Should You Take a Dividend or a Salary From Your Business? in Hong Kong and Globally With Ray Ng – GFA175

Michael MicheliniBusiness, Ecommerce, Podcast1 Comment


How are you paying yourself? This is a hot topic from many listeners – as entrepreneurs, digital nomads, e-commerce sellers traveling the world- how do we pay ourselves? Its important to take care of ourselves – but also maximize the tax benefits – for Hong Kong as well as anywhere in the world.

And I apologize for last week we left some swear words and other parts of the show that were a bit not cool for some of you – Doug and others -we have since cleaned that up – and today’s show is a bit 180 – with talking taxes and corporate. This is my business partner, Ray Ng, from Unipro Consulting Limited – doing HK corporate services together. So lets tune in

Topics Covered in this Episode

  • Connector.

    Intro Ray

    My business partner at the consulting firm Unipro Consulting Limited, great to have you on the show.

  • Connector.

    Hong Kong CPA

    So you’re a licensed HK CPA, right? How exactly does one become a CPA in Hong Kong? Not that I want to be – just curious haha.

  • Connector.

    Options To Take Money Out

    A lot of entrepreneurs here wonder how to get the money out of their companies to pay their rent, food, beer, and coconuts. What are the options?

  • Connector.

    Option 1: Dividend

    So Hong Kong doesn’t have a dividend tax, right? so that is nice. Is this the more common way?

  • Connector.

    How to take out the dividend?

    Just head on over to the ATM at Nana’s in Bangkok and withdraw a few times, pay the international ATM bank fees and currency exchange rate, and that’s it?

  • Connector.

    Option 2: Salary

    So, there’s the other option which is hiring yourself in the HK company. What does this mean exactly?

  • Connector.

    HK Employment Tax

  • Connector.

    HK Employment form

    Each year, Hong Kong companies get this form in the mail that asks how many employees they have, can you explain that a bit? So if the owner is paying dividend, they don’t count themselves, but if they are counting themselves as an employee, that should be as 1 person?

  • Connector.

    Hiring people outside of HK

    So if the HK company has staff working full time, in Thailand, do you need to report that in HK? How does that work?

  • Connector.

    Offshore status

    Regarding tax exemption as an offshore elect company – does option 1 or 2 matter for filing offshore as a HK company?

  • Connector.

    When does someone need to decide which way?

    Is this something the business owner should decide from the beginning? Can they call the ATM withdraws at Nana’s a dividend or a salary later on?

  • Connector.

    Tips

    Any tips for a listener who is a bit confused on what they should do for their situation?

  • Connector.

    Contact

    And how can you, or we – help them? What is the best way for them to reach out. Website, email, support@uniprohk.com

  • Connector.

    Thanks Ray

    Glad to finally get you on the show!

People / Companies / Resources Mentioned in this Episode

Unipro
Global From Asia Experts
Personal and Corporate Tax Rate
√ unipro email – support@uniprohk.com

Episode Length 25:23

So that’s a wrap – I hope to get Ray back on in the future to talk about taxes and other accounting help. Actually something in the works already on Amazon and e-commerce accounting streamlining and strategies.

And another cool announcement- we talked about meetups and workshops in an open platform – well Vietnam is coming! June, you can check that one as well as a lot of other events, courses, and workshops at our new experts platform – experts.globalfromasia.com – ok, see you next week!

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Podcast Transcription

“They set up a Hong Kong company here, then set up a bank account, then all the goods were ship from China to States directly. This is a typical case for being successful.”

Welcome to the Global From Asia podcast where the daunting process of running an international business is broken down into straight up actionable advice and now your host, Michael Michelini.

Mike: Global From Asia Episode 175 and it’s Friday evening as I do my recording. And my kids are turn off my little home office again into being, on the show now but behind me in spirit. So, this week actually first I want to apologize for last week’s. We left in some swear words and may clean those up. Sorry and other listeners, thanks for your messages. We cleaned it up, it was, we’re trying different ways, different styles. That was more like, lifestyle and fun. Today’s and the other side of spectrum more corporate taxes and accounting and something I know a lot of people have been asking about as entrepreneurs, digital nomads, ecommerce sellers, how do we deal with salary? Do we take it out from the ATM machine as a dividends to salary? Do monthly or whatever you want. How do we account for that? So I bring my business partner, Ray Ng from Unipro Corporate Services and we are equal business partners actually I think I mentioned earlier in other shows that we merge our consulting companies and some work on me at corporate set up in Hong Kong. So we do that together Ray and I at Unipro Services Limited Company. So, I though it be good time to bring on the show finally. And he’s got to help Claire questions collected from listeners and myself that can help you doing some better accounting in Hong Kong. But not just in Hong Kong but anywhere in the world. You need to pay yourself. That’s why we work so hard. And how should we do it. So today, let’s get Ray on the show.

