Hong Kong - EMIs & Tax

[Vaios01]

Hi All,

I am thinking of setting up a Hong Kong company due to its beneficial corp tax rates for offshore income (0%) and the fact its a proper jurisdiction that client are comfortable with. Banking options would be Airwallex, Currenxie to start and possibly CIM Banque going forward too.

Seeing as no money is touching a physical Hong Kong bank, what are the accounting requirements?
Does airwallex, currenxie and CIM Banque report our fund balances and details to HK? or its based on a self disclosed nature?

I was going to report nothing but want to make sure things are done properly. After all 0% tax is due for offshore income so no reason to hide anything. Although I would rather not disclose the full list of expenses so they dont see which counterparties I am dealing with for privacy on their end.

Hope someone with experience can assist.

Thanks

 

[Sols]

Audit is (almost always) required in Hong Kong, so there is getting around accounting. Corporate income tax in Hong Kong is only 0% if you can demonstrate that every single cent of income does not originate from Hong Kong. If you can't do that, you might be required to pay full tax on your profits.

 

[Vaios01]

Yes all our income is outside of Hong Kong and easily proven. Accounting audit is definatley necessary the question really is we have no physical bank account in Hong Kong as we would only be using EMIs. If the EMIs are not disclosing it then the company can appear dormant for accounting purposes. I am just not sure if EMIS are reporting anything or not.

 

[Sols]

So you're asking if you can get away with the criminal action of accounting fraud? Probably, for a little while.

EMIs and banks might report but not to HK IRD (the reporting goes your home country). But the EMIs and banks might ask for your audited financials every year, since they know that an actively trading HK company always has those each year.

And what's your plan when you withdraw funds from the company and you get questions about where the money is coming from? If you one day wire yourself a 500,000 USD dividend and your bank wants to know where that money is from, what do you show them when they want to see the audited financials of the company and HK tax returns?

Your HK company becomes tax resident wherever you live, and unless you live in a tax haven, your company has to pay corporate income tax like any other local company. So your local tax authority is going to be interested in seeing proper financial records as well.

 

[Fred]

If you are looking for a fully fledged Bank for your HK Company forget about CIM Banque unless you are living in HK and even then they are juicy - Dubai they don't open any longer even when the Authorized Signatory lives in Dubai.

If you are fine with banking on EMI's like mentioned from you then go ahead but keep in mind both Currenxie and AirWallex doesn't send in your name funds - only in there names.

They can be seen as collection accounts similar to Payoneer.

The shared accounts are at least not reported under CRS.

 

[moneyhoney]

Yes all our income is outside of Hong Kong and easily proven. Accounting audit is definatley necessary the question really is we have no physical bank account in Hong Kong as we would only be using EMIs. If the EMIs are not disclosing it then the company can appear dormant for accounting purposes. I am just not sure if EMIS are reporting anything or not.

I really don't understand why someone would do that when you can pay 0 tax and have all the papers in order.

As @Sols said: what if the EMIs ask for the accounting papers? And how can you distribute the dividends? In most cases, unless we are talking about change money, your personal bank will ask to show the source and the audited financials (I do have an HK company and this happened to me).

 

[Vaios01]

@Sols and @moneyhoney- You make a good point which I hastily forgot to think about. Right now every time we have an issue we simply show our annual reports, agreements etc and all is ok. With such a setup as I proposed we would definitely face issues with large sums since we wouldn’t be able to show it as a viable business. Again not worth such trouble when 0% tax is owed in HK for offshore income.

What I really want to do is keep some entities names receiving funds private.

For example, a client pays us XXXXX USD and then I pay my staff and other operating costs from this. I don’t trust some of my suppliers who I am making payment to basically as they have some other businesses that i think will fail drastically. I am worried when they eventually fail my company may be pulled into their mess. Someone examining their books will see my company name sending payments every month or two and will likely ask us lots of questions.

