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Running offshore hong kong company while nomadize in Euro zone

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jerseyuser

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Apr 30, 2021
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#1
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My wife is a Hong Kong citizen. We sell goods in online market platforms mainly in UK , Euro and USA. We currently own a trading company in Hong Kong.
We are planning to move out of Hong Kong and offshore the company. Basically, our company are one man band like those drop shipping company. We order and then ship to our customer. We do not hire anyone and do everything by our own. We can operate our business anywhere in the world. As such, we are thinking of how to save tax by going digital nomad.
Can we save some tax by going nomad around the Euro zone and not fall into any country tax residency. Basically it is just like tax residency of nowhere.
 
#2
jerseyuser said:
My wife is a Hong Kong citizen. We sell goods in online market platforms mainly in UK , Euro and USA. We currently own a trading company in Hong Kong.
We are planning to move out of Hong Kong and offshore the company. Basically, our company are one man band like those drop shipping company. We order and then ship to our customer. We do not hire anyone and do everything by our own. We can operate our business anywhere in the world. As such, we are thinking of how to save tax by going digital nomad.
Can we save some tax by going nomad around the Euro zone and not fall into any country tax residency. Basically it is just like tax residency of nowhere.
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You did not provide your citizenship. So, whether or not you can save taxes depends on the tax laws of your home country and, in the case of your wife, the tax laws of Hong Kong. Other than that, you need to ensure that you do not become a tax resident of any country in which you live, the laws of which vary by country.
 
#3
jerseyuser said:
Can we save some tax by going nomad around the Euro zone and not fall into any country tax residency. Basically it is just like tax residency of nowhere.
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It can be a challenging setup you are into there. You will need to have a company with substance i.e. office, staff etc. or something that can proof you have it. Being a nomad can also be difficult now a day, specially if you live within the EU.
 
#4
Tax residence nowhere is not desirable anymore. Pick a place and call your home. If you're an EU citizen, Cyprus 60-day program is a good fit for this. Spend at least 60 days per year in Cyprus, don't be tax resident anywhere else, and you can get all the necessary certificates and paperwork in Cyprus to prove to banks and others that you are tax resident in Cyprus.

If you live off of dividends from a foreign company, there's no income tax to worry about. It's extremely unlikely the Cypriot authorities would consider your company tax resident in Cyprus, so corporate tax is unlikely to be a concern. You would have to pay into the social healthcare system, though: 2.65% up to a maximum of 4,770 EUR per year (per person).

Be careful not to spend too much time in aggressive jurisdictions like Germany, Italy, and Scandinavia.
 
#5
Golden Fleece said:
Other than that, you need to ensure that you do not become a tax resident of any country in which you live, the laws of which vary by country.
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He also needs to ensure his company won't be considered a tax resident in the EU countries, due to the "place of effective management" rule if he's the director.

Anybody knows how this works in case of director's short stays in different countries?
 
#7
misterwilli said:
How would they find out?
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They can look at passenger records, social media posts/geo-tagging, hotel/AirBnb reservations, POS/ATM card usage, medical records (in case you get into an accident), and every other financial and electronic trace left behind.

"I'm smarter than the authorities" is a very risky attitude.
 
#8
It depends if you are Citizen of an developed and aggressive Country like Germany or France. Europe is not Europe and there is a huge gap in some countries between the written law and what's enforced at the end of the day.

Basically that's the whole thing about Malta and Cyprus both are part of Europe but slows down every single regulation that is introduced in Brussels to be as much as possible offshore jurisdiction and at the same time being part of Europe. Imagine some EU countries like Malta you even have to negotiate with the tax authority some time to get the 5/6 refund while something like this would be impossible in Germany were the attitude is at the tax or pay the fine and go at some point to jail.

The whole digital nomad thing has its limitations. If somebody asks why is some address important or why should you haven one then it's all the time the same: Banks.

Another layer of security to not run into a trap would be to keep at least your finance and business center outside the EU with some setup that suits your needs like the UAE with only need to be every 6 month for 1 day there to keep the Residence Visa and therefore the bank accounts active.

