Incorporate E-Commerce Business in HK for Tax Benefits?

[Sulo88]

Hey Everyone!

I have incorporated company currently in Slovakia (EU) and sell sporting goods through amazon.com FBA (in USA) and our own website through shopify (USA). All our customers are in USA and so all our payments are going from there. We buy all goods from China.

We are getting taxed in Slovakia + VAT which at this points lead us to incorporate our business elsewhere as it no longer makes sense. Goal is to avoid tax and get rid of VAT. Which I think is unreasonable to pay just because company is incorporated in Slovakia but does no business there. (That was minimally viable solution for me because I'm Slovak citizen and at start offshore company was unnecessary.)
I'm no concerned with privacy or cost of setting things up.

Would incorporating new limited company in Hong Kong and applying for tax exempt and setting bank account in Cyprus, be a good solution for this situation?
Would this, assuming we get tax exempt mean that we pay zero tax since all income is coming from outside of HK?

Thanks for any opinions or suggestions!

 

[devnull]

I can say, i have registiered an company in HK, you still need to file tax reports first... and about Tax exempt apply, they will decide, which can be take 1-2 years to decide.

 

[Sulo88]

I can say, i have registiered an company in HK, you still need to file tax reports first... and about Tax exempt apply, they will decide, which can be take 1-2 years to decide.

Thanks! Thats actually helpful information. After you get tax exempt approved, and you paid taxes in HK, are you eligible for tax return?

 

[Tax Cow]

I use Gibraltar Non-Resident Limited for VAT mitigation but due to Brexit and legal uncertainty associated, I would look elsewhere if you need a global solution immediately.

With that said, if you are certain you will not sell to EU customers, then Gibraltar might be a viable option today. Gibraltar is the very last country in the world that will ever consider implementing any VAT taxes. They will raise the corporate tax when needed but they will never go above 0% VAT. That's the fundamental value proposal of this jurisdiction, and the ultimate reason any non-casino businesses go there.

I have no experience with HK to share my insights.

 

[devnull]

Thanks! Thats actually helpful information. After you get tax exempt approved, and you paid taxes in HK, are you eligible for tax return?

I dont know, i have not appiled for Tax Exempt yet. The fact is, that all revenues/business made outside of HK is 0% Tax by law, the same is for personal income also, for example Residing in HK but income made from outside is 0% Tax. Not sure, if i am right.

Personally, i would plan an relocation to HK for Resident, if the infos above are true.

 

[fshore]

You shouldn't be required to pay vat to Slovakia for USA fba sales.

 

[Sulo88]

You shouldn't be required to pay vat to Slovakia for USA fba sales.

It's not for actual sales but for services provided. E.g. I order $1000 worth of ads on amazon or facebook and because of it I have to pay on top of that $200 extra in VAT to government.

 

[Sulo88]

Why not setting up a company in Seychelles or Belize and using it to do price transfers with your slovakian company?

It wouldn't eliminate VAT as it is paid for service (advertising) I buy from amazon and facebook. But sounds like interesting idea. Do you mean I would get paid to slovakian company from shopify and amazon and then transfer these payment to Belize as "expense" so it wouldn't be taxed? It could work well.

Only caveat is I wouldn't get rid of VAT as Amazon or Facebook will not cooperate with company in Belize or Seychelles...

 

[Sulo88]

Yep that or "buying" the goods with the Belize/Seychelles IBC and then "reselling" it to your slovak company,you will reduce the tax amount....for VAT you can try Gibraltar as @xzars said....

You can even do that "You set up an IBC in Belize for example and you sell it to your gibraltar Ltd. that will sell it on Amazon

Thanks! Will definitely look into this option!

 

[devnull]

Please note, that some EU countries such as Germany, the tax offices in Germany does not accept bills from Belize.

 

[devnull]

I wanted to give you an update. I am currently considering to starting an Gibraltar offshore just for EU EMIs within EU like Revolut.com, as a sub-company of a HK company for Trading, also note, with an Gibraltar, you can sell products to within EU with 0% VAT too and you dont need the billing infos such as address from EU customers. (Its why many VPN providers have this company)

 

[Sulo88]

I wanted to give you an update. I am currently considering to starting an Gibraltar offshore just for EU EMIs within EU like Revolut.com, as a sub-company of a HK company for Trading, also note, with an Gibraltar, you can sell products to within EU with 0% VAT too and you dont need the billing infos such as address from EU customers. (Its why many VPN providers have this company)

Seems interesting. Thought not sure what business model you have. For me as I checked, Gibraltar would not be a good option. I need some established and well known country, just like HK because I need to use Stripe, Paypal, Amazon, Shopify for all my payments and orders and most of them will not support business operating from Gibraltar nor anything like Belize etc.
Luckily it seems like HK will be just fine. Even without getting tax exemption, getting rid of VAT is guaranteed and maintaining company there will cost just about same than where I'm currently incorporated.

 

[devnull]

Yes, what I meant, HK company with an subcompany in Gibraltar, so i can use both companies to trade. Also Europe EMIs are harder for the offshore companies outside EU. For example, PayPal on HK company for international customers, PayPal in Gibaraltar for EU customers and Banking on Gibraltar company, so i can save a lot of $ to € exchange fees.

 

[devnull]

I forgot... BRexit might affect my decision, because Gibraltar is dependent on UK... I will wait for the result.

 

[mattd]

I believe if you register for VAT in SK then all the VAT on services from Amazon would be zero-rated.

 

[Bmw850]

Seems interesting. Thought not sure what business model you have. For me as I checked, Gibraltar would not be a good option. I need some established and well known country, just like HK because I need to use Stripe, Paypal, Amazon, Shopify for all my payments and orders and most of them will not support business operating from Gibraltar nor anything like Belize etc.
Luckily it seems like HK will be just fine. Even without getting tax exemption, getting rid of VAT is guaranteed and maintaining company there will cost just about same than where I'm currently incorporated.

You are right I have recently got a HK, it works fine, it s a well accepted juridiction in my business, the bank is good but more surprising, it s PayPal Hong Kong, higher limiiand smooth deals

 

[Sulo88]

You are right I have recently got a HK, it works fine, it s a well accepted juridiction in my business, the bank is good but more surprising, it s PayPal Hong Kong, higher limiiand smooth deals

Thanks for some feedback! I just started process of forming HK company. BTW, Do you know if any HK bank gives you business loan if you apply for tax exemption?

I believe if you register for VAT in SK then all the VAT on services from Amazon would be zero-rated.

Doesn't seem to be case according to my accountant... They basically assume that any service from Amazon was delivered to Slovakia, therefore I have to pay that extra VAT...

 

[mattd]

Just register your Slovak company for VAT so it will be a reverse charge

 

[Bmw850]

Thanks for some feedback! I just started process of forming HK company. BTW, Do you know if any HK bank gives you business loan if you apply for tax exemption?

I have no idea at all sorry.

 

[devnull]

I told you so, i have moved 1.5M€ via PayPal HK until now, no issues.

However the real problem is the EMI or bank account for HK.