How To Set Up An Offshore Company

With more and more people doing business online these days, have you ever wondered if you really need to register your company in your home country? Especially if you run a location independent business that does not tie you down to any one place, you could consider the benefits of incorporating offshore.

We have previously talked about the concept of Flag Theory for slashing your taxes, and offshore company formation is an important part of this.

Don’t Limit Yourself

Online businesses today do not need to be limited by national borders. The country of Estonia has in recent years launched their own groundbreaking E-residency program, which let’s anyone in the world set up a company in a trusted EU jurisdiction and conduct business with EU customers.

However, for the purposes of this article, we will be talking about how to set up a Hong Kong-based company specifically.

Hong Kong is perhaps the most popular place in the world to form a business, with some reports claiming up to 30% of all companies in the world are based in Hong Kong. With this in mind, shouldn’t you too educate yourself on these possibilities?

Setting Up a Hong Kong Company

The process for setting up a Hong Kong company is actually pretty straightforward, and anyone can do it regardless of nationality. You can even complete all the steps from your home country without ever setting foot in Hong Kong. You will need to provide a copy of your passport and a proof of your residential address, for example a recent utility bill. The process goes like this:

  1. Choose a business registration agency. It is highly recommended to use a reputable agency for registering your company. Some of the ones you may want to take a look at include Jumpstart, OneStart, and Startupr.
  2. Submit all supporting documents to your agent and settle the required fees.
  3. Director and shareholder(s) need to sign the registration form and send it by physical mail to your agent in Hong Kong.
  4. After about 12 business days, the whole set of documents are ready.

Why Hong Kong?

Now, you may be wondering why I am pointing out Hong Kong specifically as a place to incorporate your business. First of all, Hong Kong has a few obvious advantages over other so-called “offshore” jurisdictions. One person is all that is needed, making it ideal for solo entrepreneurs. Additionally, the minimum share capital required to form a Hong Kong company is only HK$ 1. Other more significant reasons for choosing Hong Kong are:

  1. Stable politics and banking: Hong Kong offers a stable and sound banking and political system. The government is pro-business and the banks charge some of the lowest international wire transfer fees in the world.
  2. Strong reputation: When you’re doing business with big companies, chances are they will raise some eyebrows when you tell them to wire the pay for your services to a bank account in Belize or British Virgin Islands. Hong Kong, on the other hand, enjoys a good reputation as the business hub of Asia and is a legitimate place to base any business.
  3. Low or no taxes: With a territorial tax system, profits earned from activities outside of Hong Kong are not subject to Hong Kong taxes. This means that the tax rate for international online businesses, classified as “offshore” companies, in most cases will be close to 0. Should you still be taxed as an “onshore” Hong Kong company, the tax rate is a low 17%.
  4. English language and Common Law: As a former British colony, most people you deal with such as company agents, bankers, and lawyers, all speak good English. You can also expect all contracts and written documents to be available in English.

The Downside

So, now that you know all the benefits, what are the requirements you need to comply with in order to operate your new Hong Kong limited company?

Firstly, you will need a Hong Kong accountant to submit your audited financial statements to the tax authorities once a year.

Secondly, a local office address is needed. Note that this cannot be a residential address. Luckily, reputable company registration agents like those listed above can usually help you comply with both of these requirements for a small additional fee.

Check Your Own Situation

Remember that you still need to follow all reporting requirements from your home country’s government. Depending on your particular circumstances, you may or may not be exempt from taxes in your home country, and you should always seek professional advice regarding this.

If you have any questions about this process, let me know in the comments below and I will try to point you in the right direction.

Featured image from Flickr.

Fredrik Vold is an entrepreneur, financial writer, and technical analysis enthusiast. He has been working and traveling in Asia for several years, and is currently based out of Beijing, China. He closely follows stocks, forex and cryptocurrencies, and is always looking for the next great alternative investment opportunity.