In this episode, I interview my current accountant, Sunny Wong, and get expert insights on items you’re considering when opening or maintaining a Hong Kong company. Try not to get too complex or boring, this is geared towards those in the beginning stages of a HK company setup process.
Topics Covered in this Episode
- Any differences for a foreigner versus a local Hong Kong citizen when registering a limited company in Hong Kong
- Offshore transactions vs domestic Hong Kong business transactions and the tax implications
- Deciding between a shelf company or just opening a brand new HK limited company
- Does scope of business matter with a HK company
- Costs to maintain a Hong Kong company
People / Companies Mentioned in this Episode
- Sunny Wong, Grand Consultancy – Hong Kong company registration, bookkeeping, and accounting services
And as promised, here is a photo of Mike “the gweilo” white ghost in Shenzhen, China on Halloween night (along with the face painter):
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Below we had this podcast converted to text, as it is a top listened episode, enjoy!
Introduction: Welcome to the Global From Asia podcast where the daunting process of running an international business from Hong Kong is broken down into straight up actionable advice and now your host, Michael Michelini.
Mike: Thank you listeners and thanks for tuning in episode 2 of Global From Asia and yesterday was Halloween here in Hong Kong and Sunny, did you know Halloween?
Sunny Wong: Yeah, yeah. Quiet evening, nice light.
Mike: Yeah. I was actually in Shenzhen, China last night and I do not have to dress up because I was like Gweilo (laughs) for those who don’t know, Gweilo is a Cantonese word, it’s a slang for foreigner. Yeah and what it means is white ghosts. So I was a white ghost at the bar last night in Shenzhen, China and actually I had some free face painting, so I was even more white as a skeleton. I’ll post it up on the website this episode globalfromasia.com/episode2 if you want to check out that picture. Okay, so let’s just jump right in.
We have Sunny Wong here from Grand Consultancy Limited. It’s a Hong Kong consulting and accounting company to help small- medium sized businesses register and maintain their Hong Kong companies. So thank you for..
Sunny: Yeah,yeah, yeah.
Mike: And I’ve known Sunny for about 4 years now or maybe more. My first Hong Kong company, I didn’t know what I was doing. I wish I knew Sunny then but after I got introduced to him through Francy, a friend of ours and we’ve been working together. He’s pretty fun to work with. He’s flexible. We work, sometimes we meet at KFC (laughs) or a today we’re on his office here in Mong kok or Diamante next to Mong kok. And it’s still be good to get him in here on our second episode just because I know a lot of people has some basic questions about Hong Kong companies and what’s involved, and the costs so let’s just jump right into it. Okay so?
Sunny: Yes, ready!
Sunny: Yeah, yeah. Yes exactly. There is no difference for a foreigner or a local citizen to form a company in Hong Kong supposed that any person who is an etal, which means age 18 or above, he also can maintain a company as the shareholder and director of the company. Because according to the company laws in Hong Kong is similar to the laws in countries like Britain, USA, Australia, New Zealand and Singapore. A person who is an etal can form a company like this and also when the company is based in Hong Kong, this is called Hong Kong company. According to the law, a company can do any kind of business.
Sunny: Basically there is no restriction in business area.
Mike: Okay, great! And I know I’ve been reading a line and I have a couple of Hong Kong companies registered too. So there’s lot talks about offshore versus domestic transactions and the taxes involved. It’s a little bit complicated but maybe we can just briefly talk about offshore transactions and some example.
Sunny: Yes. Yeah, yeah, yes. Some kind of restriction regarding to areas where the common government can transfer the profit tax. First of all a company has contact to some kind of business through Hong Kong, say if the products are manufactured from Hong Kong, officially dissecting this as what we call inside activities, any profit of service of money from this area will be subject to Hong Kong tax. No matter what kind of country they are, maybe a phone company or offshore company or a local company. Secondly, if contract or transaction was signed in Hong Kong so the terms and conditions of the contract will be subject to the Chasiman from the Hong Kong law system. On this area,surface or profit generated from the activities will also be subject to the Hong Kong tax. When the fee, if the company and employee staff in Hong Kong and maintain an office okay of course officially this activities will also be subject to the public tax so for example a company, say an office company they manufactured made in China’s and this was directly transferred to the bias company say USA or Canada- logistic services or more other supposedly services provided from the Hong Kong people.So offices this service will not be subject to Hong Kong public tax.