So, thank you everybody for tuning in to our Global From Asia podcast. Today, we have my business partner, Ray Ng. Thanks for coming on, Ray.

Ray: Thanks for having me, Mike.

Mike: Yes. That’s great. So, we’ve been working together for couple years now, time is flying. You’re the partner and Director at UniPro Consulting Limited and it’s great to have you on the show.

Ray: Great! It’s always a pleasure doing seminar with you, Mike.

Mike: Sure. Yeah. We’ve done some webinars together. It’s our first podcast. So, it’ll be easy for you and it’s, the cool thing you are licensed Hong Kong CPA which is Certified Public Accountant.

Ray: Yeah. We called it Certified Public Accountant with the practicing at the back.

Mike: Practicing. Maybe you got to explain what is that mean.

Ray: Yeah. So, I think many of you may not really differentiate what does it mean by practicing and not practicing. So, basically in Hong Kong, you can say there are 2 licensing of CPA. For practicing CPA, that means we can issue all the report, we can do audit engagement for SME clients and for non-practicing that means they can’t provide all the service. They can just be internal accountant providing advice internally. So, that’s the difference. If you want to set up an accounting firm in Hong Kong, you will need to have a practicing CPA to corporate with you. Otherwise, you can set up a CPA firm business here in Hong Kong.

Mike: Alright. I’m not CPA in Hong Kong or anywhere. If somebody want to be, could they?

Ray: Yeah, it’s usually open for everyone. Of course, you definitely need the basic accounting knowledge. If you really want to be a CPA, you need to take some professional exams here. There’s no ways, requirement things if you graduate from non-accounting background then you can’t join the CPA exam. You can still do a conversion course. For example, if you are from engineering background and take the conversion course in HKI CPA. Once you pass it, then you can still continue for the professional exam and then if you luckily complete all the, for example, bar exam, then you still need to work on the CPA firm, maybe you can come to my firm.

Mike: Yeah, sure. We’re always looking for, we’re trying to build up a community for CPA. So, sure we contact Unipro. We can have you guys working with us. That will be awesome. So, there’s tons of stuff I’m sure listeners will love to have you and I discuss today but we have to focus on one thing, maybe can do more shows in the future. But I think today is something I’ve had people ask me about a lot on social media, emails. How to get their money out of their business? You know, personally. So, there’s huge different options to take money out as the owner or director of the Hong Kong Limited. So, maybe we can give some different options?

Ray: Yeah. I think many of you may be wondering, if withdraw money, is there any other limitation or restrictions, how much money can I withdraw? All kinds of nature of money I can refill? But you don’t worry about it. Actually, it’s very possible here. That’s not really limitation on when, how much, and what nature you can withdraw a money. I was saying when you withdraw the money and then there should be a purpose, right? Either you take the money for, to pay your operating expense or take your money for dividend or either you take it for salary.

Mike: Sure. Well everybody needs some beer and coke and nuts and food and rent. So, let’s go through some ideas here and the course. I think we should put a disclosure on this podcast. Obviously, you should talk to tax professionals such as Ray or a firm. Of course, before you make big decisions but were giving general advice because this is a hot topic on my, Ray’s coming on today to share. But we’ll give some general advice today. So, first is maybe will start with dividend. So, I think one of the perks of Hong Kong is there’s no dividend tax, right? On distribution profits.

Ray: Yup.

Mike: So, maybe you could explain that options. So, if you are, maybe you have 2 partners 50/50 and you take out a thousand dollars, just an example, each 500 dollars, maybe ATM withdrawal or bank transfer to a personal account. That would just be, a dividend of profits being taken out of the business. Can we, maybe help give me a little bit of an explanation?

Ray: Okay. So, either you pay for dividend or salaries, we need, internal matter actually. It’s up to management decision. If you take the salary out it is an expense. It is more than beneficial if you incur some expense in the P and L. So, that your profit tax log is lower but if you take dividend, then definitely it’s not treated as not expenses. And that is not pass deductible and you will make sure the profit and loss looks better because you’ve made last expense if they hire profit but then you will need to pay higher profit tax.

Mike: On the corporate level.

Ray: On the corporate level.

Mike: I always try to explain to people when I talk to them is, there’s tax on the company side and there’s tax on individual side. So, a lot of entrepreneurs especially, of course, Amazon FBA sellers and online sellers, their life is their business. I mean, my life is my business, too and Ray. You have to kind, of course, you need to separate yourself from the business, I think.

