5 Reasons Your Internet Business Should be Based in Hong Kong — Even if You Are in the USA

5 Reasons Your Internet Business Should be Based in Hong Kong — Even if You Are in the USA post image

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I often say “location independent” isn’t location arbitrary. Your location matters. If you’ve got a little freedom to move around, you should use it to benefit your business.

Ian and I have been interested in offshore corporations for just over a year now. Before that time, our discussions on business structure revolved around LLC vs C-corp and California vs. Delaware. We heard about offshore corporations, but we thought they were the domain of the rich and powerful– the jetset and ballin’.

That’s changing. The barrier to entry is lower than ever. The information is out there. It’s feasible for most internet business owners to get set up in Hong Kong, Singapore, the British Virgin Islands, or elsewhere. If you run your business from your laptop, you can enjoy the same benefits that the rich, powerful, and jetset have for decades.

I’m learning about all this as I go. That’s why I’m writing about it. Please don’t take my word for it. In fact, I’m hoping for your feedback. There are many people in our forum who know way more than myself. Those are the folks who schooled me.

I owe a huge thanks to DCers Mike and Chris for flying from China to the first Tropical MBA summit in Puerto Galera. They were able to spend hours with me walking me through the details. That helped me to turn complicated information into action. I owe those guys more than a beer. They saved me 1000’s of dollars and made the whole summit worth it for me financially. Even if they hadn’t shared their business experience, those guys are tons of fun so it still would have been worth it :D (Also HT required for many DCers, but most importantly to Chris for writing up his experiences, and to Matt for being an insanely generous super-guru).

I suspect that for many internet business owners, the prospect of having a Hong Kong corporation seems distant, irrelevant, and maybe just off the radar.

Here are the 5 benefits I didn’t know about Hong Kong corporations before last year.

1) Getting a Hong Kong Corporation is Relatively Cheap and Easy.

When you are growing a business you are strapped for cash. The task of setting up offshore companies can be daunting and distracting. Setting up in Hong Kong, though, is cheaper and easier than you probably think. If you start your own company and work through a firm like Jumpstart, you can get your company started in a few weeks for about $600 USD.

You’ll also need an address and phone number– that’s about $30 USD a month for us. There are tons of companies in Hong Kong that provide that service.

The biggest expense? You’ll need to fly to HK to open a bank account. As far as I know, you can only open one in person at the bank. It only takes 20 minutes. You need to have a minimum balance in business accounts at most banks (we use HSBC), but it’s small. There are also places you can stay in central HK for $50 bucks a night on AirBnB. It’s a great place to visit anyway. Win, win! You could get all of this done for less than 2K (including travel) if you are coming from a western country.

2) Hong Kong Corporate Tax Rate is 0% For Transactions Outside of Hong Kong.

For all transactions completed outside of Hong Kong, the tax rate is zero. That’s sweet. Keep in mind for Americans this doesn’t mean you don’t pay taxes. Americans must pay taxes on all income they earn from corporations, even if they are overseas. You need to keep track of how much money you earn from that corporation and ensure you pay personal income taxes on it. It’s complicated, but that’s the basic gist. Either way you’ll save on sales taxes and corporate taxes at minimum.

3) You Can Write Off More Expenses Against a Hong Kong Corporation.

I find the US tax code stingy in what one can write off against corporations. I feel I spend most of my time working towards the success of my enterprises. Because of this, it drives me crazy that the IRS doesn’t let me write off my commute as a business expense. How about that beer I bought a client? No. What about the apartment I stay in? I rented it because it’s close to the office! No.

Here is the straight shot– if you are set up in Hong Kong you can write off a great number of expenses against your corporation that the IRS considers “personal.” This move alone could save you thousands annually.

4) Hong Kong is a World Recognized Leader in Banking and Business.

Not so pumped up about the track record of your American bank? I don’t blame you. Hong Kong’s economy is built on the idea of safe, secure, and easy banking for businesses. It’s a great first step to diversifying your assets outside of American borders.

Working with Hong Kong also won’t put you on any IRS blacklists. Also, you can easily keep and transfer your cash into multiple currencies. Hong Kong banks are highly international and adept and handling currencies from all around the world. In fact, when a customer pays me in Euros, my HK bank holds it in Euros until I tell them to transfer currencies.

