From employee to sole proprietorship in HK

jecolpar · 31-01-2018, 04:48 PM

Hi,

I have been living in HK for 4 years with dependant Visa. I currently work for a company here but planning to move to Spain (my native country).

My company proposed me to keep working from Spain just opening a sole proprietorship, then i would invoice them the salary monthly (basic+commision based). Also planning to do other future trading business HK-Europe.

I understand SP would mean easy paperwork, no need business bank account and no audit required. I wouldn't need any agent involved, i would be coming at least once a year to HK.Only need to pay Business reg fee (aprox 2.5 K/year) and 15% taxes of profit (I heard profit can be sent as dividends then no tax paid?).

Would you say this is a right move? I am missing something critical?

Thanks in advance

shri · 31-01-2018, 05:13 PM

Double check in the dividends thing...

Trebor · 31-01-2018, 05:51 PM

Originally Posted by jecolpar:

Hi,

I have been living in HK for 4 years with dependant Visa. I currently work for a company here but planning to move to Spain (my native country).

My company proposed me to keep working from Spain just opening a sole proprietorship, then i would invoice them the salary monthly (basic+commision based). Also planning to do other future trading business HK-Europe.

I understand SP would mean easy paperwork, no need business bank account and no audit required. I wouldn't need any agent involved, i would be coming at least once a year to HK.Only need to pay Business reg fee (aprox 2.5 K/year) and 15% taxes of profit (I heard profit can be sent as dividends then no tax paid?).

Would you say this is a right move? I am missing something critical?

Thanks in advance

You might be exempt from HK corporate Tax too, if your income is being generated outside of HK. You wont be liable for salaries tax if you aren't working here I wouldn't have thought.

Best check with your tax advisor.

Full disclosure - I know nothing about Sole Proprietorships or if they are even susceptible to corporate tax.

crombyboy · 18-04-2018, 01:00 PM

I want to say 2 things

1) Keeping a company isn't as easy as it seems. Doing the annual audits etc. are costly and it's hard to find reliable companies. You can't trust your secretary to do what you're paying for them (I mean, in some cases you will be, but in my case, I certainly hasn't been, so it's a lottery). Applying for offshore status (so you don't have to pay any tax in HK) seems to be really hard and costly and also take a lot of time (nobody tells you this when you incorporate, only afterwards). Even if you are offshore, you have to pay tax on director's fees.

2) If you are a resident of Spain, you will still have to pay income tax on all money earned - and I think it will be counted as "salary" even if you claim dividends if you're the sole owner of the company (this depends on tax regulations in Spain, look it up). Even if you're able to claim it as dividends (I think it's unlikely in a EU country) you will have to pay tax on the dividends. Having a corporation in HK won't change that.

I'm going to say that it's just not worth the hassle and the headache. At least in my case (incorporated 2 years ago and desperate to dissolve/get rid of the whole thing) it certainly hasn't.

TallT · 19-04-2018, 10:47 AM

A SP is basically you under a different name, so you don't get any of the benefits as you would if you ran a limited company in HK.

There are no dividends for an SP.

The profits tax for SPs for the year 2018/9 has been reduced by half to 7.5% for the first HK$2M profit. This will not be applicable if you pay tax under the Personal Assessment scheme.

A lot of HK banks will not allow you to use a personal account for business - check your banks.

Remember the SP is responsible for all debts and liabilities. In cases of debts incurred, there is no protection of personal assets.

Residency does matters - you will need an appropriate HK visa. A visitor visa is not valid.

You will need a HK address.

I'm not an expert on the Spanish Tax system but I think If you are classified an official resident in Spain you will be subject to Spanish tax on your worldwide income but HK does have a double taxation treaty with Spain so you can avoid double taxation.