Ray: Yeah. This is something about limited company or there’s no unlimited company but there’s simple forms of doing business here. You can either choose, you are a sole proprietor or you do a partnership business but most foreigners here they will do a, limited shares by company. And once you did limited by shares company, you will need to separate yourself if you’re company. You and your company is separate entity. This concept has to be very clear. So, when we talk about a director take a salary out of the company, he’s also liable for his personal tax here in Hong Kong but I was saying the personal tax here is actually is slightly, the tax rate is slightly lower than corporate tax rate with just 16.5% but for the personal tax rate is 15% and you also enjoys some personal allowance and some many kind of different allowance. Of course, we can discuss more in details if you’re interested.

Mike: Great! Yeah. So, again today’s obviously, we can’t go on all these specifics and nervous to put this online. You should not be nervous to put this online or the ones people like the most. So hopefully guys you appreciate today and Ray’s expertise here. So, a lot of clients we work with are nervous to take out the salary because they have to pay in Hong Kong, then they have to register as an employee in Hong Kong tax department as individual and then pay employment tax as individual. So, that’s always more complicated, are they people think that they don’t want to be an employee. Cause there’s also offshore claims that’s a whole another huge topic. Is there employee, they won’t be able to get the offshore, right?

Ray: For the offshore, it’s more complicated and we need to treat it as more comprehensive holistic view to whole situation. Generally, the claim at offshore, basically your staff has not, cannot situated in Hong Kong. You cannot have a physical office here. As long as you prove that you’re business is not involving any Hong Kong, of course, you can have your bank account here but for supporting your business, you will need to need get more offshore so that you make your case stronger.

Mike: Okay. Would they be able to do a salary as an offshore company?

Ray: Yes. He is still able, he could be able to do that as well. Having a salary with the offshore claim is okay but the, if you decided to make an offshore claim and successful, then you don’t need to worry about to pay your salary or to pay corporate tax here because it’s offshore and it’s an exemption anyway.

Mike: Got it. So, then after doing the offshore then, they will just do the dividend.

Ray: Yeah.

Mike: Okay. So, I hope people are following. We’re trying to give you a higher level. How do they, how can they take out this dividend or salary either way could be just going to the ATM overseas like in Thailand or Mainland China and just going to the ATM and withdraw for business bank account.

Ray: Yes. To be more appropriate, actually, if you pay for dividend, then actually all directors of the company have by having a board meeting. But you know, most entrepreneurs they are more private company and just be friends, only the company then they can just assign the proper means to us or you can have your professional company secretary to help you. But for really, received of money, write a check or bank transfer or PayPal or whatever means you can receive the money.

Mike: Very Cool. So, yeah. So, I like your, you are stand on entrepreneur side and the smaller businesses. Our busy hustling and businesses, they may not have to do other thing fully, I was not enough proper but of course just make your business happen. But I guess to keep on doing with this, have to distribute evenly among the owners, right? So, if you have 50/50 partnership, one partner takes out 100,000 the other partner also has to take out equal amount or the amount that being distributed by the present of shares outstanding, right?

Ray: Yeah. It’s basically the same that you buy the business companies stock and you share your proportion profit. So it’s based on how many shares you have, the more shares you have the dividend amount will be higher.

Mike: So, it’s something I think owner should think about when I take owners in the company sometimes it might be an investor, maybe doesn’t need the income and they want reinvest the profit back into the business. So maybe, if that happens that should maybe, if one of the owner or directors need the money then, but the others don’t, then that should maybe be a salary or what have to be a salary, right? If you’ve got to distribute it evenly and one owner needs a cash flow independently.

Ray: In many of this cases, you can just treat it as a shareholder loan but to loan is of course non, you can set the terms normally payable on the manner, there’s no interest rate, just as no commitment on when is the time do we pay the amount then is more flexible.

Mike: Cool. This is great. Thanks. Yeah. Shareholders alone and other common one and on this day on the books for a while. I mean, I guess, alright. Again, everybody, this is obviously case by case, we need to, CPA would need to relocate your current financial situation. But we’re trying our best to give you guys some general advice for free and so if you have different choices, there’s dividends and salaries, and expenses for the company. Employment tax would then be on the salary side and then they have to register with the Hong Kong government as individual. They could do the e-tax, they have to come to Hong Kong to do that or?

Ray: They don’t really need to physically in Hong Kong. But they just need to know that, that has department to remind them on the actively, so once you set up a company the governors assumes that you understand all your liability, your responsibilities as a director. If you employ any employee or if you pay yourself salary then you need to actually file a form to the tax department, to notify them you’re currently employing some people to work for you.

Mike: Got it. So, employing, do they have to based? I mean does employee have to be in Hong Kong? I know there are some questions I’ve asked you for clients and they’ve ask like, they have so many overseas, does that person could be employee of a Hong Kong company?