You would safe yourself a lot of headache you can run into if you reside in Cyprus it's always a "should be" but if it's not like you thought it is you always pay something so in case of the bottom line of 12.5% tax in Cyprus you could probably end to pay is fine to you together with the fact that you move your finance and business center to the EU from a offshore jurisdiction like HK is fine for you go for it.

Otherwise the UAE would be interesting to look into as a replacement of your HK setup and the most possible freedom with getting retail banking access in a 0% tax jurisdiction outside Europe in 2021.
 
#9
I am UK citizen. Since UK has a CFC rule, I decide not to own the company under my name. As tax residence nowhere is not desirable anymore. So does it mean, if I own a offshore Hong Kong company, I need to find a place to set up PE to claim its tax residency.
Consider the above facts, where should I form my PE ? It seems Cyprus will tax my company as I own a PE there.
 
#10
1) Retain HK Company
2) Setup Dubai Company
3) Setup UK LLP with Dubai + HK companies as partners
4) Get your residency in Dubai.
5) Open your UK LLP bank account with Dubai residencies when they do the UBO check

This should allow you to have digital nomad lifestyle as long as Dubai is not strict in issuing you a tax residency (actual days needed are 183 days of stay but i heard they can offer you as long as you have the residency visa)
 
#11
In hindsight, my suggestion is a bit overcomplicated.

I don't think CFC rule does not apply to you in this scenario. CFC rules only apply to passive shareholding in foreign companies of a local tax resident.

UK and Hong Kong are both territorial tax systems. If you have been out of UK for long time, I don't think HMRC will come pounding. But to be on the safe side. Just setup a Dubai company and get residencies for both of you. Register yourselves as residence there and live there for some time to get the tax residency issued. Dubai companies company can now open Stripe and Wise quite easily, so it should suffice normal online e-commerce. As for your HK company, don't try to use it for trading activities, HK IRD nowadays do not like to see double non-taxation, even after you submit for Offshore Profits Claims.

If you want to keep the HK company, you can let the HK the company be the shareholder of the Dubai Company, so that profits repatriated will be regarded as foreign dividends which are tax exempted anyway, its hell alot easier than claiming for offshore profits tax exemption, which incurs a lot of time, energy and costs. If you want to have a front company, rather than the Dubai company (maybe due to the stigma when doing business with certain European countries), go for a Canadian British Columbia LLP or US Wyoming/Delaware LLC, and conduct business from that USLLC/BCLLP

Disregard my suggestion of the UK LLP since you are a UK citizen, its best to remove all trace of activities in UK.
 
#14
Sols said:
Tax residence nowhere is not desirable anymore. Pick a place and call your home. If you're an EU citizen, Cyprus 60-day program is a good fit for this. Spend at least 60 days per year in Cyprus, don't be tax resident anywhere else, and you can get all the necessary certificates and paperwork in Cyprus to prove to banks and others that you are tax resident in Cyprus.

If you live off of dividends from a foreign company, there's no income tax to worry about. It's extremely unlikely the Cypriot authorities would consider your company tax resident in Cyprus, so corporate tax is unlikely to be a concern. You would have to pay into the social healthcare system, though: 2.65% up to a maximum of 4,770 EUR per year (per person).

Be careful not to spend too much time in aggressive jurisdictions like Germany, Italy, and Scandinavia.
Click to expand...
Does this actually happen to people? Like when you're visiting a couple countries and government suddenly declares you a tax resident and is asking for tax?

I would imagine a few years needs to pass for this to even be possible
 
#15
CryptoIsFreedom said:
Does this actually happen to people? Like when you're visiting a couple countries and government suddenly declares you a tax resident and is asking for tax?
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It's one of those things that might rarely happen, but is nonetheless a risk that needs to be quantified and measured, and shouldn't be dismissed too casually. Even if it is a very, very small risk in most cases.

Not every visit is the same. What you think of as a visit may be different from another person's intentions. It depends on what you do when you visit, how long you visit, frequency of returns, and many other factors. You can't always control everything that happens to you during a visit.
 
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