Posted on November 12, 2019
How and Why to Open a Bank Account in Hong Kong
Hong Kong these days stays one of the exceptional offshore banking jurisdictions. It offers a tremendous combination of financial institution secrecy, company secrecy, a financially and politically stable environment, and strong banks. But possibly most importantly, it is a comfortable offshore funding haven for folks that need to diversify out of sinking western currencies into booming Asian markets, and China particularly visit slick cash loan to learn advantages of online installment loans.
So how can you pass approximately commencing an offshore financial institution account in Hong Kong? Do you have to journey there? This article will answer those questions and give you some realistic recommendations and suggestions. But first some background.
A Successful Free Market Experiment For East and West Alike
Hong Kong, in my view, is the simplest realistic instance inside the world of a main town that has been advanced from scratch and run as some thing of an offshore, free marketplace experiment – first through the British, then by way of the Chinese.
The important Island (and later Kowloon and the New Territories, components of the mainland) become a British colony for maximum of the nineteenth and 20th centuries. During this time it grew from a fishing village and opium buying and selling hub, right into a city-state of 7 million humans. It have become known as a free-wheeling, loose market paradise for capitalists, with an economic system characterized by means of low taxation, unfastened trade and no authorities interference in enterprise.
In 1997 the British lower back sovereignty over Hong Kong to China. The former colony became certainly one of China’s Special Administrative Regions (SARs), the opposite being Macau. Many humans have been first of all doubtful approximately one of the international’s capitalist bastions being run by way of a communist power, and at the time a lot of investors pulled out, many taking their dynamic commercial enterprise acumen heading to locations like Singapore and Vancouver.
However, the “one united states of america, systems” version followed through Beijing to coincide with loose market reforms and the growth of China into an economic superpower has proven very a hit. The Basic Law of Hong Kong, the equivalent of the constitution, stipulates that the SAR keeps a “excessive degree of autonomy” in all subjects besides overseas members of the family and defence. The SAR nowadays operates as a chief offshore finance middle, discreetly oiling the wheels of commerce between East and West.
These days, rather than being do away with through the Chinese impact, maximum global traders who are attracted to Hong Kong are coming exactly due to this Chinese connection. Hong Kong is the point of get entry to to Chinese exchange, without the criminal and cultural difficulties of doing commercial enterprise in mainland China.
Those who do now not accept as true with their own governments are reassured via the reality that below the Basic Law, Hong Kong’s overseas relations are run from Beijing. While maximum offshore jurisdictions humbly submit to needs from america and other western international locations, in the case of China, the relationship is genuinely reversed. Hong Kong does have some of Tax Information Exchange Agreements (see below) however these are sensibly policed and do no longer permit for fishing expeditions.
Offshore Banking in Hong Kong
The location’s population is 95 percentage ethnic Chinese and 5 percent from other groups, however English could be very broadly spoken and is the principle language in businesses like banking.
One thing I like about the usage of Hong Kong for offshore financial institution money owed is the same argument I even have used for Panama and Singapore: it’s a ‘real’ u . S . A . With real trade taking place. The Hong Kong dollar is the 9th maximum traded forex within the international. Compare this to doing enterprise on a small island or different far flung banking jurisdiction, wherein everybody is aware of your only purpose for doing business there’s offshore banking. It also means that there is no hassle doing your banking in cash, in case you so wish.
For now the HKD, the nearby dollar, nevertheless tracks very closely the United States dollar, but this seems to be converting as the Chinese Yuan circulates freely in Hong Kong, both in cash and in financial institution deposits. We assume this represents an fantastic opportunity to diversify finances out of america greenback now, gaining exposure to Chinese boom within the interim. (Of path, you can additionally hold HKD in banks in other elements of the world too)
Bank accounts in Hong Kong are almost all multi-foreign money through default, allowing all essential neighborhood and worldwide currencies to be held below one account range and exchanged freely and immediately inside the account at the press of a mouse.
