Jurisdiction spotlight: Hong Kong and Macau

With the recent changes (as of January 1st 2014), it is high time to discuss Hong Kong. I will also be going over its Portuguese-heritage neighbour – Macau (also Macao).

History

Grab your time travelling gear. It’s history time.

Hong Kong

Flag of Hong Kong

To most, it seems that Hong Kong’s history began in 1842 when China cedes Hong Kong to the British Empire following the First Opium War. This is because Hong Kong’s early history is poorly recorded.

Archaeological findings have identified tools and pottery in Hong Kong, dating back over 30,000 years ago.

Real signs of civilization start around 700 BC, with some fishing colonies forming.

Hong Kong was then a part of the various Chinese dynasties, where it grew from a fishing colony into a harbour of some importance.

The Portuguese arrived in the early 1500s and set up a small base in Tuen Mun.

During this time and until the 1800s, Hong Kong was a haven for pirates and it became an important port for the opium trade.

While China wanted silver – of which Great Britain had plenty – and Great Britain wanted tea – of which China had plenty – the two started trading extensively.

However, between 1839 and 1842 the First Opium War was fought. As an outcome of this war, Hong Kong became a British crown colony on the 29th of August 1842 with some expansions in 1860 and 1890.

The British rule met initial resistance but by the mid-1920s, although still with racial tensions, the foundations for what ultimately became modern Hong Kong were set out. Industry, trade, and commerce blossomed.

On the 23rd of December 1941, Japan invaded and occupied Hong Kong. They held it until the 15th of August 1945, when it was liberated by British and Canadian forces.

Great Britain kept Hong Kong after the end of World War 2, despite letting go of many other colonies, such as India.

Starting in the 1950s, the Hong Kong economy was again blooming. A large number of people from mainland China moved to Hong Kong and many started successful textile businesses. In addition to textile, the Hong Kong industry exported shoes, plastics, and buttons. By the 1960s, “Made in Hong Kong” was a sign of quality.

Like in the west, equal rights were big in the 1960s and 1970s, with equal pay for men and women being put into law by 1968. The 1970s also saw significant investments in education, which would pay off in the 1980s and 1990s, when Hong Kong – under direction of Margaret Thatcher – liberalized its economy. This was part of a strategy for Hong Kong to become a conduit of trade with the at the time rather isolationist mainland China.

By the 1990s, Hong Kong was one of the fastest growing economies in the world.

In 1997, on the 1st of July, the British rule of Hong Kong came to am amicable end and it became a Special Administrative Region under Chinese rule.

To this day, Hong Kong remains a prosperous region with a superb international reputation. It is one of the Four Asian Tigers together with Singapore, Taiwan, and South Korea.

Macau

Flag of MacauSimilar to Hong Kong, the early history of Macau is poorly recorded, since it for a long time was not a separate entity.

There is some evidence of human activity in Macau as early as 4000 BC.

While the Portuguese settlement in Hong Kong (mentioned earlier) never quite took off, the settlement in Macau was more successful.

Portuguese sailors came to Macau by way of Goa and Malacca, landing on Macanese shores in 1513.

Portugese—Chinese relations were volatile. Diplomatic relations and trade routes were established early but were ousted by the Chinese a few years later.

Relations were especially complex due to the role of Portuguese Malacca (today a part of Malaysia). Malacca had historically friendly ties with China and the relation between Portugal and China soured when Portugal invaded Malacca.

By 1535, Portuguese ships were allowed in the harbours of Macau but the crew were not allowed onshore.

Following the Ningbo Massacre in 1542, whereby the emperor ruled that all Portuguese and Christians be killed and over 12,000 were massacred in response to Portuguese frivolous killing of Chinese people, Portuguese survivors were given safe harbour in Macau.

The Portuguese built houses and slowly built up a society in 1557 in Macau. In return, the Macanese charged a rent equivalent to 20 kilograms of silver per month. It was at this time also agreed that the Portuguese were subject to Portuguese law and the Chinese to Chinese law, creating a social divide between the two groups.

In 1622, the Dutch tried to conquer Macau but were driven back. The Dutch outnumbered the Portuguese soldiers, but Portuguese slaves took up arms and helped in fighting back the Dutch.

After this, Macau became an important trading hub for silk from China to Japan, with the Portuguese acting as middle-men.

Between the mid-1600s and mid-1800s, Macau’s global influence shrank, much due to isolationist movements in Japan.