Ray: For example, if they have employee in Thailand, there’s no need to notify the tax department that a Hong Kong company employs this staff but they won’t be any tax on this Thailand staff because there’s a rule saying if the employee doesn’t work in Hong Kong for over 183 days, then this staff is actually not liable to any personal tax here.

Mike: Okay. So, I know, we don’t work together, we have people outside of Hong Kong helping us in our firm. And there are some part time and full time, does it matter, or is it contractors, or we pay service providers? So, that is expense or as individual, I guess maybe doesn’t matter either anyway because they are outside of Hong Kong.

Ray: Yeah. I think so. Just us as example, we do have some offshore people helping us. There’s many offshores that you can actually pay for some professional companies that you can use and then they provide your HR service.

Mike: So, it was like invoice, which is like an expenses from another business instead of individual?

Ray: Yeah.

Mike: Alright. That’s pretty good. So, we’ll talk a little bit about offshore. So, if they’re offshore there’s a dividend, but they have to prove you know obviously get a tons of request by email about this offshore claims, foreign income inclusions and such. Do you want to touch that a little bit more?

Ray: I think, it’s general. I can just put a general case, like typical trading company trading from China then sell to united states. They set up a Hong Kong company here then set up a bank account and then all the goods are ship from China to States directly. They have nowhere host in Hong Kong. They don’t have any people here in Hong Kong. This is a typical case for being successful. So, if the goods actually go through Hong Kong and then ship to the states, this will definitely make your case weaker because in Hong Kong, there’s a function taking part in this whole operation that means somewhere or added here then it is more difficult to argue with the tax department saying that this business is also offshore.

Mike: Got it. Alright. There’s offshore you know very complex will get into that later. I think another good question, I’m thinking of is, when somebody need to sometimes people freak out, they just started their business, do they need to decide if this is a salary or dividend right away, or can they wait until they file their taxes?

Ray: I think, it’s, it will be the best if they just wait until, if they don’t have employees, it’s just a director of the company, why is that a company to decide whether there’s a dividend or salary with your account and all with us if you are using our service when your tax filing as come.

Mike: Okay. Clients that we’ve help is, of course, they’ve offering. Usually, they don’t file your tax for in a Hong Kong limited for almost a year and a half or little bit more around that time. Always been offering you business. of course we can help or any CPA can help classify those transactions. So, I have joke in my notes about a bar in Thailand at the beach and they take out money for their night out. They could later decide that’s a salary or dividend or shareholders loan or expense or other things. Of course, I think we always recommend using Quickbooks Intuit, advisers, we try to use this all the online tools. We always recommend you keep track and remember all these transaction and not just keep on bunch of bank statement and file of receipts, so please at least make of a note of these things. But later on when you do your books and audit you could then help work with the CPA to ensure that those are maximize for your tax return.

Ray: Sure.

Mike : Cool thanks so much, Ray and I know this is, its difficult to go on, putting these answers online. I appreciate you coming on the show. Of course, we would always love to have anybody listen to use your service. Support this podcast as well as Ray and the future shows. We have uniprohk.com and I think the email is probably the best way support the uniprohk.com and that will go to our team to help with your case. Also, we do some live question and answer webinars that are paid. So, if you’d like to get on some future webinars and try to ask some live questions we do that so that we can you know, we’re not trying to force it, use our service and happy that you want to ask some questions to Ray, our firm and we will have this on a regular basis going forward. We’re trying this out, we’ve got to do one in February, it might be too late for the show event. But seems like people are already excited about that, so Ray and I are talking about some regular service where you can ask CPA for help online. As we know that’s stressful thing. Sometimes entrepreneurs are nervous about their tax filing and also thank you so much Ray for coming on the show. We have to get it back on soon.

Ray: My pleasure. Thanks, Mike.

Mike: Thank you Ray for coming on and I don’t know if you guys know as far as his own podcast in Cantonese or Chinese language and he’s been, ours is his first guest it’s awesome. I mean, I love reading content. I love inspiring others. He also share knowledge and skills and inspire others to take action. So, I hope today’s show help you out. Sometimes I always worried that they’re too boring talking about taxes and stuff but I know there are certain listeners that really enjoy this stuff. Help you guys out. Also, there’s another platform, I know last week I mentioned meetups. I got a lot of emails and messages from people that interested in meet ups in their area and looking at Vietnam Ho Chi Minh City. So that’s coming up in June, you can also see some workshops working on in courses at experts.globalfromasia.com/experts like a new platform. So if you’re an expert in your field around Asia business ecommerce international cross border ecommerce. I’d like to know you and love to connect with you and workout some events and workshops and courses together. So it’s a new initiative after Cross Border Summit. People really want to get involved with us and Global From Asia brand. I’m excited for that, too. I’d love always your feedback and show notes as always at globalfromasia.com/episode 175. See you next week.

To get more info, on running international business, 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.