Mike: Got it. Okay. So just to kinda summarize a lot of interesting information. (laughs) That tax is 17% right?
Sunny: No, 16.5%
Mike: 16.5% is taxes. This is actually pretty low compared to other countries like.. You have to pay that tax if these three conditions: First, if the business happens inside of Hong Kong;
Mike: Second, is if there is a contract signed in Hong Kong; Or three, if you have Hong Kong employees.
Mike: Okay and the example of the outside transaction is something’s made in China, manufactured in China and shipped to Europe or US and that’s the outside of Hong Kong, transactions that doesn’t need to pay the sixteen and a half.
Sunny: No, no, no.
Mike: Okay. I hope people get that. I know it’s nobody really talking taxes.
Sunny: Money (laughs).
Mike: Money, yeah. That’s kind of the idea.
Mike: Another common question is the shelf company versus like a normal registered company and why do people do a shelf company.
Sunny: Yeah, yeah, yes. Because forming a company is quite easy. It just takes one week to complete this but actually people, many people in Hong Kong they want to get a company sign a contract and say in two days, so people buy services in this area. There are some ready made company, that means this is actually a shelf company, what you called a shelf company need to has not contact any activities. A person who wants to buy the company tends to change the shareholdings of the company from us. It’s quite simple just 1-2 day to arrange.
Mike: Well. Oh, okay.
Sunny: This what called share companies.
Mike: And the age usually, what’s the age? How many years that a shelf company been registered?
Sunny: Basically, they are new company. This kind of company will basically form in just two months or just a few weeks.
Mike: Oh, really?
Sunny: Because for old companies people will feel a little bit dangerous.
Mike: I see.
Sunny: Not dangerous. Maybe the company has any kind of politics, wising the trust.
Mike: Got it.
Sunny: There is no good reason to buy a company which already been old.
Mike: Got it. Thanks! So we can’t touch from the beginning but the scope of business. I’ve registered companies in other countries, China is one and it’s a lot more difficult where you have to be specifically talked about what your company’s doing and you can only do that kind of business but in Hong Kong, I think one of the benefits is flexible. Maybe just explain the scope of business. How that…
Sunny: Okay. Among many people now, they want to have business in mainland China through using their Hong Kong company. Of course, we do know that there are a lot of restrictions in mainland to setting up a business there. A lot of… In Hong Kong, we can set up a company just simple. Just using your full identity, pay the tax and set up the company. When we have already form a company in Hong Kong, we can use this Hong Kong company as an investor in China. In China, to own or set up a new company in China. So basically, although this company is a Chinese company, the owner is local Hong Kong company to use this kind of method.
Mike: Got it.
Sunny: To start business in China.
Mike: Okay. And I also heard about that Philippines and other countries in Asia that have a Hong Kong parent company with like Philippines subsidiary.
Sunny: Yeah, yeah.
Mike: It’s a little bit different with the question. The scope of business and scope of business in Hong Kong, you can say trading but you can do consulting or you can do e-commerce or you can do, you know, in Hong Kong you can do any kind of business with your Hong Kong company.
Sunny: Yes basically a Hong Kong company which can conduct any kind of business…
Sunny: With some exceptions such as, talk market trading and also some kind of specific areas. They have some restriction on founding some industry. But basically regarding general business, a company can do that because according to the constitution of a company what we call atticus, the association of the company. There is basically absolutely no restriction.
Sunny: But you can use the ABC company to contact a transportation business (laughs). You can still do this.
Mike: Got it. Okay, great! And I know popular question I’ve been getting is what are the costs of maintaining a Hong Kong company after registering.
Sunny: It’s simple and the cost is basically low because the company must pay the business registration fee and the fee is in Hong Kong now is 250 something Hong Kong.
Sunny: And also they have to file the envelope return, they have to and if they have business, they have to audit financial statements like an auditor. So the fee for the company actually depends on the transaction model. So maybe I feel a thousand Hong Kong or maybe over 10,000 Hong Kong. So it depends on the business model.
Mike: Got it. So this is Hong Kong dollars not US?
Sunny: No. Hong Kong. (laughs)
Mike: So for the annual registration is about 250 Hong Kong dollars divided, so the exchange rate is it a lot like US dollar 7.8,so it would usually round up to 8. So 8 to 250 is not half as bad here.
