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I'm sick of Hong Kong! Is this a better structure...?

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drpreobrazhensky

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Jul 5, 2019
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#1
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I'm a US citizen living abroad and I run a services company through a Hong Kong limited corp of which I'm the sole owner.

But the yearly costs and headaches of accounting, auditing, and trying to communicate with my service provider in broken English are driving me nuts.

Plus, ever since China took over, the HK tax authority is demanding that I hand over private info on my entire team (their names, addresses, passport numbers, etc.), which is the first time I'm seeing this in almost 10 years of running my corp.

Here's my question: would it be better to incorporate a US LLC to run my company? I live abroad and have no effectively connected income to the US (online services).

OR—would it be better to incorporate a holding company in Seychelles / BVI / etc where they don't have onerous requirements and make this holding company the sole owner of the US LLC?

The only benefit of the current Hong Kong corp is that I can legally avoid US taxes (up to a certain amount). But other than that it's a huge hassle.

Thanks in advance for any advice. :)

Cheers!
 
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#2
drpreobrazhensky said:
I'm a US citizen living abroad and I run a services company through a Hong Kong limited corp of which I'm the sole owner.

But the yearly costs and headaches of accounting, auditing, and trying to communicate with my service provider in broken English are driving me nuts.

Plus, ever since China took over, the HK tax authority is demanding that I hand over private info on my entire team (their names, addresses, passport numbers, etc.), which is the first time I'm seeing this in almost 10 years of running my corp.

Here's my question: would it be better to incorporate a US LLC to run my company? I live abroad and have no effectively connected income to the US (online services).

OR—would it be better to incorporate a holding company in Seychelles / BVI / etc where they don't have onerous requirements and make this holding company the sole owner of the US LLC?

The only benefit of the current Hong Kong corp is that I can legally avoid US taxes (up to a certain amount). But other than that it's a huge hassle.

Thanks in advance for any advice. :)

Cheers!
Click to expand...
Substance…
What about Puerto Rico? Assuming that you are not ready to relocate in BVI/Seychelles or similar nice places
 
#3
JohnnyDoe said:
Substance…
What about Puerto Rico? Assuming that you are not ready to relocate in BVI/Seychelles or similar nice places
Click to expand...
I believe relocating / residing in these places is less important for US citizens considering they're taxed on citizenship right?

drpreobrazhensky said:
I'm a US citizen living abroad and I run a services company through a Hong Kong limited corp of which I'm the sole owner.

But the yearly costs and headaches of accounting, auditing, and trying to communicate with my service provider in broken English are driving me nuts.

Plus, ever since China took over, the HK tax authority is demanding that I hand over private info on my entire team (their names, addresses, passport numbers, etc.), which is the first time I'm seeing this in almost 10 years of running my corp.

Here's my question: would it be better to incorporate a US LLC to run my company? I live abroad and have no effectively connected income to the US (online services).

OR—would it be better to incorporate a holding company in Seychelles / BVI / etc where they don't have onerous requirements and make this holding company the sole owner of the US LLC?

The only benefit of the current Hong Kong corp is that I can legally avoid US taxes (up to a certain amount). But other than that it's a huge hassle.

Thanks in advance for any advice. :)

Cheers!
Click to expand...
Depending on the importance to your business, consider the jurisdictions reputation. You'll find a lot more people/businesses are happy to work with a HK company than Seychelles etc.
 
#6
Hong Kong is stuck in 80’s and with the latest development it essentially shot itself in the head and is currently behaving as a headless chicken.

Look int the direction of Dubai, or Caribbean. Reach out to 4-5 regional Accounting firms from page 3-4 of google search and schedule some free consultations. As a result you will have a better picture and some “gold nuggets” of advise will be spilled during the presentations.
 
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#7
drpreobrazhensky said:
The only benefit of the current Hong Kong corp is that I can legally avoid US taxes (up to a certain amount). But other than that it's a huge hassle.

Thanks in advance for any advice. :)

Cheers!
Click to expand...
If by "legally avoid US taxes (up to a certain amount)" you mean the Foreign Earned Income Exclusion (FEIE), if you do not earn more than the FEIE threshold of about $112k then you can form an IBC almost anywhere else (as long as you have adequate access to banking). You have many options.

