In the post-CRS era, when Chinese entrepreneurs intend to expand overseas markets, establish branches, or build their own international brand, they will often consider registering companies in countries or regions outside mainland China.
In the current context of international tax transparency, OFFSHORE operations are being transformed into ONSHORE, and it has become difficult for pure OFFSHORE operations to meet tax planning needs.
Secondly, in addition to tax planning considerations for corporate income tax, business owners also have to consider personal income tax – that is, changing their tax residency status. In order to officially change our tax status, we must first choose a place or country suitable for us to live in. (Hence, it is impossible to change your Chinese tax registrationstatus by merely buyinga passport from a small country while still having your business and residence located in China.)
In the current conditions, the best choice for us Chinese to find a suitable place to truly change our tax registration is to register companies in Hong Kong or Singapore.Both Hong Kong and Singapore currently have low tax rates.
So how do we choose? What is the difference between Singapore and Hong Kong? When choosing between a Singapore companyanda Hong Kong company, in addition to the initial costs, it is also necessary to fully consider the government policies, related procedures, and post-operation and maintenance issues of the two places.
World Trade Enterprise Consultancy Co., Ltd. provides Chinese entrepreneurs with corporate services in Singapore and Hong Kong. Combining more than 10 years of practical service experience, today I would like to discuss the situation in Hong Kong and Singapore.
Hong Kong: China's special administrative region with a clean government, good public security and a strict legal system, bordering Shenzhen Province, just threehours by plane from Shanghai.
Singapore: An independent, multicultural immigrant country, with a 74% Chinese population, stable politics, a developed economy and a well-established legal system, four or five hours byplane from China.
Hong Kong and Singapore are each one of the Four Asian Tigers. The combination of Chinese wisdom and Western institutions makes them both major global free trade and financial centers. In terms of trade facilitation and banking services, they are both of sufficiently high quality.
The difference is that Hong Kong is a region, and a part of China. Singapore, on the other hand, is an independent country and one of the ASEAN member states. This is the most important difference.
Secondly, Hong Kong and Singapore have had different development priorities in recent years. Singapore has more prominent advantages than Hong Kong in communications, IT, petrochemical, biomedical, and maritime affairs. Especially in recent years, Singapore's openness towards blockchain technology and digital currency has made it hugely attractive to emerging technologies and related investments.
Singapore was ranked secondin the world in 2018 in the Latest International Competitiveness Rankings released by the World Economic Forum, and Hong Kong was ranked seventh.
When considering setting up an overseas company, one needs to consider whether to choose Singapore as an independent country, or Hong Kong as an area within the jurisdiction of China. In terms of tax audits, legal disputes, and intellectual property rights that may be involved in the future, differences between countries and regions will have a large impact.
Hong Kong: Names must be in bothChinese and English, with traditional characters for Chinese names. Names in Chinese and English respectively are allowed to have meanings that aren’t translated literally. In most industries, keywords can be used with fewer restrictions. However, in recent years, the changes in policy for opening accounts in Hong Kong banks have had a slight impact on naming. The name of the company must not contain words such as "International" and "Group" unless certain requirements are met.Otherwise, it is impossible to open a bank account in Hong Kong due to the company name.
Singapore: Namesmust be in English, with a fixed company name ending, such as the most commonly used company type, "Private Limited" or PTE. LTD. Aside from companies with certain keywords, pre-approval is required. Company names including most industry keywords can be quickly registered.
Hong Kong: Shareholders and directors do not have nationality restrictions orrequirements, but in order to be able to open a bank account, it’s not recommended that people in sensitive regions or countries act as shareholders or directors. Shareholders and directors must be at least 18 years old; there must be at least one shareholder and one director, and the director and shareholder can be the same person at the same time.
Singapore: At least one person is required, and there is no restriction on nationality. One of the biggest differences is that companies in Singapore must have at least one local Singaporean as a director. They must be at least 18 years old with a legitimate identity card. Those who have declared bankruptcy, or have been sued for lack of integrity cannot be a director.
Hong Kong: There are no restrictions on business scope, except for industries that require pre-approval. In the past,business scope was not required to be written into the BR business registration certificate of the company registered in Hong Kong. However, new regulations now require you to indicate your business scope to complete your registration.
Singapore: Refer to the Singapore Standard Industrial Classification (SSIC) for the selection, which consists of 22 industry categories. Each business scope consists of a 5-digit code and an English description. Each company can choose 1-2 business scopes to be displayed in the company information report.
Hong Kong: Every company must have a statutory secretary. Since March 2018, it must be a Hong Kong secretarial company with a "trust or company service licensee". Operating illegally without a license leads to a fine of up to HK$100,000 and imprisonment for 6 months. (Our company has obtained this license).
Singapore: Every company must register a statutory secretary and only a qualified local Singaporean (such as a licensed accountant, a lawyer, or a professional secretary with 3-5 years of experience) can take up this role. Our company has met the requirements and is qualified to act as a statutory secretary.
The statutory secretary is concerned with all companyprocedures related to the government. The governments of both places have stricter and more standardized regulations on the requirements of the secretary and the supervision of the license of the company service agencies. I would also like to remind all customers that it is very important to choose a strong and legal secretarial company with a license.
Hong Kong: Annual audit. If there is no operating company, a tax declaration without operations can be made. If there is an operating company, accounts and audits must be prepared in accordance with tax laws and regulations.
Singapore: Annual audit. If there is no operating company, a Zero-Tax declaration is applicable. If there is an operating company, accounts must be prepared. However, not all companies need to be audited. Only companies with an annual turnover or assets reaching 10 million Singapore dollars (about 50 million yuan), and companies with over 50 employees need an audit.
Operational companiesboth in Hong Kong and Singapore are required to create accounts. The difference lies in auditing. Hong Kong companies need to be audited regardless of their size. Singapore companies do not need to be audited if theyare a small company.
Hong Kong: Over the years, the majority of domestic customers that set up overseas companies choose to open bank accounts in Hong Kong. With the in-depth development of global anti-terrorism and anti-money laundering efforts, Hong Kong banks’ account-opening policieshave been further tightened in the past two years. The cost of opening accounts has increased significantly compared with the previous two years, and the efficiency of account opening has also declined.
Singapore: As the world's third largest financial center, Singapore is home to some of the world's major banking institutions. As a Chinese settlement, Singapore has quite a number of Chinese bank managers who can provide Mandarin services to Chinese customers. Account opening takes about 2-3 weeks and the difficulty and costs are moderate. Compared with Hong Kong banks, it is a little easier and less demanding.
Finally, whether it is a Hong Kong company or a Singapore company, there must be a statutory secretarial company to submit administrative procedures. The Singapore companymust have at least one local director and at least one qualified statutory secretary. Therefore, it is most important to choose a reliable statutory secretarial institution.
Singapore and Hong Kong are both “an inch of land, an inch of gold” areas with high land prices and high rental rates. If you register a company by yourself, you will need to rent a local office with a high rent. You will also need to hire local people to arrange and submit various administrative procedures for the company. The cost of labor is high. If you choose a professional secretarial company, you can get the local business addresses and local services at a lower cost.
