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HK Company, Salary, and Accounting

  1. #21

    Join Date
    Aug 2015
    Posts
    6

    The origin of the question wasn't "how to avoid taxes" but "should I pay taxes or not, and if yes, to who?".

    To answer your question, I'm doing business in China, and it is somehow more convenient (and much more trusted) for me to have a HK company.


  2. #22

    Join Date
    Feb 2019
    Posts
    4

    Hello, if all the profit from the company is paid to directors, all under the personal allowance, then no tax from either side would be paid?

    HK_Katherine likes this.

  3. #23

    Join Date
    Dec 2013
    Location
    Hong Kong
    Posts
    8,967
    Quote Originally Posted by mousefer
    Hello, if all the profit from the company is paid to directors, all under the personal allowance, then no tax from either side would be paid?
    Correct.
    traineeinvestor likes this.

  4. #24

    Join Date
    Dec 2018
    Posts
    129

    To add to this, even if the director's fee is higher than the personal allowance, it may still be worth doing as the personal tax rates for low income earners are below the company rates (assuming the company is liable to profits tax).

    Also, if you pay to the directors, you need to (i) file the relevant forms with the IRD and (ii) consider whether you have to pay MPF. The advice I received (several years ago) is that there is no MPF for fees paid to non-executive directors but MPF contributions are required for fees paid to executive directors.


  5. #25

    Join Date
    Feb 2019
    Posts
    4

    Thank you for your reply!

    1. So it is doable to use all profit from the company to pay directors just to pay $0 on company profit tax?
    2. What do you mean by low income earner and what is its tax rate?
    3. What we would pay is Director’s fee, not salary, should we still file the forms to the IRD?
    4. How is the MPF calculated?
    5. If I am the only shareholder and director of the company, am I executive or non-executive?
    6. In case I am executive, can I switch and be non-executive leaving no one being executive?
    7. In case it is not possible doing, the only way would be to assign “in paper only” friends/family members as non executive directors just to distribute the company profits and pay neither taxes nor MPFs right?


  6. #26

    Join Date
    Dec 2018
    Posts
    129

    With the huge caveat that I am not a tax lawyer or accountant and strongly suggest you speak to your account antabout all of these questions (rather than relying on an anonymous stranger on his second glass of wine for the evening):

    1. check with accountant if there are any limits - I am aware (in a different context) that the IRD has queried companies that syphon off all of their profits to avoid tax
    2. salaries (including director's fees) are taxed at progressive rates starting a 2% and peaking at 17% subject to a standardised cap of 15%: https://www.gov.hk/en/residents/taxe...ariesrates.htm
    3. yes - director's fees are treated the same as salaries for these purposes - my company fills in the form notifying the IRD of my non-executive director's fee every year
    4. since my fees are in a capacity of a non-executive director, I have not had to look at this
    5. depends on how much time you spend working for the company (possibly other factors?) - again, your accountant may be able to give you some guidance on this
    6. not sure about switching, but there is no requirement for a company to have any employees or executives
    7. this sounds a bit risky to me - perhaps you could run this past your tax adviser?

    Sorry I can't be more helpful, I've only got my own experience to go by.


  7. #27

    Join Date
    Feb 2019
    Posts
    4

    Thanks so much for your help, I guess I am just so refused to pay taxes since my home country charges lots of taxes, if considering all of them, it would reach an index of 106% .

    1. Anyways, these type of questions should matter only when the date of tax filling is approaching, which is 18 months after the company registration, right?

    2. What are the accountant and tax advisor fees in HK?

    3. Do you have any HK Accountant or Tax advisor who is reliable and charges reasonably?


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