Archive 19 May 2021

Hong Kong – is the glass half-empty or half-full?

Hong Kong - half-empty or half-full

Hong Kong businesses are suffering from a mandatory quarantine of 21 days at hotel which is barring visitors to land in the city. The health situation is totally under control with ZERO Covid cases but the social and business impacts are great.

Confronted to months of protests followed by confinement and restrictions, with in addition divisive political decisions, the pressure is high to see better days.

Westerners living in the city are often obliged to explain and protect China decisions to their family, friends and business partners living abroad. As a matter of fact, the Asian approach is totally different from the rest of the world.

The health situation was very well managed by most of the Asian countries, social and business impacts were strong and difficult to deal with, but this was only for a relatively short period of time.

Today we see with envy from Hong Kong a western world with no or low travel restrictions, opening public spaces and abandoning face masks, while in the same time Asian countries are enforcing travel restriction and isolated confinements, for a zero-case goal.

This difference of approach isn’t a small detail, it’s symptomatic of a huge difference of values and of acceptance by the population of governmental decisions, as if in the span of few months only the world separated in two.

Hong Kong - half-empty or half-full

Short-term situation for Hong Kong?

It’s very unlikely that Asian countries will accept travels without strict quarantines, Hong Kong is hoping that Mainland Chinese’s will come back and spend time and money in the city and support the economy, with the understanding that visitors from western countries are still considered too dangerous.

The shared opinion in Hong Kong is that mainland Chinese would come back by the end of the year but that the attractivity of Hong Kong has been damaged by months of protests and (even with lower travel restrictions) visitors’ numbers will be low.

The multiples impact on restaurants, hotels, retail shops and to any activities linked to visitors have been (temporary?) managed, the unemployment is by western standards low and the economy is re-starting slowly.

 

Exodus of westerners?

Relocation agents are full of work, everybody knows someone living or intending to leave and this increase a sentiment of solitude for the ones having no such prospect.

The reasons justifying the departure of westerners are to be carefully understood, although many are making use of the recent political changes and the fears of changes in the education sector it’s unlikely that these reasons are the real ones.

Travel’s restrictions are harsh, this obviously impacted a lot more the ones having families abroad plus the common opinion is that this situation will perdure for quite a long time. On a small island like Hong Kong, one of the most expensive location in the world, the pressure is multiplied.

Because of the poor economy a drop of turnover and profitability is harder to manage in a city where everything is expensive, westerners confronted to this situation will have the tendency to blame other factors.

The short-term situation of Hong Kong is therefore likely to be difficult till we do understand if the western world is right to open everything and to allow free travels, if the western countries are doing right and if Asian countries are continuing, whatever the reasons, to restrict freedom to travel the burden will become for many unbearable and then a real exodus of westerners will happen.

If the western experiment fails, if because of Covid variants the overall health situation become out of control the world will face catastrophic consequences, but in the same time China and Hong Kong will, as a show of supremacy, allow more individual freedom.

 

Hong Kong on the long term

The city is a definitive winner, first because China is winning and also because the western countries are in such a situation that compared to what will happen to them in a few months it’s not difficult to do better.

Hong Kong will remain a showcase of Chinese success, mainland china money will pour in the city for economic and, let’s be straight forward, political reasons.

China putted to a halt the concept of foreign interference, Hong Kong is then de facto the perfect location to be showcased as an example of a strong and protective government leading to economic and social success.

The only question which remains is the willingness of the Hong Kong population to be used to expose differences in democratic values between East and West. Although Hong Kong is not the toy of US and Europe it’s also unlikely that the Chinese grip is totally welcomed.

Hong Kong will then have to adapt and to demonstrate to the motherland, by way of economic success with a real improvement of the wellbeing of its inhabitants, that a bit of western attitude is not that a big deal.

Hong Kong tycoons will surely be the victims of this long-term process, after having exploited to the limits the property market, they will be asked to contribute to the economy. The process will not go through taxes, this isn’t the DNA of Hong Kong ,but they will be obliged to contribute to social housing and to create the jobs the city needs.

This time it’s not the Hong Kong government to softly require some support, thanks to the mainland power the property tycoons will have limited choices.

 

How to increase your chances of bank account approval in Hong Kong

increase your chances

One of our articles have discussed and narrated how several banks in Hong Kong are leaning towards rejecting almost every client that falls under their ridiculous high standards. Most of the time, their criteria are hard to meet, or even match. That’s why most of applicants are left with no choice but to accept the fact that they are rejected.

