Introduction
Hello everyone! Welcome back to my channel. Today, I want to talk about a topic that many people are concerned about: how to achieve the goal of tax savings by setting up a company overseas. If you have left your home country to do some remote work or your income comes from multiple countries, is there a more efficient and tax-saving way? Let's discuss this in detail today.
Why Set Up an Overseas Company
Disadvantages of Working as an Individual
When many people start doing freelance work, they usually take on projects in their personal names. However, as you progress, you will find that there are several drawbacks. Firstly, the tax rate is relatively high because you cannot offset many expenses. Secondly, it is inconvenient to manage invoicing. Additionally, there is a legal risk. In case of any problems, you bear unlimited liability.
Advantages of Setting Up a Limited Company
On the other hand, if you establish a limited company, there is a separation between you as an individual and the company. For example, my investment properties in the UK are not in my personal name. Instead, I set up a limited company specifically for property investment to purchase these properties. The rent received each year is considered the company's income. This approach has the following benefits:
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Tax Savings: Many property management expenses can be regarded as deductible business expenses, which can be deducted when filing taxes. According to UK tax regulations, if the property is in an individual's name, all rental income is added to the individual's income and taxed together. The UK's personal tax rate is extremely high. Once your annual income exceeds £50,000 (including salary, rental income, and any other income), the tax rate is 40%. In contrast, if the property is held by a company, the corporate tax rate is currently around 19%. Moreover, when the company holds the property, the loan interest can be deducted, which is not possible when the property is in an individual's name.
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Flexibility in Business Transactions: When you want to sell the property or transfer your business in the future, having a company makes the process more convenient and flexible compared to doing it as an individual.
Why Hong Kong and Singapore are Ideal for Company Setup
Low Tax Rates
Hong Kong and Singapore are long-term regarded as friendly to startups, and their tax rates are very low. In Hong Kong, the profit tax rate is 8.25% for the first HKD 2 million and 16.5% for profits exceeding HKD 2 million. In Singapore, the tax rate is around 17%, but for a new company, the first SGD 100,000 of profit is tax-free. Compared to the UK's corporate tax rate of around 20% and the even higher tax rate in the US, Hong Kong and Singapore are undoubtedly excellent choices for tax savings.
100% Foreign Ownership and Remote Operation
Both Hong Kong and Singapore allow 100% foreign ownership, so you don't need to find local partners as shareholders. Even if you are not a Hong Konger or a Singaporean, you can fully own the company and operate it remotely, which is very attractive.
Transparent Systems and English Environment
The systems in Hong Kong and Singapore are relatively transparent, and the official language is English. All processes, such as tax filing, accounting, and dealing with the government, are transparent and can be mostly completed online without the need to go to the local area in person. This makes it relatively convenient.
Good International Reputation
Although many places are tax-free or have low tax rates, Hong Kong and Singapore have a relatively high international reputation. For example, if you set up a company in the Cayman Islands, people may have some doubts at the beginning. However, if your company is registered in Hong Kong or Singapore, it sounds more formal and reliable.
Company Setup Process in Hong Kong and Singapore
Similar Processes
The company setup processes in Hong Kong and Singapore are relatively similar. In Singapore, you need to go through a company name approval process to ensure that the name is not duplicated and not too exaggerated. Additionally, you need to have a local Singaporean director. In Hong Kong, foreign directors are allowed. Both places require a local registered address and a company secretary. The registration time is usually very fast, taking only 1-2 days or 1-5 working days.
Diverse Bank Account Options
Since Hong Kong and Singapore are highly developed financial centers, there are many options for bank accounts. In addition to traditional banks like HSBC and Standard Chartered, there are also many new online banks such as Wise, which are available in both places.
Tax Registration and Accounting Requirements
In Singapore, you need to register for GST when your annual income exceeds SGD 1 million. The accounting and tax filing requirements are similar in both places, where you need to prepare accounts and file taxes annually.
How Awesome Can Help
One-Stop Service
There are many professional service agencies that can help you complete the entire process of setting up a company, including bank account registration and tax filing, remotely. One such platform is Awesome. Their focus is on helping entrepreneurs register companies in Hong Kong, Singapore, and the UK, and they have branches in these three places.
Services Provided by Awesome
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Company Name Approval: Awesome can help you check if the company name is available and meet the requirements.
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Local Director and Registered Address: If you need a local director in Singapore, Awesome can provide one. They can also offer a local registered address.
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Company Secretary: Awesome can provide a company secretary to handle administrative tasks.
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Bank Account Opening: Awesome can help you connect with banks that support remote video account opening.
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Accounting and Tax Filing: They can handle annual accounting and tax filing for you.
Cost of Services
The cost of registering a company with Awesome is around $300 - $700, and the annual accounting and secretarial services cost around $1,000 - $1,500. This is much cheaper than the cost of hiring a local accountant in the UK, and it can help you avoid potential fines due to tax filing errors or missed deadlines.
Important Considerations
Personal Tax
Although setting up a company can save corporate tax, you still need to consider your personal tax. Your tax residency status depends on the number of days you stay in a particular country in a year. It is advisable to consult a professional tax team to clarify this issue.
Compliance and Transparency
When setting up a company anywhere, it is crucial to keep your accounts clear, comply with the law, and be transparent. Avoid hiding income or trying to exploit loopholes.
Conclusion
Setting up an overseas company can be a great way to save taxes and manage your business more efficiently. Hong Kong and Singapore are excellent choices for this purpose. If you have any questions or ideas about setting up an overseas company, please leave a comment below. If you like this video, don't forget to like and subscribe to my channel for more practical tips on digital nomad life, financial planning, and international lifestyles. See you in the next video! Bye!
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