There is not any capital profits tax, no tax on financial institution interest or inventory marketplace investments, and no tax on offshore sourced profits. This, mixed with a welcoming attitude to non-resident clients inside the banks (inclusive of US residents by way of the way, who’re commonly unwelcome in conventional offshore banking havens like Switzerland), and robust cultural and prison admire for financial privacy, makes Hong Kong one among Asia’s great offshore banking jurisdictions.
For folks who need to set up a small offshore account below reporting limits, or certainly to have the financial institution account mounted in view of future enterprise, Hong Kong is also appealing given the low minimal deposits demanded by the foremost banks there. The minimal bank account balance can be as little as HK$ three,000. Of course, you can not assume pink carpet, VIP non-public banking at this degree – but you get a superbly accurate functioning bank account with all the technological trimmings.
Offshore Corporate Bank Accounts in Hong Kong – Do’s and Don’ts
Typically, offshore clients select to open debts using organizations, in preference to private bills. This now not handiest offers greater privacy, but additionally flexibility and may – relying of path on how matters are dependent – offer enormous tax and asset safety benefits.
Accounts can effortlessly be opened both for natural offshore groups like Panama, BVI, Nevis or Marshall Islands, or for local Hong Kong businesses which might be set up the usage of nominee administrators and shareholders.
When contacting local company service providers in Hong Kong, you may discover that most of those corporate provider vendors will recommend you operate a Hong Kong company to open the account. The purpose they do this is that it’s less difficult and more profitable for them. They can include a neighborhood agency at low value, beginning the financial institution account is smoother and quicker with a neighborhood employer, and they are able to carry on billing nominee director fees each year. But it is able to now not be the proper component for you.
Whilst it’s far actual that Hong Kong companies do not ought to pay any tax supplied they do not make any local source earnings, administering any such corporation isn’t always so simple. For example, Hong Kong organizations are required to file audited bills every 12 months. They need to record pages and pages of files to convince the Inland Revenue Department (HKIRD) that they haven’t any neighborhood enterprise, and, from sensible revel in, the HKIRD is getting a good deal stickier approximately this. Long-installed organizations are normally left unmolested but newly installed companies can count on plenty of compliance paintings of their first few years. Again, this fits the Hong Kong company provider vendors who fee handsomely for such services.
Another element to remember is Controlled Foreign Corporation (CFC) law in your home country. (For an evidence see Wikipedia ) Many clients select to installation LLCs as they may be dealt with as passthrough entities, hugely simplifying reporting requirements in a few nations just like the USA. Hong Kong corporations are not LLCs and can’t be treated as passthroughs for tax purposes.
My recommendation – assuming you do not intend to do any commercial enterprise in Hong Kong except banking and perhaps the occasional journey to visit your cash – might be to open the account inside the name of a organization from a overseas offshore tax haven. It’s a bit extra paintings and expense at the beginning, and the financial institution may ask you greater questions, however it’s going to save you a lot of money and headaches in the long time. If you need a nearby look and sense on your enterprise, severa digital workplace services are available.
Hong Kong Tax Information Exchange Agreements
Contrary to what you’ll read on a few out-of-date websites, Hong Kong has signed a number of Tax Information Exchange Agreements (TIEAs). However, the HKIRD is at pains to factor out that fishing expeditions are not going to be tolerated.
The HKIRD has issued Practice Note 47, available at the net, which usefully explains how the HKIRD are seeking to attain a stability between the requirements of compliance with the OECD requirements, while imparting assessments and balances to protect the rights of businesspeople.
The HKIRD are experts and should be nicely placed to cope with TIEA requests nicely and justly according with the treaties and pointers. I am assured not going to permit their ‘clients’ rights to be trampled on.
Regulation of Banks in Hong Kong
Hong Kong’s Banking Ordinance become remodeled in 1986. It has seeing that undergone several amendments to enhance prudential supervision. The Hong Kong Monetary Authority (HKMA) turned into fashioned in 1993 as a one-prevent economic regulator, answerable for the whole thing from banks to stored price nameless debit cards.
