As IT companies engaged in outsourcing for clients in the US or Europe, we face a plethora of options when it comes to selecting a jurisdiction for our business. However, once we dive into the details, one of the most intriguing and beneficial options is Hong Kong. I want to share my reflections and explain why this jurisdiction could be a key decision for your business.
Why I Chose Hong Kong
During the pandemic, many jurisdictions closed their borders, but I kept a close eye on Hong Kong, despite the strict entry restrictions that were put in place. Even with a three-week quarantine for incoming travelers, this territory maintained its appeal. Here’s why.
First and foremost, Hong Kong is a veteran among financial centers. Unlike younger and more ambitious cities like Dubai, Hong Kong has long established itself as a global financial and trading hub. The main advantage is the absence of currency controls. This means that when my company conducts transactions in US dollars, euros, or any other currency, I don’t encounter the bureaucratic hurdles that can be found in other countries.
Legal System and Reliability
Hong Kong's legal system is also noteworthy. As a developer, it’s important for me to know that my rights and business are protected. The British legal framework continues to be in effect here, providing a predictable and reliable legal environment. There are no unexpected surprises, as one might encounter in jurisdictions with elements of Sharia law, for example.
Moreover, Hong Kong has a double taxation agreement with Russia. This opens doors to tax advantages, especially for those of us who, like me, want to minimize taxation for companies with international clients.
Tax Benefits
When it comes to taxes, Hong Kong is a goldmine for companies operating outside its borders. If your company, like mine, does not generate income within Hong Kong, you can qualify for a zero tax rate. Of course, the process of confirming this status can take time—anywhere from six months to a year—but the result is worth it.
For companies with income under two million dollars, the tax rate is reduced to 8.25%, which is significantly lower than the standard rate of 16.5%. Plus, there’s no VAT or sales tax—what more could you want for comfortable business operations?
Opening Bank Accounts: Challenges and Solutions
I won’t hide it—opening a bank account in Hong Kong can be a challenging task, especially for companies with foreign founders. But there’s an alternative: virtual banks and payment systems. For example, I recently discovered Z8 Bank, which offers excellent conditions for startups. They provide a full 18 months to prove viability, after which you can continue the partnership.
This is a lifesaver for companies like mine that operate remotely. We can handle transactions, pay employees in other countries, like Armenia or Bulgaria, and use Hong Kong financial institutions to receive payments from our clients in the US or Europe.
Remote Company Registration
If someone had told me a few years ago that I could register a company in Hong Kong without leaving my home, I wouldn’t have believed it. But this has become a reality. Since 2018, companies with a TCSP license can certify documents remotely. This means I can not only register my company but also start conducting business without being physically present in the country.
The registration process through the online eRegistry service takes just one day. You only need to provide documents, such as the founder’s passport, and you’re ready to go.
Why Not Everyone Chooses Hong Kong
Despite all these advantages, many still do not consider Hong Kong as the optimal jurisdiction for business. In my opinion, the reason is psychological. After the pandemic, entrepreneurs developed a fear of encountering difficulties when visiting their country of registration. Although this barrier is more mental than legal, it affects decision-making.
Virtual Banks as the Future
Hong Kong is actively developing financial technologies, and virtual banks are one of these initiatives. Unlike traditional banks, they are more flexible and tailored to tech companies operating remotely. For instance, Hong Kong's online banks, such as the aforementioned Z8, have no physical offices but offer a full range of banking services, including accepting deposits and providing loans.
Hong Kong vs. Dubai: My Choice
Hong Kong and Dubai are often compared. Each has its advantages. But when it comes to taxes, Dubai is introducing a corporate tax of 9% starting in 2024. In contrast, Hong Kong maintains its attractive tax rates, making it more advantageous for business.
Ultimately, I chose Hong Kong. It’s a stable, time-tested jurisdiction with low taxes, a transparent legal system, and flexible financial options. If you’re looking for a place to register your IT company, Hong Kong is definitely worth considering.
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