By The 1840s, several European industrialists had opened up factories and offices in Macau.

When China handed over Hong Kong to Great Britain, Macau’s importance as a trade hub decreased. Instead, Hong Kong attracted trade ships, with its larger, deeper, and more developed harbour.

In 1849, Portugal stopped paying rent to China and instead attempted to declare Macau independent from China. This met with resistance from mainland China and led to the assassination of the governor of Macau.

By 1870, Macau had become a major slave trade hub.

During World War 2, Macau served as a refugee center, housing over half a million refugees in total. Japan recognized Portugal’s neutrality even in Macau, which gave Macau a temporary economic boost midst the war.

Aircrafts from the USS Enterprise bombed Macau after it was discovered that the supposedly neutral Macau was selling petrol to Japan. Portugal protested the bombing after the war and in 1950, the US government paid 20 million to Portugal.

The period between World War 2 and the handover in 1999 was marked with moderate growth. Relations between Portugal and now communist China were volatile. Protests were often met with excessive force by the Portuguese authorities.

On the 20th of December 1999, the Portuguese ceded Macau to China. It became the second Special Administrative Region, after Hong Kong.

In 2002, the government of Macau enacted a law from 2001 which legalized gambling and offline casinos opened up. Macau internet gambling was regulated in 2003.

The financial crisis of 2008—2009 caused delays in expansions and unemployment spiked.

Today, Macau is the gambling center of Asia. Its offshore financial sector is growing but still nowhere near the size of Hong Kong.

Overview Data

Hong Kong

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Macao

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Hong Kong Incorporation

Hong Kong is a highly reputable low-tax jurisdiction. While Singapore consistently rank higher in the IFC and World Bank Ease of Doing Business rankings, Hong Kong is unparalleled for non-residents, since Singapore requires that companies have a resident director, whereas a Hong Kong company can be owned, managed, and operated entirely from abroad.

Hong Kong permits corporate directors and shareholders, which for long meant that Hong Kong companies were formed with anonymous (no public records) offshore companies, so that the offshore company could appear to be a Hong Kong company and enjoy the reputation advantages thereof.

However, as of the 1st of January 2014, Hong Kong now requires companies to have at least one natural person as director, who will appear on public records. Nominee directors are still a very rare occurrence in Hong Kong and there are no signs of any rapid improvement.

Hong Kong still remains a very attractive jurisdiction for companies to form, since it applies territorial taxation, where only income source from within Hong Kong is subject to the 16.5% corporate tax rate.

There is no sales tax (VAT) in Hong Kong.

By far, the most common legal form in Hong Kong is limited company; usually private limited. It is very easy to form, maintain, and operate private limited companies in Hong Kong. Bookkeeping is required but there are tonnes of accountants and accounting firms that can do it for you.

The company through which you form your Hong Kong company will most likely have in-house accountants that can do it for you, as well as make all necessary filings – including tax exemption.

The cost of forming a Hong Kong company is around 10,000 to 20,000 HKD. Annual renewal is usually just a few thousand, not considering the cost of outsourced bookkeeping, which will depend on complexity of the bookkeeping.

All Hong Kong companies must undergo a full annual audit, unless the company is declared dormant, in which case an audit is only required to confirm that the company is dormant. While audits usually cost a lot, the fact that it’s required for all companies means that competitions among auditors is quite fierce and prices are kept relatively low. Having audited books is something banks and diligent business partners appreciate.

As of 2012, LLP (Limited Liability Partnership) is available. It has not seen much usage yet.

Macau Incorporation

Macau has a longer list of legal forms available, allowing for a wide range of liability.

  • Unlimited Liability Company (S.N.C.)
  • Mixed Liability Company by Quotas (S.C.)
  • Mixed Liability Company by Shares (S.C.A.)
  • Limited Liability Company by Quotas (L.D.A.)
  • Limited Liability Company by Shares (S.A.)
  • Limited Liability Company by Sole Owner (S.U.L.)

Macau companies are exempt from tax on the first 200,000 MOP and the next 100,000 MOP is taxed at 9%. Remaining income is taxed at 12%.

There is no territorial basis for Macau taxation. All income may be subject to tax.

However, under the Offshore Regime of Macau, companies can be fully tax exempt if they do not operate in MOP currency, do not target Macanese persons, and do not focus on other Macanese companies.

Unlike Hong Kong, where you pay tax depending on the source of income, Macau has taken a different approach of either full tax exemption or full tax liability.