The SAR keeps a 3-tier system of deposit-taking institutions, comprising certified banks, limited license banks, and deposit-taking agencies. Only certified banks may additionally perform modern-day and savings money owed, and accept deposits of any length and maturity. RLBs are simplest allowed to simply accept deposits of HK$500,000 and above, while DTCs are only permitted to accept deposits of no less than HK$one hundred,000 with authentic adulthood of now not less than 3 months.
Both these latter classes offer an opportunity for distant places banks to conduct wholesale, investment or private banking activities in Hong Kong without having to leap thru the hoops of making use of for a complete banking license. In addition, a few overseas banks have selected to open consultant workplaces in Hong Kong, which aren’t allowed to take deposits however can help in starting accounts at different workplaces within their organizations.
As Hong Kong is an worldwide monetary centre, it’s far an explicit policy of the HKMA that the regulatory framework in Hong Kong need to conform as a great deal as feasible with global standards, especially those encouraged by using the Basel Committee.
Hong Kong’s 5 largest banks, in phrases of general belongings, are as follows:
– Hong Kong & Shanghai Banking Corporation (HSBC)
– Bank of China (Hong Kong)
– Hang Seng Bank Ltd
– Standard Chartered Bank
– Bank of East Asia Ltd.
A full list of up to date Hong Kong banks can be determined on Wikipedia.
Visiting Hong Kong to Open a Bank Account
If you’re touring Hong Kong to open your account, it may commonly be opened the equal day furnished you have got made some arrangements with a neighborhood provider issuer, or without delay with the financial institution, in advance. This is assuming you operate one of the principal banks, that nearly absolutely everyone does. You can then definitely visit the bank, sign documents and receive the financial institution account quantity immediately. This might be a full multi-currency account and you may usually acquire a digital token for net banking, a password and a debit card.
The files required for commencing offshore financial institution account are:
1) Formation files (within the case of company bills. Apostilles are required within the case of overseas company accounts – your offshore company will recognize the way to achieve these.)
2) Bank paperwork and marketing strategy/expected pastime (a corporate service company will commonly deliver these as part of the provider)
three) Passport copies of every director, signatory and shareholder (take unique note of this requirement if you are the use of nominee directors – if the persons aren’t gift, copies will have to be notarized.)
4) Proof of cope with (along with updated bill statement which shows up your name and address) and signed (of each director and shareholder)
A financial institution reference is usually required if you are dealing direct with the bank. If you go through a corporate service company, they typically write a reference so you do not want to deliver a bank reference. However, if you can achieve a financial institution reference it’s far higher.
Opening an account without touring Hong Kong
It is also perfectly feasible to open money owed without touring Hong Kong (referred to as ‘remote account beginning’) even though this procedure tends to take significantly longer as banks will ask a lot greater questions. In this situation, your bank or service issuer will typically electronic mail you the bureaucracy, that you’ll be wanting to print out and sign.
Depending on the financial institution, there may well be sure special instructions about how and wherein to sign – as an example, HSBC in Hong Kong will commonly request that you have your signature witnessed within the HSBC Bank nearest to you. As with all foreign bank money owed, you should make certain to use the equal signature that looks for your passport, otherwise the documents might be rejected.
In the case of remote account beginning the financial institution will normally courier the password, debit card, and token direct in your cope with in your own home country. Then you want to prompt them via the financial institution’s website.
Hong Kong competes very favorably with Singapore, the alternative Asian banking jurisdiction we choose. If you have not but different your offshore holdings into Asia, you should seriously do not forget doing so. I hope this article could be helpful on this regard.
This article became originally published in the participants’ section of The Q Wealth Report, a privately posted e-newsletter devoted to offshore and private banking, asset safety and comfortable investing. Please go to the Q Wealth Report to to study extra articles and free studies reports on those topics, or to join the top rate phase for more articles like this.
If you want assistance with putting in place a Hong Kong financial institution account or an offshore employer, Peter Macfarlane & Associates S.A. Can provide this carrier. Please ask for a referral thru the Q Wealth workplace.