On our end everything is fine and documented but I would much rather go to sleep knowing we aren’t dragged into their mess at all. Another option I was thinking was paying them in crypto but I would need to disclose an invoice with their company name on it to my accounting team/auditors plus I have not found anyone willing to open business crypto accounts = so doesn’t solve the issue.

Im at a loss of what to do to keep their name private other than perhaps (1) Paying a trustee that then pays them on our behalf (not sure if its possible) or (2) convince the supplier to set up a completely different company.

 

[fanban]

Wonder how you would slip away, with not paying taxes, in your home country?

 

[Hyo]

Hi All,

I am thinking of setting up a Hong Kong company due to its beneficial corp tax rates for offshore income (0%) and the fact its a proper jurisdiction that client are comfortable with. Banking options would be Airwallex, Currenxie to start and possibly CIM Banque going forward too.

Seeing as no money is touching a physical Hong Kong bank, what are the accounting requirements?
Does airwallex, currenxie and CIM Banque report our fund balances and details to HK? or its based on a self disclosed nature?

I was going to report nothing but want to make sure things are done properly. After all 0% tax is due for offshore income so no reason to hide anything. Although I would rather not disclose the full list of expenses so they dont see which counterparties I am dealing with for privacy on their end.

Hope someone with experience can assist.

Thanks

You know HK has a public registry, right?

 

[Vaios01]

Happy new year to everyone.

Regarding the public registry, yes we have a nominee in place for this. As for taxes, no issue with paying full taxes in my home country on income received. The issue is protecting entity names. Seems more complicated that I had imagined.

 

[Sols]

For example, a client pays us XXXXX USD and then I pay my staff and other operating costs from this. I don’t trust some of my suppliers who I am making payment to basically as they have some other businesses that i think will fail drastically. I am worried when they eventually fail my company may be pulled into their mess. Someone examining their books will see my company name sending payments every month or two and will likely ask us lots of questions.

On our end everything is fine and documented but I would much rather go to sleep knowing we aren’t dragged into their mess at all. Another option I was thinking was paying them in crypto but I would need to disclose an invoice with their company name on it to my accounting team/auditors plus I have not found anyone willing to open business crypto accounts = so doesn’t solve the issue.

Im at a loss of what to do to keep their name private other than perhaps (1) Paying a trustee that then pays them on our behalf (not sure if its possible) or (2) convince the supplier to set up a completely different company.

Under normal circumstances, no one would see the name of your business partners, except for your bank, your accountant, and your auditor. If you're not comfortable with even that, then Hong Kong isn't a good fit for you.

I guess you could set up offshore companies for each supplier, so that funds go from Supplier to Vaios Offshore to Vaios Hong Kong (or vice versa). Supplier does not see the HK company and, on paper, the HK company does not see the Supplier. The two end companies only see the Offshore company. Depends on how many companies you work with (unless you use one intermediary offshore company for multiple suppliers). You also need to solve for tax residence of those offshore companies, but that might be doable with just a nominee directorship service if all they do is passing funds through.

But before you start doing things like that, I'd invest in some sound legal advice to understand what the risks actually are. Just because you work with a dodgy company doesn't mean you necessarily have any legal liabilities if they get into trouble. As long as your business with them has been entirely on the up and up and legal, you probably have very little to worry about.

 

[bastard]

But before you start doing things like that, I'd invest in some sound legal advice to understand what the risks actually are.

most often the best if you consider Hong Kong as a good offshore jurisdiction for your next venture!

 

[fanban]

Under normal circumstances, no one would see the name of your business partners, except for your bank, your accountant, and your auditor. If you're not comfortable with even that, then Hong Kong isn't a good fit for you.

they don't have public register in HK, is that what you mean?

 

[Sols]

they don't have public register in HK, is that what you mean?

I think you may have me confused, perhaps I worded it poorly.

OP is concerned about public awareness of the companies they trade with. Information about who your vendors and suppliers are, do not ordinarily become public record. That would only be disclosed during extraordinary circumstances (court order, subpoena, public disclosures required by law).