Sunny: The fee for launch (laughs).
Mike: Yeah, yeah, yeah. Usually, cost of launch is yearly registration and then there’s 2000 Hong Kong for like the office, the address, the maintenance.
Sunny: The maintenance fee.
Mike: You could use your address for them to work for you, for a couple thousand Hong Kong and then which would be about again, like what’s that in dollars, 8.
Sunny: In US, it’s about 300.
Mike: Yes, 300 dollars a year for the office and maintenance and then the audits after 18 months.
Sunny: Yes, for the first year’s audit, it takes about 18 months.
Mike: 18 months. So you don’t have to worry for that in a year and a half but once you get that, it’s then about the lowest like 3000 or 2000, this is Hong Kong dollars. That’s about 400 dollars or like maybe to 2000 dollars US.
Sunny: Yeah, yeah, yeah.
Mike: So it depends on how many transactions and how well you keep track of your own books.
Sunny: A company, any business for the years, no audit were has to do.
Mike: Okay. Alright. I think that it kinda covers the basics here. I know there’s a lot of more complications and you have to keep all your, the receipts or the…
Sunny: Yeah. Keep all the document related to the expenses. Just keep all the evidence, the papers because in Hong Kong now, we have more than one million, more than one million with the company in Hong Kong.
Mike: One million (laughs).
Sunny: The population of Hong Kong…
Mike: Yeah. So you’re saying there’s one million companies registered in Hong Kong. More than that, more than that. The population in Hong Kong is about 7 million.
Mike: So that’s a lot you know.
Sunny: You see the ratio (laughs).
Mike: So you guys get the idea. There’s a lot of registered companies here and they run their Asia or global businesses from.
Sunny: Yeah, yeah, yeah.
Mike: Have you worked Sunny? Do you have people maybe on a call, they want to…
Sunny: Of course, welcome to all people. No matter their nationalities, come to Hong Kong or come to our office.
Sunny: About the span of company set up.
Sunny: And also the consultancy service.
Sunny: Because when they open a company, they have to open the bank accounts and how to conduct the business and we also provide some kind of extension payment.
Mike: Tax planning.
Sunny: Yes, tax planning.
Mike: Yeah, that’s great! And then I think as far as a lot of our listeners, I think are internet businessmen that or anywhere. So a lot has asked if they have to come to Hong Kong to do this?
Sunny: When they open a bank account, they have to do so but when they just set up the company, you can send the document for them to sign and return but when they open the bank account, the bank will like to see them at the beginning.
Sunny: So they need to come one time.
Mike: One time. So then the steps can be filed, they can work online first and when they get the company registered.
Mike: They have to open up a bank account.
Mike: So they can work by mailing the documents and when it’s registered, they come in to Hong Kong first on a personal travel and they go to bank, file a HSBC or Standard Charter and then take the company documents and open a company bank account.
Sunny: Of course, there’s some kind of exceptions. If they can’t to go to Hong Kong, say to open a bank account, they can arrange the bank to send the documents…
Sunny: To the branches overseas. Of course, there are fees, expenses for certain services.
Mike: Okay. I think we all should take a trip out to Hong Kong.
Mike: Alright. So I think that’s about it for today.
Sunny: Okay. Thank you.
Mike: Maybe we will get you back on the show.
Sunny: Yeah, yeah, yeah.
Mike: For some follow up questions.
Sunny: Okay, Okay.
Mike: Thanks Sunny.
Sunny: See you.
Mike: So just a useful tip from this takeaway. I’ve registered my start up here in Hong Kong Social Agent Limited little bit less than a year ago and it was pretty painless. And I’ve been operating all over Asia with different team members and suppliers towards customers around the world. So it’s definitely possible and don’t be too intimidated by it.
So that’s a wrap of Episode 2 Global from Asia. For clips, photos and more, go to our website at globalfromasia.com/episode2 and see you next week. We’re gonna have an episode 3 Casey Lau from Startup HK talking about the start up scene in Hong Kong and other programs from his catalyst program. Thank you.
To get more info on running in a international business via Hong Kong, please visit our website at www.globalfromasia.com. That’s www.globalfromasia.com. Also. be sure to subscribe to our iTunes feed. Thanks for tuning in.