There is no sales tax (VAT) in Macau.

The Offshore Regime creates two types of offshore operations: Offshore Commercial Service Companies and Offshore Auxiliary Services Companies. Both are designated International Business Companies (IBC), but are significantly different from the IBC legislation of Belize, Seychelles, and so on.

The differences between Offshore Commercial Service Companies and Offshore Auxiliary Services Companies lie within their scope of operations. While auxiliary services companies can only perform duties for holding or parent companies, commercial service companies are free to conduct business with anyone. Auxiliary companies pay a lower annual fee, between 4,000 and 10,000 MOP lower per year.

All companies in Macau – even those registered under the Offshore Regime – must prepare and file accounts. Non-resident companies will normally outsource this to a Macanese accounting firm.

The costs of forming a regular or offshore company in Macau higher than Hong Kong, but not enormously.

Banking in Hong Kong

Opening a bank account in Hong Kong is easy, although you will have to visit Hong Kong in person. Remote account opening is done very rarely.

Remote account opening is effectively limited to wealth management accounts (several million HKD), international banks that allow you to open an account in a jurisdiction through foreign branches, and residents of China or Macau, for which some banks will open accounts by video conference. To find out if you qualify, contact banks.

Hong Kong is, however, one of the best banking jurisdictions in the world.

You can find banks from all over the world in Hong Kong. There are over 150 banks licensed in Hong Kong.

The banks have generally low fees but still offers excellent services, both in terms of customer service and banking services.

The banks have low minimum balance requirements, with most being happy with 5,000 HKD. However, more personalized and prestigious banking is available for high networth individuals and larger companies.

Hong Kong banks are open to all sorts of companies, including offshore companies. The risk appetite varies between banks. IBCs are often subject to higher minimum deposits, though still acceptable (25,000 – 100,000 HKD).

It can be difficult to obtain a Visa or MasterCard credit card from Hong Kong banks as a non-resident company. It takes a bit of convincing and assurance, often not possible immediately upon account opening. Chances are you will be given a China UnionPay card. While support for China UnionPay is growing internationally, it doesn’t have anywhere near the presence of Visa and MasterCard.

Banking in Macau

I have so far never heard of a bank in Macau opening accounts remotely. It probably is possible, but even more restricted than Hong Kong.

Banking in Macau is not as good as Hong Kong and one big reason is language. While banks in Hong Kong always have staff that speak fluent English (although with an accent), Macanese banks cannot always deliver English-speaking staff. Speaking Portuguese is of little value outside of government interaction. You either need to speak Cantonese, have a translator with you, or be fortunate enough to book a meeting with English-speaking staff. Websites and internet banking are generally available in English, though.

The biggest banks in Macau are Chinese or local. There are very few non-Chinese foreign banks in Macau, most opting for Hong Kong instead.

While generally open to non-resident persons and local as well as Hong Kong companies, opening bank accounts for offshore companies is not quite as easy. Asian companies (Singapore, Labuan, and Brunei) seem to work quite well. Macanese banks have limited experience dealing with other offshore companies.

Living in Hong Kong

Hong Kong is a large city with influences from all over the world, though mainly China and UK. It is an intense city, with a lot of people living in a relatively small area. Hong Kong is a melting pot of Asian cultures.

Apartments are small and expensive, unless you opt to live in off-side areas such as New Territories.

While traffic on the streets of Hong Kong doesn’t always flow very well, the subway system is one of the best in the world. It also comes at a perfectly reasonable price.

Clean and quiet parks are located throughout the city, for when you need to get away from the hectic city life.

However, there is more to Hong Kong. Anyone who has flown to Hong Kong and travelled to the city by car or bus will have seen a glimpse of the stunning nature that Hong Kong also has to offer. It’s not large, but it’s probably larger than most people would think.

Crime is very low.

Pollution is a problem and people frequently walk around wearing masks over their nose and mouth.

Nearly everyone in Hong Kong speaks English, although many are shy to use it but will understand you.

Immigration and Residence

Immigration to Hong Kong is quite easily obtained if you have a sponsor. This sponsor can be a company or, if you are looking to move to Hong Kong to start a business, a person of a reputable profession, such as a lawyer. (This is not required if you start a business operated from abroad.)

If you wish to settle in Hong Kong without a sponsor, there are nonetheless two other ways:

Capital Investment Entrant Scheme

This is subject to an investment of 10 million HKD.

More information: http://www.immd.gov.hk/en/services/hk-visas/capital-investment-entrant.html.

