Adventures in Offshoring

Adventures in Hong Kong Offshoring

One Entrepreneur’s Experience of Offshoring in Hong Kong, and How It May Help You

Who Am I?• Keith Commins• Web designer and entrepreneur from

Dublin, Ireland• “Digital Nomad” for 3 years, spent two

years in Chiang Mai, Thailand and one year in San Francisco

• Run a web design agency (pearldesign.ie) focused on internet marketers and copywriters, in the process of beginning Amazon FBA

• Decided to offshore last year, set up Hong Kong corporation October 2015

What this presentation isn’t..

• A guide on how to reduce or eliminate tax via Hong Kong or discuss income tax (this will vary according to your home country..)

• The finer details of how Hong Kong tax code will work (paying yourself a salary, audits, tax write-offs etc..), other than the “bigger picture”

• A guide to the different Hong Kong business structures (Sole Proprietorship, LLC etc..), suffice to say LLC will be the preferred choice for most DN’s

• A general offshoring guide – rather my personal experience of the offshoring process in Hong Kong

What this presentation is..

• Why you might want to consider offshoring, and who it is for..

• Practical “nuts and bolts” information about what you need to have to complete the set up

• My first-hand experience of setting up a Hong Kong corporation – the costs, the company I used to complete the process, the HSBC bank interview

• Potential pitfalls you may encounter should you decide to set up a HK corporation

So why set up a HK corporation then?

• Primary reason – 0% corporation tax (with a caveat that all profits are sourced outside HK – HK profits are subject to 16.5%), making it ideal for “digital nomads” seeking to reduce their corporation tax liability

• Access to the world class business infrastructure that HK provides, internationally recognized and respected legal system

• Ideal base for setting up business in Asia - perfect for those looking to build a team in places like Philippines, ideal gateway for doing business in mainland China

• Allows you to set up a multi-currency HK bank account and access to Hong Kong banking, allowing you to hedge risk in dollars or euros

Why you might not consider it..

• Annual audits – start at approx 1500euros, can be more depending on the complexity of your business

• Will require a trip to Hong Kong• Expensive to set up – can top 2,000 euro between flights

and various set up costs• Some countries take a dim view of offshoring and tax

“avoidance”- even if you are following the rules but if they “think” you are breaking the rules, you are breaking them

• Getting a HK bank account is NOT guaranteed, credit card is tough if not impossible without residency..

HK Corporation Setup Costs

• Costs can vary widely – from as little as $500 to $3000• Allow at least one month from when you begin the process

to when you arrive in HK, preferably 6 weeks if in Europe• You will have to courier company formation documents to

Hong Kong so allow for this expense and time• Look for competency in English, prompt correspondence,

overall attitude• Relatively straight forward process – pay the appropriate

fees to your formation company, print out your documents, sign them and return them via courier

• I used startitup.hk for company formation• Also recommended – globalfromasia.com ran by DC’er

Michael Michelini and asiabs.com

Basic HK Corporate Structure - LLC

• One shareholder (you)• One director (you)• Company secretary (usually set up company – must be

HK resident or a HK LLC)• Registered office in HK (set up company)• An auditor (usually the set up company will take care of

this for a fee, or can recommend a trustworthy firm) –first audit must be done within 18 months of company formation

• Business registration certificate

HK Business Bank Account Setup

• Trickiest part of process• Dress in business attire, bring business cards• You will need to convince your banker you are in Asia to do

business, NOT to offshore to save tax• Have your story straight – understand that a typical HK bank

does not need your business, and wants you know how your business will benefit them, not the other way around

• Ideally should be an established business with a few years of trading, minimum 12 months. Raw, “fresh off the turnip truck” startups aren’t suitable for HK incorporation, though not impossible

• Not too keen on CPA marketers, or certain affiliate marketers• After approval you will need to make a deposit of HK11,500

within two weeks to activate your account

Required HSBC Bank account docs

• Passport, proof of address via utility bill at a minimum• However, bring us much proof as possible that you are a

serious, legitimate business – bank statements, website screenshots, company accounts, invoices, work you have done for clients, Paypal screenshots, company formation documents from your own country..

• As much supporting information needed to build your case – this is key and (I believe) was a major part in the ease in which I got an account

Your obligations once set up

• Business registration renewal (HKD 2250 / 250euros)• NAR Government Filing Fee (HKD 105 / 12euros)• Registered Address (depends, approx HKD 1000 /

120euros)• Secretarial and general admin (approx HKD 1000 /

120euros )• Audit Costs (approx 1500euros)• Accounting – can do yourself or else use HK company,

expect to pay 500e -1000euros per annum

Further Resources

• Dynamite Circle ( www.dynamitecircle.com ) and the Tropical MBA (www.tropicalmba.com )

• www.sovereignman.com• www.nomadcapitalist.com • www.globalfromasia.com • nomadforum.io • Email is keith@pearldesign.ie if you have questions