivable, you may miss out on potential revenue and could wind up with bad debt.
You also need to be able to track payments so that you know when someone has paid an invoice and can mark it as “paid” in your accounting software.
This will help keep your books accurate.
There are a few key things to remember when it comes to accounts receivables management:
- Stay organized! Keep track of invoices, payments, and account credits in a spreadsheet or other tracking tool.
- Follow up with clients who haven’t paid their invoices yet! Don’t let money just sit there. Send them reminder emails or call them to see what’s going on.
- Use good accounting software that can help you track payments and keep your books accurate. This will save you time and headaches down the road.
Managing your Accounts Receivable is important for any business, big or small.
By following these tips, you can make sure that this aspect of your finances is taken care of and doesn’t become a headache.
The Accounts Receivable Process
The accounts receivable process is the system that a company uses to track and manage payments owed to it by its customers.
This process usually begins when a customer places an order with a company and ends when that customer has paid for all of the products or services they ordered.
The accounts receivable process involves several steps, including:
- Tracking orders and invoices
- Determining which invoices are due for payment
- Issuing bills and reminders to customers
- Collecting payments from customers
- Recording payments in the accounting system
companies use a variety of methods to track and manage their accounts receivable, including specialized software, spreadsheets, and handwritten ledgers.
However, the most important part of the process is ensuring that all payments are tracked and recorded in the accounting system.
This allows companies to keep accurate records of their income and expenses, and make informed decisions about their financial future.
The accounts receivable process can be complex and time-consuming, but it’s essential for any business that wants to maintain healthy finances.
By understanding the basics of this process, business owners can ensure that they’re taking steps to protect their bottom line.
Common Challenges in ARM
Accounts receivable management is the process of managing customer payments.
This has become a necessary task for businesses that want to ensure that they get paid by their clients on time, if not early.
The problem with this system is it can be tedious and challenging in many ways:
Dependence on paper-based systems
Some companies still use paper-based processes in managing accounts receivables.
If a company does use an online or cloud accounting system, its employees might have to manually update the records every now and then which can make things more prone to human error.
Then there are those who rely on manual payment processing through checks or cash which takes longer than electronic payments such as credit cards and wire transfers via banks (ACH).
Tracking down unpaid customers
Trying to track down customers who have outstanding invoices can be a daunting task.
This is especially true if the company is using an outdated or manual system in which information about these debts may not be readily available.
In some cases, it might require calling customers or sending them letters in order to remind them of their obligations.
Sending out collection notices
Another challenge lies in determining when it’s time to send out a collection notice.
If a business sends out too many notices, it could alienate its customers and lose future business opportunities.
However, if they wait too long, the debt could become harder to collect and the customer’s credit score could take a hit.
Handling customer disputes
Disputes with customers can also create a challenge for businesses.
This may include disagreements about the invoice amount, the quality of the product or service provided, or late delivery.
In some cases, it might require going to court in order to resolve the dispute.
Dealing with chargebacks
A chargeback happens when a customer disputes a credit card payment that was made to your business.
The bank then reverses the transaction and charges back the funds to your account.
This can be costly for your business as you will need to pay administrative fees as well as any legal expenses incurred in fighting the chargeback.
There are many challenges that companies face when trying to manage their accounts receivable effectively.
By understanding these challenges, businesses can develop strategies to overcome them and improve their accounts receivable management process.
Automating the AR Process
When it comes to automating the accounts receivables process, there are a few different options that businesses can choose from.
One option is to outsource the entire process to a third-party company.
This can be helpful for businesses that don’t have the staff or resources to handle AR themselves.
Outsourcing also allows companies to focus on their core competencies and leave the AR management to specialists.
Another option is to use software that helps automate some of the tasks related to AR.
This can include invoicing, tracking payments, and generating reports.
Automated software can save time and energy, making it easier for businesses to keep track of their receivables.
A final option is to combine outsourcing with automated software.
This can be a great option for businesses that want the benefits of both options.
By outsourcing to a specialist and using software to automate tasks, businesses can get the best of both worlds.
No matter which option businesses choose, it’s important to make sure that the AR process is as efficient and effective as possible.
Automating the process can help ensure this happens.
Here’s some ideas:
- Use specialized software to automate the invoicing and tracking of payments.
- Automated systems can flag potential problems with customers’ credit ratings, helping you avoid late or missed payments.
- Have your bank set up automatic withdrawals for regularly scheduled bills, such as rent or loan payments. This will help ensure that payments are never missed or late.
- When possible, have customers pay online using a secure payment gateway. This helps to speed up the processing of payments and reduces the chances of human error.