Skilled Immigrant

This is a point-based test, which is available to anyone, with or without a pending job offer in Hong Kong.

Taxation

Personal taxation in Hong Kong is generally low.

Income tax is on a sliding scale from 2% to 17%, although total tax exemption can be made if the income is determined to not be sourced from within Hong Kong. This is a decision taken on a case by case basis.

There is no capital gains tax, inheritance tax, wealth tax, or sales tax. Property tax is charged on a territorial basis.

Living in Macau

Compared to Hong Kong, Macau is not as much of a metropolitan top-modern paradise.

The first thing you see when you get off the ferry from Hong Kong and through customs, is the Grand Lisboa casino building. Macau puts Las Vegas to shame when it comes to gambling and decadence. Macanese casinos together turn over about three times as much money as the ones in Vegas.

You then get to the part with picturesque old Portuguese colonial era buildings standing next to traditional Chinese buildings. These parts of Macau offer a vivid combination of east and west.

However, once you get beyond the sprawling city center you get into mainstream residential Macau, which compared to Hong Kong looks run down. The divide between rich and poor is enormous in Macau.

Costs of living in Macau are much lower than Hong Kong, unless you live in the center and near the casinos.

Crime is kept well under control with plenty of police present throughout the territory.

Pollution is a problem and, like in Hong Kong, people often times walk around wearing masks over their nose and mouth.

Despite its heritage as a Portuguese colony, it’s hard to find anyone who speaks Portuguese. It’s also hard to find anyone who speaks English outside the central and most touristic areas.

Immigration and Residence

Macau offers two main types of residence schemes:

Investment

Requires an investment of one million MOP, of which 500,000 MOP must be placed in a locked account (term deposit of sorts) for seven years with a bank in Macau.

It was previously possible to acquire residence through investment in property, but this was abolished in 2010.

This is a lot cheaper than Hong Kong and with around-the-clock ferries, it is an attractive alternative.

Technical or Talented Foreigners

Highly skilled professionals may qualify for residence under this scheme. It is usually limited to management staff or highly skilled professions, such as medical professionals and lawyers.

Taxation

Personal taxation in Macau is lower than Hong Kong.

Residents are liable for income tax on salary from employment with Macanese companies or salaries paid into Macau, which means that if you work remotely for a foreign company, you pay no tax. This can be used to live and work tax free in Macau.

The income tax rate in Macau varies from 7% to 12%. The first 120,000 MOP are exempt from tax.

There is no capital gains tax, capital duty, capital acquisitions tax, inheritance tax, or wealth tax. There is also no sales tax.

Final Words

Hong Kong is one of my favourite places in the world. It’s very easy to feel at home and at ease in Hong Kong, despite it being a hectic city. Walking around in Hong Kong never gets boring.

Forming a company in Hong Kong – whether operates from abroad or locally – is probably the easiest way to get a low or zero tax private limited company in a reputable jurisdiction. Hong Kong companies are welcome at nearly all banks in the world.

Macau has some edge over Hong Kong in terms of taxation and lower cost of living, but life in Macau is not as glamorous as Hong Kong. Since Macau has far fewer expats, especially from outside of south-east Asia, and language limitations, assimilation is not as easy as in Hong Kong.

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18 Comments on "Jurisdiction spotlight: Hong Kong and Macau"

  1. Hi Streber, have also to add thanks for your ‘pro bono’ work on informing people in a factual-type way without charge.
    Am living in SE Asia and wanting to set up an offshore business, overseas income will not legally be taxed (in my situation – as I see it.) Business will be nothing controversial, but on-line. Also need an offshore account for any offshore work I may do.
    Have spent far too long considering alternatives. Presently looking something relatively simple to get started- a BVI company and HK bank account. Lots stories in recent years on difficulties with opening etc bank accounts in HK, and lots people unhappy with HSBC. Not sure to what extent this is real.
    It seems using an agent is a bit smarter. However in questions, one person detailed their experience which wasn’t so positive, with HBSC. https://www.streber.st/2013/07/offshore-service-providers-in-review-part-iii-kaizen/ We have been recommended http://www.chandler.com.hk/
    Any comments on strategy, and agents etc?
    Thanks!

  2. HSBC HK used to offer a USD-based credit card for companies if you could provide an HKID. That seems to have disappeared now in favor of a dual currency HKD/RMB card. Even the banks in Singapore seem to not offer a USD card. Any solutions for those of us with expenses in USD and trying to avoid the 2-3% foreign transaction fee?

