Offshore tax exemptions in Hong Kong

tax exemption offshore

Contrary to popular beliefs that are villain oriented, just like in the movies that portrays the antagonist characters hiding their money in offshore accounts, it is however different in reality. Offshore companies are merely juridical entities that conducts business outside of their original jurisdiction where they are incorporated. Also in reality, offshore entities are tax havens since most jurisdictions that regulates these companies have lenient tax laws or tax exemptions that does not eat away your corporate profits.

Hong Kong provides a venue for offshore companies and businesses to thrive on. Some people may not have known that Hong Kong itself is considerably an offshore jurisdiction, but instead of a tax exemption, it provides low tax regulations. One perfect example of such is that in Hong Kong, profits emanating outside of the jurisdiction of Hong Kong are not subject to taxation.

Local companies in Hong Kong can file for an offshore status by way of offshore claim. Although the process is rigorous and requires a specific skill-set in terms of the application process in general, the goal though is beneficial in the long term scale.

Applications for offshore status by local companies can be availed and granted by the HK Inland Revenue Department (IRD). All applications for offshore claim is diligently screened and vetted through a complicated process. Upon approval, the validity usually range up to 5 years. It is important to remember that offshore status in Hong Kong is not retroactive, and any corporate tax payments made before gaining the status is not covered. Hence, the absence of an offshore claim can result to a company paying the actual applicable tax on profits that is required by law, regardless if those profits are derived from sources outside of HK.

Before filing for an offshore status, you should first evaluate whether or not you are qualified to avail of this privilege. Since the said status is granted by law, the applicant must ensure that they are covered under the realms of the law allowing the status to be given to companies. Otherwise, your application for offshore status will definitely be rejected on valid causes, and it boils down to the matter of not being eligible.

To give you an actual insight on what you should consider before filing for an offshore status. There are several tests that are conducted to determine if your company’s request can be granted by the IRD. These tests are conducted based on the nature of business of the applicant.

Contract Effected Test

This test is utilized in order to ascertain the taxability of the income accruing to the taxpayer engaged in a trading business. This phase is design to also gauge whether or not the purchase or sale contracts are executed in Hong Kong. Moreover, the IRD will look into the execution of the contracts by the company, particularly on how the goods are shipped, how sales are solicited, how orders are processed, how goods are procured and stored, and how payments are made.

Operations Test

If you are not engaged in the trading business or money lending, you will then be subjected to this test. For commission income, the test will scrutinize the origin cause of the income. If indeed the income emanated and took place in Hong Kong, and what has been executed to earn those profits and where was it rendered. Furthermore, enterprises are subjected to a different set of test, and they would normally gauge if you have no operational office in HK, no workforce are hired or employed in HK, no clienteles in Hong Kong, no suppliers in Hong Kong, contracts are not negotiated and executed in HK, goods should not be entering HK, service agreements or sales/purchase invoices must not involve any Hong Kong based entities, and the actual operation of the business is conducted outside of Hong Kong. If you meet these criteria, you have a chance in being granted with an offshore status.

Final thoughts

It is very important to know and to understand, that even if you meet the necessary requirements for an offshore status, it does not guarantee an approval from the IRD, since a thorough evaluation will be made to validate and verify all submitted documentations in the application process. Aside from this, there are several requirements that are mandatory to be submitted by the company itself which would involve the actual operation and conduct of business. Hence, all must be evidenced by irrefutable and valid documentations.


    Benefits of an offshore bank account

    Benefits of an offshore bank account

    Going offshore in your personal or company banking is considerably the best option for you right now regardless of your motivations. An offshore bank account will provide you and your company with many possibilities and benefits that you can never get in a regular bank account. Shifting on an offshore bank account will diversify your wealth and assets across multiple countries, accounts, currencies, and most importantly channels to protect your capital and savings. By doing so you are directly preparing to get rid of risks associated with maintaining a normal bank account in a domestic market that is prone to financial lock-downs and breakdowns.

    To be exact, there are tons of benefits when you venture and slide into offshore bank accounts. To name some, you might be interested to know that we have compiled some of the best benefits that you can get in offshore bank accounts.

    Security & Protection of Capital Assets

    It is practical to remember that securing and protecting your wealth is the most important aspect of your financial well being. Compared to a traditional bank account in a regular banking institution, going offshore will open doors for a well regulated, transparent, and top notch privacy shielded banking experience, without the need to worry about economic crisis, freezing of accounts by government agencies, and other financial related troubles in a normal banking system.

    Exemplary Services

    Providers of offshore bank accounts have prioritized a user friendly and personalized service to its clients, unlike traditional banks. Normally, a bank representative is assigned to oversee your funds and account to ensure that you are benefiting from their banking facilities to the fullest. Most importantly, you will be able to benefit from their global services, especially for companies and business people who requires international banking facilities.

    Easy & Immediate Access to your Funds

    Offshore banks always maintain a high degree of customer experience to their clients. Since majority of whom are requiring a global access to their funds regardless as to where they are located. Rest assured, when you go offshore your funds are accessible in multiple secured channels.


      Savings on Tax

      Depending on your personal or company needs, you can reap your tax benefits from offshore bank accounts in many ways. For the sake of mentioning a critical one that relates to tax optimization is that when you go offshore you can secure your wealth from your tax origin and residence.

      Estate planning by going offshore can be equally beneficial for you as well. To know more about tax savings on offshore, Talk to Us directly now!

      Access to Open Market Investment Opportunities

      Regardless of where you reside or your country of origin, once you have an access to an offshore bank account, your possibilities on tapping to open market investments will also open. This feature is not always available on traditional banks. You and your offshore bank can create an investment portfolio on your wealth that fits your requirements.

      Foreign Exchange Outlet

      Possibly one of the major perks of having an offshore account is your ability to create an avenue for you to enter into multi-currency accounts. Of course, circumnavigating on these accounts will be hassle free and not chargeable. Most offshore banks have the ability to transfer funds from multiple currencies while giving you the best rates on those forex rates.

      Our thoughts

      As you may well know, we provide bank account opening not only in Hong Kong, Singapore, and Macau, but you will also benefit from other famous offshore jurisdictions that has the best financial facilities to protect your wealth and assets.

      Aside from what we have written in this article, we actually have tons of advice that you can benefit from if you intend to open an offshore account under our service. These advice are in fact very confidential and you would never read it online.

      Feel free to Contact Us and we will provide you with the best protection on your money that offshore accounts can offer.