- Invest in automated reconciliation tools that compare customer account data against your own records on a regular basis. This will help you quickly identify any discrepancies and take corrective action before they become bigger problems.
- Automate the process of reconciling accounts. This will save you time and help to reduce errors between your books and those of your customers.
The process of accounts receivable management can be complex and challenging for businesses.
However, by using automated tools and outsourcing to specialists, businesses can make the process easier and more efficient.
By automating the process and focusing on their core competencies, businesses can improve their bottom line and ensure that they are getting paid for the products or services they provide.
Is your business looking for a way to make AGM less of a hassle?
Choose Air Corporate as your dedicated accounting service provider and get world-class accounting, or more, for your company.
An annual general meeting, or AGM, is a key event for all Hong Kong companies.
Held once per year, the AGM provides a forum for company directors and shareholders to discuss the company’s performance and strategy.
It’s also an important opportunity to vote on key decisions and appointments.
In this article, we’ll take a closer look at what happens at an AGM meeting and why it’s so important for Hong Kong businesses.
The AGM is a chance for company directors and shareholders to come together and discuss the company’s performance.
This includes reviewing its financial results, discussing any major changes or challenges that have taken place, and setting future goals.
It’s also an opportunity to vote on important decisions, such as appointing new directors or changing the company’s registered office.
Why AGMs are important
Annual General Meetings are important because they allow shareholders to have a voice in the management of the company.
AGMs are required by law for all Hong Kong companies, and must be held at least once per year.
Here’s some things to note about AGMs in Hong Kong:
- The purpose of the AGM is to allow shareholders to discuss and vote on the company’s financial reports, as well as elect directors and other officers.
- Shareholders are also allowed to raise any concerns they may have about the company at the AGM.
- The AGM is an important opportunity for shareholders to stay informed about the company’s operations and make decisions that will affect its future.
How to call and hold an AGM
An annual general meeting (AGM) is a mandatory requirement for all companies incorporated in Hong Kong.
All public and private limited companies must hold an AGM every year, during which directors and shareholders can discuss matters of concern related to the company’s development and operations.
The meeting also provides shareholders with an opportunity to ask questions and cast their votes on resolutions put forth by the directors.
An AGM can be called by either the directors or the shareholders of a company.
The procedure for calling an AGM meeting is as follows:
- A notice of the meeting must be issued at least 21 days before the date fixed for the meeting.
- The company secretary must give the directors of the company a copy of all relevant documents relating to items on the agenda for discussion at least 14 days before the date fixed for the meeting.
- A list of members eligible to attend and vote at general meetings must be available for inspection by shareholders during an AGM.
- A report on the company’s affairs must be presented to shareholders at every AGM.
- The directors of a private limited company are not required to appoint an auditor or prepare financial statements for annual general meetings, but they should keep proper accounts and records of the business in Hong Kong.
- At least one director must be present at the meeting, and shareholders holding not less than one-tenth of the total voting power must be present in order to constitute a quorum.
- A majority vote is required for resolutions to be passed. If the number of votes cast in favor and against a resolution is equal, the chairman of the meeting may exercise his casting vote.
- Minutes should be kept by either an officer or member appointed at the AGM, and must be signed by them as soon as reasonably practicable after the conclusion of proceedings.
- If a meeting is adjourned, a notice of the next adjourned meeting must be given as soon as possible to all members entitled to receive it and within 30 days after such an adjournment takes place.
- The company secretary should keep written records of all business transacted at general meetings and provide these documents upon request to shareholders within seven days of the meeting.
- The company secretary must give notice of any adjournment made at an AGM, or a resolution passed during such proceedings, as soon as possible after it takes place and before giving effect thereto for members who have not yet received that information previously. >
- A copy of these notices should be filed with the Companies Registry.
The directors of a company are responsible for calling an AGM and ensuring that all relevant documents are prepared and circulated in good time to shareholders.
It is important that a quorum is present at the meeting in order to pass resolutions, and directors should be aware of their responsibilities under the law when it comes to holding AGMs.
Hong Kong companies must comply with the Companies Ordinance in order to hold a valid AGM.
The annual general meeting of a company is an important event in its calendar, as it provides directors and shareholders with the opportunity to discuss matters relating to the business’s development and operations.
AGMs must be held by all companies incorporated in Hong Kong, and there are strict laws governing how they should be conducted.
The Companies Ordinance outlines exactly what needs to happen at an AGM, from preparation through to ensuring adequate quorums for resolutions being passed during proceedings – which may include appointing auditors or amending articles of association that affect future decisions made within private limited firms operating locally here on HK Island (such as changing who has power over management).
Are you looking to incorporate your business in Hong Kong?
All your annual general meeting needs are taken care of if you choose Air Corporate as your company secretary.