  3. I read that Macao actually expects an offshore company to conduct business operation from an office in Macao, have staff and make an investment. It seems one has to apply for a license for a offshore company in Macao first and than form it within 6 month.
    That is not the case in Hong Kong. The formation in HK is very easy.

  4. Hi Streber!

    When opening an account with HSBC under a corporate account, can you negotiate the opening balance? And approaching a bank like DBS, would that give you an advantage to create a foot into the Singapore jurisdiction?

    Also if you have an offshore company located in Seychelles, I heard you were required to have an interview with account manager filling and discussing a 6 page documentation asking the nature of your business or your investment, could you give some insight to this process?

    So speaking hypothetically, if someone was to go through the process of creating an offshore company with an account with HSBC with the purpose of utilising it purely as an investment vehicle to invest into Asia, what documentations would you require to prepare and present?

    Thanks!

    Anaru

    • Hi Anaru!

      Last I checked (might have changed), HSBC doesn’t have a deposit minimum as such to open an account. Some of their service packages have minimum deposit or turnover requirements. There is some room for leniency there but you’d usually end up with a pretty unattractive monthly fee instead.

      I’m not sure I understand your question about DBS. What type of establishment in Singapore are you referring to? Opening a bank account for an offshore company with DBS is possible. They are probably one of the most easy-going banks there right now.

      The paperwork you refer to sounds like the basic any bank will ask for: due diligence on the company itself and officers/shareholders and a business plan which includes business activities, customer information (hypothetical/expected if you haven’t started trading yet), marketing plan, and financial projections.

      As for documentation, it varies from bank to bank. I cover this in another post – How to Open an Offshore Bank Account (revisited) – which I believe will address most of your concerns around the practicalities.

  5. Hi Streber,

    Thanks for your amazing articles and blogs, I have just stable across you today.

    Great to see your experience and wisdom, shared, as I am really enjoying it and plus I’m new to this game. Lately I have been researching, as it has been constantly on my mind, to start to plant flags globally, as I have been following figures like Roberto Kiyosaki, Simon Black (Sovereign Man), Andrew Henderson (Nomad Capitalist) and Doug Casey (International Man) that speak about this extensively.

    Truly inspired by them, yourself and figures like Jim Rogers, Jim Rickards, Bert Dohmen and many others.

    I am starting all over again, so at the rebuild stage, so I have very little capital, but would like to set things up very methodically and wisely.

    Andrew Henderson once said, “even if you just set up a Offshore Bank account or a Offshore Foundation/Trust/Bank Account or a Offshore Company/Bank Account, is all you do, for now”, this will create possibilities for me to do so much more at a later stage when my current financial position is in a better place, as I’d like to invest into Asia and South America possibly Eastern Europe.

    Currently I reside in Australia for the last 9 years, but originally from NZ, so I’d like to start planting some seeds and flags globally, plus look into a second passport eventually.

    At the moment, some advice or your shared experience, be amazing and possibly some contacts that could help me get things underway, cost efficiently, effectively and with great anonymity.

    So, I have continuously looked into different Banking Jurisdictions, like Hong Kong, Singapore, Georgia, Chile, Uruguay, Cook Island, Andorra and Norway, which definitely captures my interest.

    Hong Kong is really appealing, as the banks have strong fundamentals and balance sheet, be great if you could provide some advice of how to go about opening an account or more importantly any contacts or recommendations be fantastic, plus a low (preferably) to medium opening balance (but the best HK bank deemed in your eyes).

    What I do like about HK, is that the HKD is peg to the USD and if it rises, great and if the USD drops, HKD de-pegs itself from USD. Other attractions is the multiple currencies held, low deposit entry and the easy to do business, plus what I am also looking for is low fees, transactions that can be wired in hours from jurisdiction to jurisdiction and keeping clear of the Western Banking Cartel, but this can be very hard to do!

    Also when applying, will they take my NZ Passport, Australian Drivers License, Utility Bill (Australia), Bank Statement or a Letter from my Australian Bank (Australia)? Am I required to have a place of residence in HK? If so, are there any solutions or ideas to overcome this part? Is there any other documents?? (if HK company is required then those documentations).

    I know you said that you are required to make a visit to open an account in HK, but are there any other arrangements thought could be done, like Video Conference?

    Singapore is like Phase 2 for me, as these are the flags I like to plant in Asia. Phase One, a Bank Account in Asia (HK) and South America (?).