First of all, in order to lower the possibility of rejection, you need to prepare yourself and your business. Companies, entrepreneurs, start-ups and SME’s, notwithstanding their size has to go over the prescribed requirements, policies and mandates of banks. This approach is to save you money, time and efforts.

Even though the horizon for some businesses and companies are oblique, we feel that it is NOT IMPOSSIBLE. This is why we have made a compilation of various things you can do in order to prepare you and your company from bank scrutiny and secure a fighting chance of that seal of approval.

We would like to set thing straight, these tips and words of advices are based on our actual experiences in dealing with various banks in Hong Kong.

STEP 1: Simplify Your Corporate Substance

Oftentimes, companies and entrepreneurs will make super complicated structure of business in terms of ownership and layering that it actually affects the overall business acumen of your company. To avoid this, simply define your purpose and outline the UBO structures.

You can use several solutions to this, which would involve offshore companies such as BVI, Seychelles, Samoa and other credible jurisdictions. Only thing left is to structure this solution properly in order to avoid any undue tax issues and operational problems.

STEP 2: Solidify Your Business Portfolio to the Bank

Think of this through this manner.

You are simply strengthening your business proofs to evidence that you are running a legitimate company. In basic terms, ensure that your business is legit and will operate in Hong Kong with a justifiable purpose, as well as being supported with specific business licences with no hidden agenda whatsoever.

Comply with KYC protocols in the bank, whether it be Customer Due Diligence (CDD) or Enhanced Due Diligence (EDD). Always bear in mind that these processes are normal and conventional.

Most importantly, beef up on company presentations, client portfolio database, product catalogue, online present boosting, as well as other business company operation proofs in order to give a safety net on your approval.

Basically, anything that can help the bank to get a better understanding about your company and the industry that you are operating from.

STEP 3: Optimise your Financial Transactions

Making sure that your origin of funds is important to avoid any suspicion on your agenda in opening a bank account.

Assure the bank by being cooperative and compliant that you are not a security risk in terms of AML-CTF matters and other illicit purposes. As much as possible, refrain from venturing into high risk and high value commodities including precious stones and metals.

Another thing to also do, is to avoid high volume, multiple or frequent transactions for service type of dealings solely for the purpose of procuring funds to a single beneficiary or otherwise.

Make certain that you will provide all pertinent details about your suppliers and customer information or data such as business cards, email correspondences, contracts/agreements, as well as quotations and invoices in order to bulk up on your business and assure the bank that you are a legit business person with a legitimate purpose.

STEP 4: Do Not Corroborate with High-Risk or Sanction Countries

This part is really important, review the current FATF, SDN and other global sanctions databases in order to determine whether a business partner, client, or supplier is belonging to a high risk or sanctioned countries such as Zimbabwe, Sudan, Iran, Syria, and others.

Consider trying to run a background check on the controlling persons of your clients and suppliers in order to ensure that they do not have ties to a high risk or sanction countries.

STEP 5: Acquire Our Services

Perhaps the most important part of these article is we would like to let you know that we offer various services that includes bank account opening in Hong Kong, Singapore, Macau, and other offshore jurisdictions such as Malta, Mauritius and others.

To know more of what we can do to ensure that you have an increased chance of bank approval, Contact Us Now!

Will a massive expatriation be the main result of digital economy and which countries are likely to benefit?

Today decision takers are in their forties and plus, they are investing in the digital economy although they often started their careers at a time when FAX was still existing. Obviously, you don’t need to be a young geek to understand, accept and accompany the digitalization of the economy.

The issue of an investor in the digital economy is basically his/her own environment, too often the possible Internationalization of the sales is well understood but applying fully a “cloud” environment by not renting office and having local employees is not yet in the DNA of an investor.

A digital business could be destined to the local market, but this shouldn’t justify an abandon of certain principles, the main one is to honestly questioning the need to locally hire and to rent office space.

Till COVID times it was easy to lie to ourselves, to mention COMMUNICATION issues, motivation, creativity meetings, local situation awareness etc.… to justify the need to rent an office and to hire local personalities.

The truth was certainly a mix of good reasons and some more unmentionable ones, we like to physically see our investments, we like to share a coffee with the team, we simply do it because we are not willing to work differently, as example to expatriate ourselves.

But what did we do for the last 18 months? We conducted business by renouncing to our comfort, we were forced to adapt and to accept to drastically change our way of working. This was possible but wasn’t FUN, this was even unbearable for some.

Expatriation

COVID 19 constraints are eyes openers for a generation of entrepreneurs and investors.

