As we talk to clients, many ask what are the downsides of owning a Hong Kong company? Today’s post is a bit opposite of what we talk about here at Global From Asia – as we are “pro Hong Kong” over and over again in various blog posts and podcast. But we want to use today as a time to “vent” about some of the negatives.
Plus, we want to be helpful, and giving you the advice upfront will help you make a truly complete and educated decision about where to establish your company. While we still hope you choose Hong Kong – there is no reason getting into something without understanding it!
So let’s go point by point by some of the bigger issues and negatives we hear for owning and operating a Hong Kong company.
Mandatory CPA Audit Every Year
This is definitely the biggest one. When you register your company, the first year you get an extra 6 month grace period, so you don’t need to worry about this until about a year and a half (18 months) after the company was set up – but you’ll deal with it.
What is a company audit? It isn’t bookkeeping, it is the process of a licensed Hong Kong CPA reviewing your books, checking over your profit and loss statement, balance sheet, and other transactions. Once they verify the “books are true and clean” they will stamp it off and you can submit it to the IRD (Internal Revenue Department) – which is the Hong Kong tax department.
So we often talk to clients who want to save costs, but this is an unavoidable fee – and the price range is approximately $1,000 USD to $2,000 USD depending on the complexity and volume of business you are doing.
Even if you elect for offshore status of your HK limited, you need to file this every year.
Another pain point is clients ask over and over again “when do they need do it? It really is up to the tax department, they will issue you a PRT (Profit Tax Return) to your registered Hong Kong address (if you use our services, it will go to our virtual office). Once you receive it, you have 60 days (2 months) to prepare your books, financial statements, and have a licensed CPA partner to review and prepare an auditor’s report. We can help you with all of this, or you can split up the services to various providers if you wish.
Banking Is Getting More Strict
Hong Kong banking is truly amazing – once you get it. Multi-currency, low wire fees, English portals.
Yet we have talked in detail about difficulties getting bank accounts in Hong Kong. They say it is outside forces putting stricter rules on them, but it is hard to know what information is coming from who.
So there is a risk nowadays that you can open a new HK company, go through the process, and not get a bank account. Working with our agency, we take extra precautions and work extensively with you as part of our HKVIP service.
Merchant Accounts Still Waiting For Stripe
Yes, we’re still waiting for Stripe. Its Spring 2016 and still waiting. Braintree is here, and there are other startups coming too. We are in close contact with Stripe in Southeast Asia, and we get multiple sources telling us they are coming very soon!
More and More Requirements for a Physical Office in HK
Lately certain accounts (like Braintree) has required a utility bill in Hong Kong for your business address. This is because they want to see you’re not virtual!
Just seems again that banks and financial institutions are getting more strict. Some have told me they want fax numbers in HK, or utility bills, and other proof they aren’t sitting on the beach in Thailand!
We work with a lot of people sitting on the beach in Thailand, what is wrong with that?! Even some of our team members are replying to your customer service tickets on the beach in Thailand.
Alas, banks never liked that, and are getting more and more strict.
No Debit Cards in Hong Kong (Only EPS)
Here’s a big one that many business owners don’t find out until after they have the bank account open. That ATM card they gave you – it doesn’t have Visa / MasterCard logos on the front, right?
It is probably blank on the front, and looking on the back of the card you may see Unionpay and EPS logos.
What does this mean? It means this bank card only works at ATMs who support Unionpay (more and more) and EPS.
EPS is more of a Hong Kong only thing. It works like a debit card, the merchant swipes your card, and you enter your ATM pin. It will debit the card and you’re done.
But that only works within Hong Kong!
I know most of you reading this are on the beach in Thailand (I’m jealous btw) and the coconut shop down the street accepts Visa and MasterCard debit cards, but not EPS. As well as your subscription to Netflix and Skillshare.
So, to buy things outside of HK and online, you’ll need a credit card.
Limited Business Credit Card Options
So when you ask for a credit card – you had better to it in person in Hong Kong. There are remote application methods (we offer it as part of our bank account application assistance package if interested) but it is very long and painful to do.
So you can apply for it when you come to the new account application, or you can come back to HK later to apply.
Yet, you’ll notice there aren’t easy ways to get a credit card here. That is because if you’re not a local Hong Kong person (with a HKID, Hong Kong ID) it is hard for them to extend credit to you. You can put cash up front as a security deposit, which is what we recommend.
For some reason, banks here don’t like credit cards, at least not for the digital nomad. We are tempted to find more ways and solutions for our readers, but for now we recommend you ask your HSBC rep for a secured card.
Those Are The Negatives – Still Lots of Positives
Well, I am tired a bit of all this bashing. But it is good to get it out there. Maybe this post caused you to skip opening a Hong Kong company. Well, I am sorry to hear that – but its better to find out sooner than later.
There are tons of positives – great banking, next to China, low to no tax, English legal system, 1st world status country.
So what do you think? Are you happy with your Hong Kong company? Read this and still going to go ahead with doing it!
Asia business is growing like crazy! All places around the world have their positive as well as negatives. We’d love to hear any and all feedback in the comment section below, cheers!