    Once establishing an Asia Bank account then planting my flag in South America, Chile is another country I read or heard about, as the govt have no debt, really good fundamentals and a great banking system. Uruguay has only just come on the radar, as I am starting to hear a few things about it, of late, hope you could share more light on this?

    So again, is Chile or Uruguay hard banking jurisdictions to open an account and what are the associated costs or the opening balances??

    Andorra is the flag for Europe but I know very little about it and Georgia for Eastern Europe, is something that I definitely want to explore more as I have heard good things about Georgia, and it sounds like it is going places, so planting a flag here based on fundamentals and strong banking system.

    Cook Islands is purely about Asset Protection for me, as my research has pointed me in this direction to this small Pacific Nation, I am currently corresponding with a contact, regarding setting up a Foundation, as I currently have one in Australia that exempts me from tax obligation. A Trust is not feasible for me at this stage, but foundations provide the same fundamentals as the Trust in the Cook Islands, but it will be interesting on your thoughts on the Cook Island Banking and Structures? I know it has strong balance sheet and great fundamentals.

    My other question regarding Cook Islands, if I were to set up a Foundation in Cook Islands, is it possible to set up a Bank account in Hong Kong? or is that process very hard to do?

    Goal is to open a HK Business Account first, whether that requires a HK company firstly or if I could use a Cook Island Foundation to open this account?

    If I can’t do the Cook Island Foundation, should I open a Seychelles, Panama or just do HK company?

    Can a company or a trust/foundation have multiple bank accounts set up in different jurisdictions?

    So once I have this process set up and I start investing abroad, what kind of structure would you go for, especially as I start building up investments in different countries and asset classes? I know its varies from a person’s risk profile, but if you were to start again, from knowing what you know now, what would you do different with a limited budget?

    What country would you opening a company?

    What bank would you bank with, in HK first, South America Second and Europe/Eastern third? And why?

    What structure would you use for Asset Protection and where?

    Would you open different Trusts/Foundations for different asset classes or would you have one Trust/Foundation for one Asset, for greater protection?

    Be great to hear your thoughts, advice and/or any contacts that could help me get started, as I am looking for the best value, anonymity and structure!

    Regards,

    Refresh 2015

    • Thanks for your amazing articles and blogs, I have just stable across you today.

      Thanks for your feedback!

      Also when applying, will they take my NZ Passport, Australian Drivers License, Utility Bill (Australia), Bank Statement or a Letter from my Australian Bank (Australia)? Am I required to have a place of residence in HK? If so, are there any solutions or ideas to overcome this part? Is there any other documents?? (if HK company is required then those documentations).

      You are not required to have a residence in Hong Kong to bank there but many banks will require a higher intial deposit for non-residents, usually just a few thousand Hong Kong dollar but some – such as Standard Chartered – require 100,000 HKD (and in some cases 1 million HKD).

      As for documents – banks will ask for proof of your identity and proof of your address of residence. A bank reference is always good to have ready, should they ask for it. You rarely need to produce two IDs and banks generally prefer passports over national ID cards or driver’s license.

      I know you said that you are required to make a visit to open an account in HK, but are there any other arrangements thought could be done, like Video Conference?

      Some banks, such as HSBC, occasionally do it for people who reside in Macau or mainland China. Otherwise, it’s rarely done outside of private banking (wealth management) account opening.

      Once establishing an Asia Bank account then planting my flag in South America, Chile is another country I read or heard about, as the govt have no debt, really good fundamentals and a great banking system. Uruguay has only just come on the radar, as I am starting to hear a few things about it, of late, hope you could share more light on this?

      It’s not exactly accurate to call any banking system in Latin America great. Great is reserved for the likes of Switzerland, Singapore, and Hong Kong. In Latin America, some are just less underdeveloped than others – such as Panama and Uruguay. Chile is OK but opening an account as a non-resident can be quite the hassle.

      So again, is Chile or Uruguay hard banking jurisdictions to open an account and what are the associated costs or the opening balances??

      A few thousand dollars will satisfy most banks. Increasingly, though, banks are insisting non-residents open private banking accounts which requires six or sometimes seven figures. Speak to banks.

      Andorra is the flag for Europe but I know very little about it and Georgia for Eastern Europe, is something that I definitely want to explore more as I have heard good things about Georgia, and it sounds like it is going places, so planting a flag here based on fundamentals and strong banking system.

