Investing in a US-based company as a non-resident alien (HK resident)

ecanza · 10-10-2019, 10:04 PM

I am a HK resident and am looking at a few US-based investments into SMEs. I am trying to figure out the best way to structure and hold these investments. The investments would pay dividends as well as have an opportunity to be sold or exit in the long-term for capital gains. Currently, I am looking at two options for holding these investments (if there are even better alternatives, please let me know).

1. Setup a company in Hong Kong. If done through this way, I believe that I would not need to file any US taxes. There would be a 30% withholding tax on my dividends. There should be no capital gains tax if the companies are ever sold (for sure on HK gov't side, not 100% sure on the US gov't side?)

2. Setup an LLC or a C-Corp in the US as a foreigner. I believe I would need to file corporate income tax in the US, but not sure how this route would affect my personal income tax in HK. Also not sure how capital gains would be taxed if the companies are sold?

I'm trying to figure out which structure would be the most beneficial and tax-efficient. As an aside for option 2, I've read that incorporating in Delaware has some benefits in terms of privacy and flexibility. Would be great to see if this informative group has any insight into my situation. Thanks in advance!

shri · 11-10-2019, 09:40 AM

If you are setting up a company just for maintaining your investment (holding co) do consider the annual BR, secretarial and audit costs - 20K+ in HK.

Sorry don't have any specific advise in terms of a delaware or HK incorporation.

aceofangel · 11-10-2019, 11:38 AM

May be useful:

https://www2.deloitte.com/content/da...-by-the-us.pdf

Elefant&Castle · 11-10-2019, 04:09 PM

I don't think you would pay capital gains tax either way - but I'm not a tax expert.

One reason to set up a us LLC is just to get a us tax id - I think the companies you invest in may require it?

MandM! · 11-10-2019, 04:36 PM

Are you talking about buying stocks or putting seed money on businesses looking to grow?

ecanza · 12-10-2019, 09:57 AM

Thanks for the advice. Yes have considered cost of incorporating and annual fees. Over the long-term it would be worthwhile if the investments are positive and if the set up helps minimize taxation.

ecanza · 12-10-2019, 09:59 AM

Originally Posted by Elefant&Castle:

One reason to set up a us LLC is just to get a us tax id - I think the companies you invest in may require it?

I could apply for an ITIN and get a tax ID without setting up an LLC. I'm inquiring more to figure out the best structure to minimize taxation and liability.