  1. A physical office is not an absolute necessity, at minima the office space could be reduced and social interaction could be maintained by having the team being present only few days a week.
  2. Most of the back-office tasks could be outsourced few thousand kilometers away, the staff wasn’t at office for the last few months and this basically changed nothing.
  3. A lot of talented individuals did seize the opportunity to change of location and a large number of important contributors are willing to work, at least partially, from home.
  4. Apart companies directly impacted by confinement (restaurants, hotels etc..) the companies suffered eventually from a decrease of demands but not from an absence of physical sales meetings.
  5. The importance of local teams in countries of exportation and importation is increasing, some traders which were under enormous commercial pressure to survive despite the Alibaba efficiency in China are now seeing large turnover increase because of their quality controls and leverage with factories.
  6. Quality of services and products is finally regaining some importance, with an absence of filters between a mistake made and its discovery by the senior management.
  7. Low efficiency team members are being caught by time and tasks trackers.

The digital economy will create waves of expatriations.

  1. When considering business opportunities and the scale-up of business it’s nearly impossible to avoid commercialization or purchasing in English speaking/working countries. Having employees or freelancers in multiples countries is becoming an obligation.
  2. A generation of talented employees has already left their poor sun and high tax countries, pushed away by insecurity and social issues. These freelancers or potential employees possess skills and expertise applied to specific countries; they just do not live IN the country.
  3. Business partners and investors are easier to meet outside of Europe, easier to approach and to convince.
  4. Most of the countries supported the economy by injecting billions of dollars, now they will tax more companies and successful individuals.
  5. By investing in marketing and organization instead of paying high taxes, by escaping administrative burden, the companies are using their resources to increase the business.  

Which countries are likely destined to host waves of entrepreneurs in the digital economy?

The process to select a country is reflecting the concerns of European candidates for expatriation: security and low pollution, ease to find private school, health system and insurances costs, visa system.

The tax environment is crucial, it’s really easy to find countries with lower taxes than Europe but every aspects of the tax regime should be analyzed carefully.

Hong Kong

  • Preferred location of many digital entrepreneurs for the setup of a Hong Kong company which will claim offshore profits (if the profits doesn’t derive from activities in Hong Kong) this could mean a ZERO tax bill
  • With activities in Hong Kong very low tax environment (8.25 till USD 250,000 of profits then 16.5 %) with no VAT and no capital gain.
  • Entrepreneur visa is difficult to obtain, life is expensive and the city is suffering from the aftermath of social unrest.
  • IDEAL solution for single operators in the digital marketing, with a company in Hong Kong they do benefit from credibility and stable environment while living in neighbour countries.

UAE

  • Very trendy as welcoming influencers in need of showing success and participating in parties, the Instagram city…
  • Very favourable tax environment if structured properly with local office and local employees, fake residents will get caught easily by their country of tax residence.
  • Poor commercial logic as definitive local absence of clients and suppliers, no business support.

Singapore

  • Same advantages as Hong Kong but with a reduced access to China when Covid constraints will be “over”.
  • Difficulties to bank outside of Singapore with a Singapore Company (when the company has the turnover of a SME) this situation creates tax risks for many entrepreneurs attracted by an offshore situation.
  • Beautiful city with less pollution and nicer standard of life than Hong Kong, still an expensive location.

Thailand

  • Not a good country to setup a company but a very nice one to live-in while having a Hong Kong offshore company.
  • Ever changing Visa and Tax environment, a local company should have at minimum four local employees for each expatriate under working contract.
  • Many solutions with nominee services to effectively own a company or a land but with high-risk exposure on the long term.

Philippines

  • THE location of the best freelancers available to support digital economy, from developers to graphic designers and content specialists. Very nice professionals with pleasant personalities.
  • Total burden to create a company, if not discouraged by the process you will abandon later when confronted to a complicated and expensive maintenance.
  • Insecurity in the main cities, outside of the cities great social & internet issues.

Mauritius

  • Low tax environment very attractive to French speaking entrepreneurs.
  • Easy banking but with regular issues with their correspondent banking, so clients should be prepared with T/T blocked/delayed and heavy compliance.
  • Fantastic Island for mature entrepreneurs, not really for start-ups
  • Ease to create and to maintain tax substance.

Indonesia

  • Few solutions with nominee services which are difficult to maintain without issues on the long term.
  • A nice alternative to Thailand with similar advantages but in an Islamic environment, so a different way of life.
  • Enormous local market with 270 million inhabitants.

A lot of countries, with low tax environment, pro-business governments and lower operational costs are welcoming the digital economy. The only whom to seems to realize the attractivity of such offers are the European governments.