      They are two totally different ball games. Andorra is a well-developed financial center whereas Georgia is simply the least bad out of it, Azerbaijan, and Armenia.

      Cook Islands is purely about Asset Protection for me, as my research has pointed me in this direction to this small Pacific Nation, I am currently corresponding with a contact, regarding setting up a Foundation, as I currently have one in Australia that exempts me from tax obligation. A Trust is not feasible for me at this stage, but foundations provide the same fundamentals as the Trust in the Cook Islands, but it will be interesting on your thoughts on the Cook Island Banking and Structures? I know it has strong balance sheet and great fundamentals.

      This is probably overkill for you if you don’t have significant wealth to protect. Consider the costs vs the benefits.

      Cook Islands trusts are very popular, and that’s for a couple of very good reasons such as only honouring New Zealand courts and actually have been tested in courts and held up.

      My other question regarding Cook Islands, if I were to set up a Foundation in Cook Islands, is it possible to set up a Bank account in Hong Kong? or is that process very hard to do?

      It’s possible and when you set up a foundation, you should be working with a good enough service provider that can place your foundation with the finest banking institutions. This unfortunately means you probably can’t go with a bottom-of-the-barrel cheap service provider but that’s part of the cost of quality servicing.

      Goal is to open a HK Business Account first, whether that requires a HK company firstly or if I could use a Cook Island Foundation to open this account?

      It’s possible but you will need a fiduciary with good relations with the bank to do so. Most banks associate foundations with wealth management only.

      If I can’t do the Cook Island Foundation, should I open a Seychelles, Panama or just do HK company?

      I can’t comment on that. It depends on your particular situation and I can’t engage in such personalized analysis. Foundations are different from companies. Apples to apples, and all that. If you do not yet want to spend time and money on an adviser, at least dig deep into companies (compare private limited companies to LLCs as well) and foundations to get an understanding of what makes them different and how that may apply in your case.

      Panama is much more established. Seychelles are cheaper.

      Can a company or a trust/foundation have multiple bank accounts set up in different jurisdictions?

      Yes.

      So once I have this process set up and I start investing abroad, what kind of structure would you go for, especially as I start building up investments in different countries and asset classes? I know its varies from a person’s risk profile, but if you were to start again, from knowing what you know now, what would you do different with a limited budget?

      Structure is highly individual and as per above, I can’t go into detail about that. It sounds to me that you have grandiose plans but I am not sure if I see justification for it. It might be that all you need to diversify yourself in a satisfactory manner is a company and bank account somewhere else. Depends on what you want to achieve.

      What country would you opening a company?

      Consider both bank and country. A bank in country that for example may have strong banking secrecy (if that’s what you seek) is no good if the bank is about to collapse, has horrible customer service, high fees, and so on. Likewise, an attractive bank in a country that’s at the brink of collapse isn’t attractive either.

      You’ve got some good ones nailed already: Singapore, Hong Kong, Andorra.

      What bank would you bank with, in HK first, South America Second and Europe/Eastern third? And why?

      I can’t comment on this either I’m afraid since it’s so individual. In terms of banking service quality, I would be inclined to put all of Europe (including Eastern Europe) ahead of South America. Hong Kong is good over all but some of the smaller banks are extremely lackluster.

      What structure would you use for Asset Protection and where?

      Can’t comment on this. It’s one thing to protect a 500,000 EUR inheritance, another to protect 50 million EUR family wealth, another to protect real estate and vessels, and so, and so on. To get any sort of qualitative answer to this, you need an adviser who will engage with you on a truly personal level. Doing your own investigating can of course be very helpful but be careful about reading about how others have done and applying it to your situation.

      Would you open different Trusts/Foundations for different asset classes or would you have one Trust/Foundation for one Asset, for greater protection?

      This is sometimes done, yes, when the client wants to diversify their assets. For example, they may want to set aside 50% for their children and 50% for their spouse and instead of having everything under one trust or entity, they divide it into two separate ones.

      I know a lot of my answers weren’t what you hoped for but the reality is that no one can accurately and responsibly answer the questions you have without taking several hours to get to know you and your situation, which is ultimately unique – everyone’s is. But hopefully it leads to a good start in the right direction.

  6. I have recently succeeded in opening a HK Ltd company and corporate bank account with HSBC (but you’re absolutely right about credit cards, the application got rejected unfortunately). For this I had to visit HK in person. I got help from a HK company that helped me with the paperwork and is going to be my agent to file the necessary annual paperwork, but they’re not very forthcoming with any other advice.