Further, you’ll be able to sign up for merchant banking accounts with ease. You can have your HK Paypal account up and running 2-3 days after you walk out of HSBC’s head office in Hong Kong. Try that in the Philippines!

Finally, your customers will generally see your official company name upon checkout. In certain industries it’s a big issue. People won’t want to check out through “Tropical MBA China Co.” Hong Kong has a brand that Westerners trust more than any other in Asia.

5) A First Step Towards Globalization.

As the costs of ‘globalizing’ your business go down, taking the first step out of the door, in this case a relatively low cost one, can be a huge competitive advantage. In the first niche I entered, we crushed it because we manufactured in China. We won in our second niche because while our competition was getting Joomla themes designed by contractors in California, we had a whole team building and optimizing websites in Southeast Asia.

In my experience so far, Hong Kong feels like a better place to bank and do business than the US, and that alone is worth something. You are also only 2 hours away from the largest manufacturing base in the world, plus a short plane ride from all my favorite Southeast Asian destinations.

I see doing business in Hong Kong as our first step in making a more financially efficient company.

From what I’ve seen so far– and on this point I’m most interested in your feedback– if you run an internet business, and aren’t seeking huge investment in the US, and you have the 2K to fly off to HK and stay there a few days, you should be set up in Hong Kong.

If you are planning to set up in Hong Kong, and want to have in-depth and specific feedback on your plans, or want to compare Hong Kong with other popular offshore destinations like Singpaore, and British Virgin Islands among others, these are exactly kind of things we discuss in our forum. It’s the cheapest place in the world to get this kind of information (I’ve looked everywhere, if you know of some great place let me know) and it’s chock-o-block full of people who have done it before.



PS, read about my friend Chris’ experience here: Setting Up a Hong Kong Company
PPS, if you like this post you can hear directly from me by putting your email address in to the form below.

Published on 09.01.11
  • Abba St. Germaine

    Hi Enrico, do you still have the connections to open a HK bank account
    without going?

  • Hi……………..
    Thanks for sharing nice blog post Company secretary job is a person who ensures compliance of all laws that is related to the company looks into finance, accounts, and legal administration and personnel areas.

  • Brandon

    No improvement that I have seen Aaron. I’m currently in the process of closing my HK corp and opening a Wyoming LLC for this very reason. As Chris has noted, banks will accept opening appointments with American citizens but they will not issue accounts. At least, this is what I have seen as an American citizen having been turned down by both HSBC and Hang Seng for corp accounts.

  • rthomas

    Is it still hard to get a hong kong bank account if you have dual citizenship (USA + another country)? Could I just use my other passport to open the account?

  • chloe

    Hi Do you have any recommendations for audit? We read about your blog last year and incorporate a HK company to do ecommerce business. We have not reached our tax year yet but we are researching and they said it’s quite costly to get offshore status in HK. Is it true?

    Is it very difficult to apply for offshore status and exempt from HK taxes?

  • Federica Petrilli

    Hi, I am also in the same situation. Did you find out the right solution?

  • Hey Dan, you might like this cool tool i found today for comparing offshore incorporating in different countries… https://incorporations.io/index.php/companies/grid

  • Clement Ly

    The main issue for most online entrepreneurs is finding a merchant account that allows them to accept credit card payments online. Unfortunately HK isn’t up to par with the US in this regard. So you end up with a favorable corporate structure with good banking, but you take many steps back when it comes to being able to accept credit card payments online. For example, Stripe currently doesn’t work in HK. Similarly, many merchant accounts require you have a “presence” in Hong Kong. Therefore a HK company paired with a HK bank account isn’t enough for most online entrepreneurs. Luckily I think Stripe will come to Hong Kong within a matter of months. Until then, there are not many easy-integration options available. If you’re looking for a merchant account in HK that will allow you to maintain control over your checkout-flow and keep visitors on your site throughout the transaction process see the list of HK providers here: http://www.zerotax.me/best-hong-kong-merchant-account-providers/

    I hope this helps!

  • Dalchand Rajput

    Web design is a broad term covering many different skills and disciplines that are used in the production and maintenance of websites. The different areas of web design include; eb graphic design, interface design, authoring; including standardised code and proprin.See more at: USA Bank Account for Nonresident

  • Raj

    Hi Dan & other commenters on the thread, any recommendations for an audit firm in Hong Kong ?