If you earn substantially over the FEIE amount of about $112k, then for a services company the first place that I would look as an American is Puerto Rico. Just search the forum for Puerto Rico. I have made a few previous posts about the benefits offered by that program, which continue to change.
 
#8
JohnnyDoe said:
Substance…
What about Puerto Rico? Assuming that you are not ready to relocate in BVI/Seychelles or similar nice places
Click to expand...

I've been living in Asia full time for over a decade, my entire life is here.

I have no desire to ever live in the USA again beyond isolated visits to see family (and that, reluctantly). The very thought makes me shudder.

That includes Puerto Rico, which is for all intents and purposes still the USA with all its nonsense, tax benefits notwithstanding—and how long till those are revoked?

In fact, I'm taking all possible measures to acquire a Carribean citizenship in the near/mid future and get out from under the thumb of American tyrrany.

That would of course make this whole thread unnecessary, but until then... :)
MrPepper said:
Dubai might be a good solution for you maybe. No taxes and bureaucracy after the company/banking is all set up is practically none. Set up process takes a bit of patience tho.
Click to expand...

Dubai company formation is pretty expensive for just a holding company, no?

I've been in touch with Fred and he's super helpful.

I reckon once I ditch my US citizenship I'll establish in Dubai but it seems like overkill, or am I missing something?


Golden Fleece said:
If by "legally avoid US taxes (up to a certain amount)" you mean the Foreign Earned Income Exclusion (FEIE), if you do not earn more than the FEIE threshold of about $112k then you can form an IBC almost anywhere else (as long as you have adequate access to banking). You have many options.

If you earn substantially over the FEIE amount of about $112k, then for a services company the first place that I would look as an American is Puerto Rico. Just search the forum for Puerto Rico. I have made a few previous posts about the benefits offered by that program, which continue to change.
Click to expand...

The banking part is the one I don't fully understand.

If you have a US LLC then you get access to US banking and payment processing, right?

Then if your offshore corp OWNS that US LLC, you would still have access to the American infrastructure, would you not?

Or do the banks and payment processors demure when they find out your US LLC is owned by a Seychelles / BVI / etc. and close you down?


mnschwarz said:
I believe relocating / residing in these places is less important for US citizens considering they're taxed on citizenship right?


Depending on the importance to your business, consider the jurisdictions reputation. You'll find a lot more people/businesses are happy to work with a HK company than Seychelles etc.
Click to expand...

Maybe this is a thing in other types of businesses but not in mine.

In all my years of providing online services almost nobody's ever asked or cared where my corporate structure is headquartered.

Since we're a distributed organization like most online services providers, customers are more concerned about where my team is from because of bad experiences with Indians, Filipinos and other popular outsource destinations.

At the end of the day, I could be incorporated on the moon for all they care.

Customers just want results, value for money and a pleasant collaboration experience.
 
#9
drpreobrazhensky said:
Customers just want results, value for money and a pleasant collaboration experience.
Click to expand...
True but even if no one ever has asked you about where your operation is headquartered, you get a much better reputation if you are based in France than in India or Pakistan.

Hong Kong is full of SCAM investment firms, so I rather avoid HK operations. Dubai for that sake looks at least a little more legit to me, less scam operations from there.
 
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#11
drpreobrazhensky said:
Dubai company formation is pretty expensive for just a holding company, no?

I've been in touch with Fred and he's super helpful.

I reckon once I ditch my US citizenship I'll establish in Dubai but it seems like overkill, or am I missing something?
Click to expand...
Approx 2 visits to Dubai and around $8000 complete setup (personal id, residency, medical test, all papers, company registration, personal and business bank account etc) + Add maybe $3k you will spend by going there. Hotels, food etc. Let's say you can count on approx $10-$12k total expense, but the main part is(was) around $8k to get things set up.

