Being location independent and able to choose where and who you do business with is amazing. Today you’re about to find out why we decided to start a business in Hong Kong (our digital marketing company, Adireto Ltd) in order to work from anywhere with freedom.
But before, please read a short story so you can picture the situation…
I’m Brazilian. When I was turning 18 years old I decided to go overseas so I could actually learn some English (at school we would learn the same thing every single year – verb to be) and explore more of this massive and beautiful world we live in. So New Zealand was the destination.
Months before leaving my country, I had started a business in partnership with my sister. And even with having a full-time job on the other side of the world, I was able to manage everything through the internet.
Almost 2 years went past and the business was slowly conquering more space in the virtual world. When my websites were generating enough income to sustain myself on the road full-time, I decided to quit my well paid job (at least for a guy with no university degree, very young and poor English) and started backpacking around the physical world.
From 2008 to 2014 (the time of this post), I’ve travelled 35 countries and I’m just about to visit a new one, Scotland. Some countries like Hong Kong, I’ve been 3 times. The last time was to start Adireto Ltd, which is now the company behind this blog and other online ventures our team is developing.
So why did I choose to start a business in Hong Kong?
I’ve done vast research. At first, honestly, I thought starting a business outside of my own country was something totally illegal.
On the news back home it was quite normal to see stories like: “[Famous person] has hidden money in Caribbean tax haven”.
But wait a second. It would never go much further into the story. The headline was just to call attention, but in fact, in most cases, something like this is completely legal.
So then I started researching and found out that so many companies have businesses all over the world, including well-known tax haven countries such as the Cayman Islands, Bermuda, Bahamas, British Virgin Islands, etc.
Here are just a few you might support very frequently:
- Starbucks (I’m writing this over a cappuccino in a Newcastle store)
- Facebook (join us there?)
- Google (responsible for my nomadic lifestyle)
- Apple (yes – I’m a fan of Macbooks since my first purchase in 2007)
- Amazon (fancy buying yourself something new? Here is our affiliate link [?])
- Citigroup (a bank I use which offers good deals on ATM fees and credit cards for travellers)
- PepsiCo (who doesn’t love Doritos?)
- and the list goes on…
Why were they diversifying worldwide?
Several reasons! By investing in a variety of assets around the world, they might reduce risk, tax burden, save money and better protect their business. No business wants to go bankrupt, so they look for alternatives to keep playing the game.
So as an individual who works several hours in front of a computer, devoting my time and health in order to create value for other people and ultimately make money to survive, I decided to start looking for alternatives to reduce risk as well.
Here are 6 reasons to start a business in Hong Kong for those of you considering working in the online space:
1) Hong Kong has the freest economy in the world
Ranked the world’s freest economy for the 20th consecutive year, Hong Kong offers a great gateway for freedom seekers like me to start a brand new business.
2014 stats highlight that while Hong Kong is the number one freest economy in the world, Brazil is all the way down the list at 114 amongst the world’s most restrained economies.
The factors for the ranking involve: Business Freedom, Trade Freedom, Monetary Freedom, Fiscal Freedom, Investment Freedom, Financial Freedom, Labor Freedom, Freedom from Corruption, Government Size/Spending and Property Rights. Better explained here.
2) The tax system is very business-friendly
Hong Kong only inflicts 3 direct taxes and gives generous allowances and deductions which reduce taxable amounts.
- Profits tax is capped at 16.5%
- Salaries tax is a maximum of 15%
- Property tax is 15%
And get this, Hong Kong does not impose:
- Sales tax or VAT
- Withholding tax
- Capital gains tax
- Tax on dividends
- Estate tax
It’s also extremely easy to submit tax returns in Hong Kong. The process is simply done online for most people without having to go through an accountant.
On top of that, Hong Kong has a territorial taxation where taxes are only collected on local business activity, so it’s possible to pay zero corporate tax:
Hong Kong adopts a territorial source principle of taxation. Only profits which have a source in Hong Kong are taxable here. Profits sourced elsewhere are not subject to Hong Kong Profits Tax. (IRD HK)
3) Hong Kong offers a lot of support to help companies set up and grow
In Brazil it takes around 120 days (4 months) to start a business (it was 6 months when I started mine back in 2006) and 4 years to close one. There are 15 mandatory legal procedures to be fulfilled and it costs a hefty $1,125 when starting up.
In Hong Kong however, it seems as though the government practically throws money at new start-ups. Offering various programmes designed to help small overseas and local businesses set up, it’s pretty obvious why there are so many turning to Hong Kong to do business.
- Incubator programmes
- Loan guarantees
- Funds for marketing
This is a big reason why we decided to start a business in Hong Kong as opposed to Brazil.
4) Hong Kong allows business owners to write off more expenses
I spend most of my time working towards the success of the business. In fact, all the travelling is very necessary to keep this blog up to date, after all, this is a travel blog. If we don’t create frequent and constant updates, this will never create enough value to an audience and ultimately will never make any income.
If you read our eBook ‘Travel More‘, you will see we are very honest and transparent on how we make money online. None of the ways written there are possible if we don’t create content to enrich people’s lives.
So with a Hong Kong company, we can write off a great number of expenses against the corporation. This move alone could save us thousands annually.
5) Bank/Paypal accounts and serviced virtual offices are easy to set up
The setting up process was pretty easy. I just had to send some documents over to Hong Kong from Thailand via post. Later I had a short meeting with the HSBC and Paypal managers at the office where the company resides and cleared up any questions I had.
Included in the amount that I paid to start up the business, I’ve hired a serviced virtual office where staff members look after our mail.
6) Selling shares of a Hong Kong corporation is easier
At least when compared to Brazil where new foreigner investors need to comply with several procedures, signup with third party organisations and really understand the language.
There are many valid reasons to sell part of a business. Selling shares in a business can generate significant cash – cash that can pay down debts, be invested elsewhere or go to charitable causes or heirs. That cash can also go right back into the business, where it can fund expansion. Likewise, selling part of a business can reduce the owner’s risk and allow them to diversify their personal assets. (Investopedia)
What does all this have to do with travel?
So you might be thinking why this sort of post is on a travel blog. Well, if it wasn’t for my first online business, I would have never been able to travel the way I do…
Imagine spending 3 months driving around the UK. Would this be as possible while holding down a conventional job?
Recommended: Using your bank to transfer money overseas can work out to be very costly. In fact, they can charge up to 5% in hidden costs, usually through adding a mark-up to their exchange rate…
We recommend using Transferwise to send money abroad because they use the mid-market exchange rate without any mark-up and are very transparent about any fees they make take before charging you. Basically it can work out up to 8 x cheaper to use this service.
Do you already have an overseas business? Or do you plan on starting one? Maybe you’re studying the Hong Kong market… Share all your thoughts in the comments section below! I’d be really interested to read your input. Thanks!