  • Cherry Lam

    You may contact Paypal business consultant for setting up a business account for free. (852) 2529 3921, nkcheung@paypal.com

  • Online Company Registration

    Hong Kong is Best Place For Business prospective. You can Invest your money in Hong Kong.

  • Cherry Lam

    You may contact 2529 3921 or email to nkcheung@paypal.com for Paypal Business account setup

  • Cherry Lam

    If you would like a Hong Kong Paypal business account, you may contact nkcheung@paypal.com / (852)2529 3921

  • Shaun Cunningham

    Hey guys – quick update. As mentioned below, HK is now a total nightmare to open a bank account. To open an account with HSBC the director needs to either have an HKID or be doing HK$15m in revenue already. On top of that, the business needs to be active for at least one year! Save yourself the hassle and DO NOT OPEN an account in HK. Singapore is much better.

  • Ben

    i set up co. and bank account in HK no probs. But setting up a payment gateway on the other hand has been an unsuccessful mission to date. All of them require a proof of address (can’t be a virtual office) by way of ultility bill or similar.

    They acknowledged that even though the virtual office setup is completely legit, they won’t accept it as proof of address.

    Tried all the major providers: Braintree, 2Checkout, Worldpay etc.

    I’m currently only using paypal but customers have to be redirected to the paypal site to actually process the payment.

    This interrupts the flow and I know I’m losing sales because of it.

    This is my main reason for wanting an additional Payment Gateway provider.

    Any other ideas?

  • Cherry Lam

    If you would like a Hong Kong Paypal business account, you may contact nkcheung@paypal.com / (852)2529 3921, Paypal can help you to receive payment all over the world with the Visa, Master, American Express credits…etc from your customers.

  • Hans

    Hi, Im not sure if anyone is reading these comments, but I am

  • Hans

    Hi, Im not sure if anyone is reading these comments, but I am an australian. I am just about to launch an online product that will be 100% sold in the US. I cant find anyone to assist me to setup the best structure for this to minimise tax legally.

  • Richard Harris

    Hi Hans. Not sure if I can help you but I was just browsing here looking for information on Hong Kong start ups. I live in Hong Kong but don’t work as my wife is the provider. Been looking at doing something online here. If you need a presence here maybe I can help. I am British/Australian citizen. Even if it just means running a virtual office for you?

  • Mike S

    I would really enjoy more discussion on this topic. I’m looking to set up a consultancy to facilitate business between Western start-ups and Asia, particularly China. Any major advantage of the HK entity vs Caribbean one other than CEPA (Closer Economic Partnership Arrangement)? CEPA is huge if you want to take a business into Mainland China.

  • silver surfer

    tried Payoneer? Neteller, Skrill?

  • Max

    HI, I am in the same situation, what did you end up doing Federica?

  • Willswiss

    Hi Enrico, do you still have that contact? It would be a great help, I’m being told I need to fly to HK. Please email me on unknown0422687@gmail.com thanks!

  • Amrish Singh Bais

    could you please provide that contact detail.

  • Wanting to incorporate in Hong Kong myself and hearing so many horror stories about it, I have created a Facebook group for entrepreneurs to discuss challenges and share best practices regarding Hong Kong incorporation: https://www.facebook.com/groups/incorporateinhongkong

    Hopefully if we share info with each other we can make the process more straightforward and keep the costs down. If you’re interested in incorporating in Hong Kong or have already done so, please join the group.

  • Kowloon Bay (Landlord)

    I face the problem of flying to HK to open a bank account. My friend who is an accountant and auditor in Hong Kong says, no banks dare to accept such arrangement. Mind if you tell me your contact? my email: e1mixer@yahoo.com.

  • Kowloon Bay (Landlord)

    I am currently using this service. the price is about USD15/month.

  • Andy

    Hi Dan,
    What is the minimum balance that you were required for the HSBC account. I checked and they have a requirement of $50,000HK. Was it the same for you ?

  • Honestly don’t recall, however I recently inquired in Singapore and the balances required there are hundreds of thousands USD

  • Andy

    Thank you Dan for your reply. That’s what i got from the Hk banks as well. If you know any other country to register a LLC as easier as you did that would be great help.