And yeah, @Fred did the job for me and it was pretty smooth. It took around 2 months to get everything 100% ready and like I said, 2 trips to Dubai. Do as he tells you and there won't be problems and be a bit patient. Bureaucracy is pretty noticeable while doing the setup, but also practically none once you have everything ready. It just works once it's all finished and depends on what you need.

You might say $8k is overkill, but on the other hand, I wanted something proven to work not to have headaches later on, and not to worry about accounting, this, and that. I just send invoices, get paid and that's it. UAE government doesn't ask or demand anything from me, it's all on autopilot and hopefully, it stays this way :)
 
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#14
drpreobrazhensky said:
The banking part is the one I don't fully understand.

If you have a US LLC then you get access to US banking and payment processing, right?

Then if your offshore corp OWNS that US LLC, you would still have access to the American infrastructure, would you not?

Or do the banks and payment processors demure when they find out your US LLC is owned by a Seychelles / BVI / etc. and close you down?
Click to expand...
It sounds as if you are living in a time warp. Before The Tax Cuts and Jobs Act of 2017 (TCJA), as an American you could defer taxation on offshore business income by simply re-investing any profit in your offshore business. In other words, as long as you did not bring your profit onshore, you could defer taxation. So, almost everyone chose an LLC under the old tax law.

The TCJA changed all that. To minimize taxation a completely different structure is required. If your income is below the FEIE threshold, then perhaps it does not matter in your case. It sounds as if you need an offshore tax professional. I wrote about it here:

https://www.offshorecorptalk.com/th...ess-in-estonia-hello-all-d.32482/#post-163522
 
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#16
aage said:
True but even if no one ever has asked you about where your operation is headquartered, you get a much better reputation if you are based in France than in India or Pakistan.

Hong Kong is full of SCAM investment firms, so I rather avoid HK operations. Dubai for that sake looks at least a little more legit to me, less scam operations from there.
Click to expand...

I think where you're incorporated matters a lot for certain types of businesses.

But not ours.


Martini said:
Yes you get access to US banking and payment processors with US LLC.

Can I ask which Caribbean island you're looking at for future residency?
Click to expand...

Yes you get access to US banking and Payment processors with a US LLC.

But the question is: if an offshore corp is the sole owner of that LLC, will you be able to transfer money from Stripe or Mercury to your offshore bank account without issues?


Golden Fleece said:
It sounds as if you are living in a time warp. Before The Tax Cuts and Jobs Act of 2017 (TCJA), as an American you could defer taxation on offshore business income by simply re-investing any profit in your offshore business. In other words, as long as you did not bring your profit onshore, you could defer taxation. So, almost everyone chose an LLC under the old tax law.

The TCJA changed all that. To minimize taxation a completely different structure is required. If your income is below the FEIE threshold, then perhaps it does not matter in your case. It sounds as if you need an offshore tax professional. I wrote about it here:

https://www.offshorecorptalk.com/th...ess-in-estonia-hello-all-d.32482/#post-163522
Click to expand...

Thanks for the link.

Unfortunately, I'm painfully aware of the Jobs act.

It's forced us into a sub-optimal accounting arrangement wherein we have to spend all of our profit by the end of each fiscal year (up to 106k, including the salary I take).

Otherwise the company profits pass through to me as if they were personal income and get taxed as such.

Ludicrous.


uplana said:
Mercury is good for US LLC's I was not aware of that they accept Hong Kong companies too??
Click to expand...

I believe Mercury is only for US businesses.

I think you'd have to withdraw money from your payment processor into your US Mercury bank account which is connected to your US LLC, and then use Wise.com or similar to transfer money from your Mercury account to an offshore account owned by your offshore company.
 
#18
drpreobrazhensky said:
Unfortunately, I'm painfully aware of the Jobs act.

It's forced us into a sub-optimal accounting arrangement wherein we have to spend all of our profit by the end of each fiscal year (up to 106k, including the salary I take).
Click to expand...
If you live in an expensive city, such as Hong Kong or Singapore, you can also take advantage of the foreign housing exclusion or the foreign housing deduction.
 
#20
Let us know if managed to get a Paypal, Stripe and/or Braintree account or similar for that kind of structure.

And a bank account as well.
 
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