eCommerce + Hong Kong Setup

[mardz]

Hello everyone

My case is quite common, I did a lot of reading on this forum but I still have some questions.

My situation:
I am currently based in Europe doing ecommerce. I would like to incorporate in another country and leave my country as soon as the corona situation is over.
I still don't know the best option for the tax residency so I am thinking of being a "digital nomad" for a while first.

I am considering Hong Kong for the company because I know Stripe/Shopify Payment and Paypal are available there.
Bridges seem to offer a good service for the formation from what I have read.

-For the bank account Neat/Currenxie seem to be the only option right now. I have read mixed things about Neat, what about Currenxie ? Are they any other options ?
-My customers are located outside of Europe so I don't have to deal with the VAT nightmare. Is there an option beside HK that would allow me to sell to european customers without paying VAT?
-In case I decide to incorporate in HK: How risky is it to continue doing business through the HK company while still living in my country ? (I will probably need a few months to pack my stuff, leave my 9-5 etc.)

 

[Sols]

-For the bank account Neat/Currenxie seem to be the only option right now. I have read mixed things about Neat, what about Currenxie ? Are they any other options ?

AirWallex is in a similar category.

-My customers are located outside of Europe so I don't have to deal with the VAT nightmare. Is there an option beside HK that would allow me to sell to european customers without paying VAT?

Anyone selling into the EU is subject to VAT regulations. The vast majority of sellers don't charge VAT even though they should.

If you are not based in the EU, EU jurisdictions can't/don't really go after you. The law is written so that they could go after EU-based assets of the company. In most cases, it won't be an issue until you're big enough to afford a lawyer to talk to.

-In case I decide to incorporate in HK: How risky is it to continue doing business through the HK company while still living in my country ? (I will probably need a few months to pack my stuff, leave my 9-5 etc.)

If you sort everything out within the first year, there would normally not be any problem. The HK company would technically be tax resident in whatever country you currently live in but unless you end getting hit with a personal tax audit and things going into a criminal investigation, I can't imagine anyone would bother you. Just keep your affairs in mint condition.

 

[fshore]

For e-commerce you need to register for vat if shipping from within in EU. If you ship from outside the EU then not vat for you, same with eu or non eu company.

So you can also consider a much cheaper alternative like the UK that has lower PayPal stripe fees.

 

[SaintVince]

Do not choose HK. After 18 months they start the circus show. You need to get the auditors, professional accountant etc etc.

- can’t open a proper bank account except some castrated options with 24 hrresponse time customer service
- paypal and stripe charge extra % for HK accounts

so set up anywhere in EU or Americas and don’t bother with HK. HK was a good place in 70s and 80s and it is still stuck in that time.

 

[mardz]

Do not choose HK. After 18 months they start the circus show. You need to get the auditors, professional accountant etc etc.

- can’t open a proper bank account except some castrated options with 24 hrresponse time customer service
- paypal and stripe charge extra % for HK accounts

so set up anywhere in EU or Americas and don’t bother with HK. HK was a good place in 70s and 80s and it is still stuck in that time.

Yes I read somewhere here that it's expensive to maintain a company in HK...
Do you think it's an option to start the company in HK and close it after 1 year or is it too much paperwork ?

Which countries in EU do you recommend ? I heard Bulgaria is interesting

What bothers me the most is that I am not ready to leave my country now so I need to find a solution to continue doing business secretly while still living in this tax hell. I am afraid that opening a business and a bank account in a EU country will trigger my tax office..

 

[mardz]

For e-commerce you need to register for vat if shipping from within in EU. If you ship from outside the EU then not vat for you, same with eu or non eu company.

So you can also consider a much cheaper alternative like the UK that has lower PayPal stripe fees.

Thanks I haven't though of the UK now. Apparently corporate tax is 20%
Would Switzerland be a good option too ?

 

[fshore]

Thanks I haven't though of the UK now. Apparently corporate tax is 20%
Would Switzerland be a good option too ?

19%, while hk is 16.5% after 2m.
PayPal and stripe fees will be a few percentage lower, might have a big impact as this is on revenue before expenses.

 

[speedster]

19%, while hk is 16.5% after 2m.
PayPal and stripe fees will be a few percentage lower, might have a big impact as this is on revenue before expenses.

Hk doesn't tax foreign sourced income though, this should also be factored in.