    Would you mind sharing how you would advise getting money out of the company? i.e. I do online freelance work and will invoice my customers via the HK company from now on. The customers will pay the HK company and I then need to pay myself a monthly salary into my personal bank account (also offshore – I am resident of a country that doesn’t tax residents on foreign sourced income, so this is not about illegally evading tax). I just don’t have it clear in my head whether the payments going from the company to my personal account should be dividends, salary, or what.

    Any advice on this, or would you know someone who can help with this query?

    • Hi Katie,

      Taking funds out of a company is a delicate matter. While your country of residence might not tax foreign sourced income, income from your HK company might not qualify as foreign-sourced if the activities took place where you reside or if your country of residence applies a mind-and-management or permanent-establishment test whereby your income is considered local.

      There are two primary ways to take money out of a company:

      1. Salary or expenses
      2. Dividends

      For a small one-person business, it’s often not worth going for the first option as you may have to register as an employer and suffer payroll taxes and insurance requirements (in your case, either in HK or your country of residence, or both). Worth looking into especially if the salary you pay out is low and falls outside of registration requirements but chances are you will find the surrounding work too much.

      Dividends can be paid to shareholders if the company is reporting a profit. You can then pay yourself up to the entire profit margin of the company, unless otherwise stipulated in the memorandum and articles of incorporation. Check with your service provider about this procedure.

      But if you pay yourself dividends, your country of residence might see it as dividends and not income which can be subject to a different kind of taxation.

      Speaking to a local tax adviser would be highly recommended. Chances are you don’t have to worry at all about Hong Kong tax but more so about local tax.

  7. Many guides refer to the territorial taxation in Hong Kong, but there is not much information on how to get the tax exemption on the offshore income. My understanding is that you can either apply for advance ruling to get the tax authorities to decide if the income is offshore/non taxable. This costs from 60000HKD. Or you can do apply for it together with first tax return. You need to provide a lot of info, and it I heard that a CPA quoted 40000HKD for handling the tax exemption application.
    Do you have experience or further info on this?

    • It’s been a while since I was involved in the details of accounting but I’d say there is one zero too much in the prices you have been quoted. The only times I have seen costs in the range of 40,000 – 60,000 HKD, it’s been for large companies.

      Determining the territorial status of your income is done as a part of the normal record keeping and annual audit procedure. For a small company, this shouldn’t cost more than a few thousand HKD.

      You might want to shop around a bit to find more competitive rates. http://www.hkicpa.org.hk/ might be a good place to start.

  8. Which factors make you recommend Hong Kong over Singapore? Anything that Singapore would have going for it over Hong Kong?

    • Forming a holding company in Singapore can be a way to consolidate financies of several companies into a legal entity which Singaporean banks are likely to accept, as they can be quite difficult to work with as a non-resident company.

      For your average non-resident trading company, I have yet to see any advantage of Singapore over Hong Kong.

  9. “Hong Kong banks are open to all sorts of companies, including offshore companies.”

    Dear Mr Streber, thank-you for sharing the great information that you have on your blog! I would love to open a Hong Kong bank account for an IBC. I don’t mind travelling to Hong Kong to open the account and a higher minimum balance is no problem. A Unionpay card is also not a deal breaker. Could you please advise me as to which banks are most comfortable being in business with an IBC? (e.g. a Seychelles IBC) Would you also be able to suggest an intermediary that might expedite the process? I’ve been in contact with Kaizen, but after much ado – nothing! 🙁 It seems you were absolutely right about their less than stellar “Connections” in the banking industry. I really hope you can help 🙂

    • This is a tricky one.

      Generally, it’s HSBC.

      However, if you present yourself as a legitimate and interesting client, nearly all banks will at least consider you.

      I’ve had success with HSBC, DBS, Hang Seng, BOC, DBS, Standard Chartered, Citibank, and probably a few more I’m too jetlagged to remember. Not always with Seychelles IBCs, but various forms of offshore companies. Does that mean it’ll work for you? Maybe, maybe not. They’ll review your case individually, unless they throw some catch-all policy in your face; luckily quite rare.

      What it comes down to is reaching out to banks and just asking around.

      You don’t always have to travel to HK. Sometimes you can open an account through a foreign branch. Again, just ask them.

      Best of luck!

  10. Again, great article!

    Some accounting firms you can recommend with competitive prices?

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