Contracting in HK - Limited Company vs Sole Proprietorship

[panadol]

I am planning to move (back) to HK, and have dual citizenship, ie, I do have my HKID.

I have a few questions regarding contractor tax, if anyone could please help?


1. What are the pros/cons for running my own ltd company vs sole prop?

2. Are there common tax structures people would use in HK to be tax efficient?

3. Can I claim home office expense? (rent, equipment, etc)

4. Lastly, if anyone could recommend me a tax accountant, please feel free to shoot me his/her details

Thanks!

[shri]

What is this contractor tax? Never heard if it in the context of HK taxes.

[panadol]

I guess I should've written 'contractors' tax liability' rather.

eg, in UK, one tax structure would be running a limited company, pay flat rate corporate tax, pay salary (liable for personal tax), have dividends paid (liable for dividends tax)..etc...in the mean time, business expenses are claimed before tax..etc..etc.

How would a typical contractor operate in HK ?

[HK_Katherine]

The level of tax in HK is miniscule, and the differences between personal and corporate tax small, compared to the UK and few people would use that as the only criteria for the decision you are proposing. More relevant is the cost of those structures where a SP is a far cheaper and administratively less burdensome way for a single person to contract. (I run a company, my husband is a SP - I need to hire both accountants and other staff to deal with the paperwork a company generates while husband spends a few hours a year on it).

[panadol]

Thanks for the explanation @HK_Katherine, how much would accountant cost roughly, if I were to go down the Limited company path?

Can an home office be considered as expense if SP?

[shri]

Parts of the home can be dedicated to business use. You should spend some time on the IRD site to review their cases and scenarios.

Ltd costs would include annual audit and a little bit more diligence for bookkeeping etc. Additional.costs would be about 12-15K.

Broadly speaking, a lot of expenses can be written off as business depending on the directors contract with the company. Education, helper, car, clubs, travel etc. But best to speak with a pragmatic accountant to help you structure t correctly.

[HK_Katherine]

Thanks for the explanation @HK_Katherine, how much would accountant cost roughly, if I were to go down the Limited company path?

Can an home office be considered as expense if SP?

The cheapest quote for accounting we could get was 4k a month plus the cost of the annual audit - circa 15k.

You also get a load of crap forms to fill out - which are obligatory but useless (census forms, forms about the research and innovation done by the company and other such idiocy). You have to keep board records and such too. It's not terrible - much less than many countries - but much less compared to a SP. Honestly there is not much benefit for a single person with an ID card going the company route. Plus you have to buy or set up the company in the first place - another 5k or so. It's also harder to open a bank account for a company than for a SP because the SP can use your personal bank account (a huge benefit of SP imho).

[panadol]

Thanks for your help!
End client actually go through an out-sourcing company for all their contractors, which makes things easier as I would simply join them instead and be like an employee.