 

[fshore]

Hk doesn't tax foreign sourced income though, this should also be factored in.

In theory yes. But complicated expensive and time consuming to get the offshore status approved.

 

[James2122]

Interesting thread, from my experience which is extensive but rusty..

HK Corporation Tax, i.e TAX on profits is 8.5% under 2 Million HFD = Approximately 208k GBP, 236k Euro

Look around for a cost effective / recommended Hong Kong Book Keeper / Accountant to give you a quote on yearly bases, plus an agent to help you set up the limited company.

Now if you are making that sort of money in profit taking out all your flights, direct and indirect expenses, tax allowance, wives freelancer salary (if you have one), COGS, Services, then your in a good position.

If you start going over that threshold whats stopping you from opening up a separate limited company in HK or where ever as a marketing arm / supply chain for the parent company.

Not forgetting of course you can 'proportion' out your overheads through both companies.

I have signed up for Neat before and was rejected I don't know why, they wouldn't give me any indication, i'm a home owner and my finances are in order so .......

Why cant you have a HK Company and set up a Transferwise account to act as a bank account? I researched it very briefly and it seems possible.

Don't forget your legal meant to pay tax on country of residency for your personal world wide income IF you cant put it through expenses.

Ive had 3 HK companies historically I wished I'd kept the HSBC Bank Accounts open some how!

 

[mardz]

@James2122 Thanks a lot for all the info. Unfortunately Shopify and Paypal don't allow payouts to TransferWise.

I talked to a tax planner yesterday and he said I should open a LLC in the UK
The setup he suggests: LLC with 2 entities, one is me with 90%, the other 10% is a Limited that I will use for E-Commerce transactions.
He said I will virtually pay zero taxes with this setup because only UK income is taxed.

Can anyone confirm this ?

 

[yngmind]

@James2122 Thanks a lot for all the info. Unfortunately Shopify and Paypal don't allow payouts to TransferWise.

I talked to a tax planner yesterday and he said I should open a LLC in the UK
The setup he suggests: LLC with 2 entities, one is me with 90%, the other 10% is a Limited that I will use for E-Commerce transactions.
He said I will virtually pay zero taxes with this setup because only UK income is taxed.

Can anyone confirm this ?

Firstly UK has no llc it has LTD and LLP

that method will work, but not for LTD structure

 

[mardz]

Firstly UK has no llc it has LTD and LLP

that method will work, but not for LTD structure

Sorry I meant LLP
You mean the Limited with 10% shares will be taxed but not my other 90% of the LLP ?

 

[yngmind]

Sorry I meant LLP
You mean the Limited with 10% shares will be taxed but not my other 90% of the LLP ?

there is no taxes for llp in uk at all, you can just get dividends on you offshore company and pay no taxes

or get dividends on your own name and lay taxes in your country

i own llp myself

 

[Spinat]

How old is this LLP and where do you find banking for this LLP?

 

[yngmind]

How old is this LLP and where do you find banking for this LLP?

I just use EMI, its new

 

[Spinat]

What EMI and how much verification did they require to open an account for an LLP - I know from the past the banks are going nuts if you submit a application for a LLP??!

 

[mardz]

there is no taxes for llp in uk at all, you can just get dividends on you offshore company and pay no taxes

or get dividends on your own name and lay taxes in your country

i own llp myself

That sounds good. How risky is it to create the LLP/LTD setup now and not tell the tax authority in my country about it? My goal is to leave the country in a few months and not pay any taxes (either digital nomad or find a country without territorial taxes)
Do you think the UK will communicate with my tax authorities ? I still have a 9-5 so I don't need the money from the eCom business and I can leave it in a UK Bank account.

 

[yngmind]

What EMI and how much verification did they require to open an account for an LLP - I know from the past the banks are going nuts if you submit an application for a LLP??!

That's true, they asking much more info for LLP, I still haven't got my payoneer they asked me tons of info, but TW works for me

 

[yngmind]

That sounds good. How risky is it to create the LLP/LTD setup now and not tell the tax authority in my country about it? My goal is to leave the country in a few months and not pay any taxes (either digital nomad or find a country without territorial taxes)
Do you think the UK will communicate with my tax authorities ? I still have a 9-5 so I don't need the money from the eCom business and I can leave it in a UK Bank account.

you need to learn about CRS in your country and check if UK is there, if not - you good