Why set up Limited Company in Hong Kong ? - Story One

Very Lower tax in Hong Kong - Offshore operation tax exemption

Mr.Achim

Background

1. Mr. Achim  originally buying mobile from China and selling to German using his own German company as the middle trading firm (G Ltd);
2. Trading profit of Euro 100,000 is subject to German tax rate – can be as high as About 30%-50% ;
3. Mr. A controls the business remotely – no need to maintain operation base in China or France.

New Way:

1. Mr. Achim setup a Hong Kong company, Hong Kong Ltd;
2. Hong Kong Ltd becomes the middle trading company – buying mobile from China and selling to German;
3. Moibles still shipping directly from China to German;
4. Selling and purchase at same price as before;
5. Location of operation – Mr. A still operating the business – without maintaining operating office in Hong Kong, China and German.

Benefit:

1. Profit of Euro 100,000 will be profit of Hong Kong  Ltd;
2. As H Ltd maintains only register address in Hong Kong, but not operating office. And also fulfilling offshore operation test, Hong Kong tax department (Inland Revenue Department) (IRD) approves the “non-HK source” application;
3. There is saving of 30%-40% in profits tax.

Note : Mr. Achim still needs to fulfill personal income tax filing to Geramn government – in order to assess overall tax saving scenario.