  • Kowloon Bay (Landlord)

    minimum balance of hsbc is HKD50,000. Many large banks require such amount.
    Some small and medium banks require HKD10,000 to HKD30,000.
    it depends on which bank you use.

  • Kowloon Bay (Landlord)

    I did a bit research before. but i am not so sure if i can post the link here. If you need it, just let me know.

    I set up a company in hong kong and do some investments, including real estate and stocks.

  • Kowloon Bay (Landlord)

    I have a company incorporated in hong kong, and doing business on Mainland china.

    I never paid any tax to China’s tax authorities.
    tax authorities in hong kong asked me to provide business structure and some contracts to them. sometimes later they waived my tax in hong kong. not sure this experience can help

  • Vertti

    Can you help me out by telling me which service you use for registered company address for mail forwarding? All the services I’ve found charge 1,500+ HKD for that.
    I read messages here and at vertically@gmail.com

  • Kowloon Bay (Landlord)

    I use Xela Business Solutions, it has a website, but i think its facebook is more active.

  • Bolo

    Great information and thanks for posting.

    I was wondering if anyone knows of any book keeping or accounting firms in Hong Kong that specialize in Amazon businesses?

  • Kowloon Bay (Landlord)

    Hi Bolo,
    I think Hong Kong has many accounting firms providing this kind of services. I do it myself and it is not difficult, at least my auditor won’t challenge me alot, but it is kinda time consuming. I think some people here shared what accounting firms they used.

  • Nitish Kannan

    You can use an app called circlepluspay.com to invoice from Hong Kong and also accept payments all over the world to Hong Kong. It is the top payments app in Hong Kong. It’s called payable.

    Email me at nitut1@gmail.com if you have any questions

    Cell 3214827393

  • Nik

    There’s a tricky thing. A huge amount of Mainland Chinese (and not only) companies use their HK branches for invoicing. And even though you have a contract with the Mainland company, you have to be sure your re not invoiced by the HK branch, otherwise you will be obliged to pay taxes.

    If your business address is outside HK and your income is not comming or anyways touching HK, you may calm down.

    Frankly speaking, there is a possibillity of tax deversification, in theory. So your income from HK may be separetd from you “outside” income, but this is a very difficult problem, usually involving the courts, it happens very, very rare on practice.

  • Nik

    It all depends on your residence, if you re one of those “unlucky” guys from USSR/ Russia postsoviet union countries, it will be a real hell to open up an account (trading account). Merchant account is simply closed maybe even forever for you.

  • Nik

    I would just like to mention that “being paid in foreign currency” is not defending you from paying taxes. As audit is a must for an HK company, you should have a very strong reson to transfer all or just a part of your funds to a PH company. You cant just say hey this is also my company and i just want to, this is not working at least, if you have a good auditor

  • Nik

    It depends, if the China corp invoices you on behalf of their HK branch, which has an HK account, you will have to pay taxes

  • Nik

    Hello Jason,

    1. You need an account to work, maybe not in HK…
    2. Nowadays-no
    3. Get a good auditor )

  • Nik

    Dear Kris,

    Off course I’m not Den, but would like to give my comment on your p.1

    No, No and No. Audit, auditor preparing of financial statement every year and filling annual Profit Tax Returns (with some excludings). Anyway you will have to ask anyone to submit the originals of PTRs and FSs

  • Nik

    + 1 zillion

  • Nik

    Dear Chloe,

    Applying to offshore status is difficult and annoying. If you still need a good auditor, you may send me an e-mail to info@mbc-hk.com. We will help you.

  • Nik

    Hey Raj,

    If you need it, you ll ge it) E-mail me info@mbc-hk.com We are one of the biggest company providers in HK, we will try to help you.

  • Nik

    Even doing more than 15 m will not help you to open up an account now. Well it all depends on your residence right now, its the first thing. I have an insider in HSBC and you better do not hear what he says ))))

  • Nik

    Dear Hans,

    I present one of the biggest providers in HK. MB Consultants (HK) Limited. If you need any help, just e-mail to info@mbc-hk.com. You will get everything you need for incorporation and performing your business also at a resonable price.

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