When it comes to setting up an offshore company in Asia, two countries usually come to mind. Singapore and Hong Kong are certainly the most secure and safest places to open an offshore company in Asia. Both countries have advantages and disadvantages, and choosing one or the other will depend on the investor.
What is an offshore company?
Business owners typically set up offshore companies in countries outside their own residence and separate from where they conduct their main business activities. Most business owners set up offshore companies to operate as holding companies. Offshore companies have a bad reputation due to some countries not respecting the minimum requirements and setting them up in countries that do not do diligence on the company’s activity or where the funds are coming from.
Entrepreneurs can legally and safely set up an offshore company, as long as the chosen country has signed international treaties and is fully integrated into the global banking system.
Why to use an offshore company?
Using an offshore company can be useful in many circumstances. Here are some examples why to use an offshore company:
- Certain countries prohibit dealings with specific other nations, making it necessary for some companies to establish entities in alternative jurisdictions to finalize agreements.
- As tax resident of a country dealing with a country directly can be not tax efficient and if the offshore country has a better deal with the intermediary country it can be interesting to set up a company offshore
- Avoid high tax pressure in a country and conduct the business directly from a country with a better tax rate
- Rapatriate the income in a country with a more stable economy and financial system
Each company or individual has its own interest in setting up an offshore company. Some e-commerce companies will prefer to use an LLC in the US to sell their products in the US while others will prefer Singapore and Hong Kong to use the Asian treaty to deal and invest in Asia.
When it comes to setting up offshore companies, a lot of criteria are important. While countries like Seychelles offer an interesting set up, it is important to see if the intermediary bank will not block the transfer. Banks nowadays are more entitled to block some international transfers to avoid any risks. A few clients set up their companies in jurisdictions like Nocibe and Seychelles and experienced transfer blocks lasting several months. Getting money into this country is easy; however, getting money out can be challenging.
Singapore and Hong Kong offer great alternatives for those looking to set up an offshore company in countries that respect international norms and offer low taxation. They are also great solutions for people investing, for example, in Thailand and Indonesia.
Singapore versus Hong Kong
Singapore Company
Singapore is hosting the headquarters of a lot of companies in Asia. Its perfect location in Southeast Asia and close to Australia offers a secure location and banking system. The taxation is low and does not tax foreigners as shareholders if the person is not located in Singapore. The country also provides a 0% tax rate on the income tax of the company as long as the company is under a certain threshold. However Singapore requires a resident director for the company.
Bank accounts in Singapore can be opened by the company’s resident director. The process can be fast with some online banking or require the director to go to Singapore to open the bank account. Having a resident director helps to open the bank account.
Singapore’s capital starts at 1 USD, making it a good solution for people looking to set up a company in Southeast Asia.
Hong Kong Company
Paradise for holdings and online business, Hong Kong has always been a financial place attracting FDI from all over the world. Setting up a company in Hong Kong is fast and can be done remotely. Compared to Singapore, Hong Kong doesn’t require a resident director. It simplifies the maintenance process and also does not give the directorship to the employee of a company the shareholders don’t know.
Hong Kong exempts offshore companies from tax on dividends and income, provided they generate their turnover outside Hong Kong. With its location near China and Southeast Asia, Hong Kong offers the best offshore solution in the area.
We also provide complete services to assist in the process of registering and opening a company in Hong Kong. It starts from initial consultation and document collection to the completion of all administrative procedures in accordance with applicable regulations.
A bank account may be opened online; alternatively, the company director must travel to Hong Kong to open an account at a traditional physical bank. Russian nationals are permitted to establish companies, provided they reside outside of Russia
Also Read : Why and how to open a company in Hong Kong
Hong Kong versus Singapore: which one to choose?
| Singapore | Hong Kong | |
| Dividend tax | 0% | 0% |
| Corporate tax | 0% with some exemptions and 15 to 17% | 0% if turnover done outside HK |
| Tax Treaty | Good tax treaty | Best tax treaty with country in Asia |
Choosing where to open your offshore company depends on each person and the situation of the business. At ILA, we generally prefer setting up offshore companies in Hong Kong. This preference is largely due to the resident director requirement and the high maintenance fees associated with accounting and compliance in Singapore. Even without considering Hong Kong’s more favorable tax treaties and rates, it remains a more practical option for foreign non-residents
