Category Archives: Blog

Second Residency in low tax Countries

Check with your Tax Advisor before obtaining residency of one of the Countries listed below. Make sure that any income you earn overseas is not taxable as local source income.

Anguilla is a small player in the world of offshore trusts and offshore banking. Anguilla also offers retirees who purchase property and provide bank statements as evidence of self-sufficiency to obtain residence permission.

Costa Rica has been the second residency of choice for American retirees and investor expats. Requirements have become more stringent in recent years. But, anyone with a monthly income of $2,500 can become a resident. Costa Rica is highly bureaucratic, but is worth considering if you enjoy sandy beaches or tropical jungles.

Georgia is the most underrated country in the world, but is becoming one of the world’s most free economies. The pro-business government slashed the taxes. Rates decrease each year. Income earned outside of Georgia is not taxed in Georgia. although you may need to provide proof. Georgia offers almost all foreigners a 360-day tourist visa. Anyone can open a Georgia company in order to qualify for residence. Buying real estate might also qualify you. If you do invest in Georgia, taxes there usually range from a flat 5-15%.

Gibraltar allows you to become a resident if you have around $3 million. Residents under the territory’s investor-friendly Category 2 visa pay a maximum tax of approximately £29,000 per year in exchange for permission to reside on the tip of the Mediterranean.

Guatemala offers territorial taxation. You can obtain residence in Guatemala if you show proof of $1,000 monthly income. But, you must be willing to live there a good part of the time or they’ll cancel your visa. If you are willing to live in Guatemala full-time, it’s possible to get citizenship after five years.

Macau has zero tax on foreign earnings. Foreign investors can obtain residency by investing 3 million Macau patacas, or roughly $375,000 into the country. However, because Macau is technically part of China’s “one country, two systems” policy, it is essentially impossible to obtain citizenship there.

Malaysia “My Second Home” (or MM2H) program is straightforward. If you’re under 50 years old, you’ll need to show proof of $2,300 monthly income and deposit approximately $70,000 at today’s exchange rates into a Malaysian bank. You won’t be able to touch your money for ten years, or until you cancel the visa, unless you decide to buy real estate. If you’re over 50 years old, the bank deposit is cut in half. Learn more about residency in Malaysia.

Nicaragua is “the next Costa Rica”. It is a great place to have a second residency… if you actually want to live there. Obtaining Nicaraguan residency is easy and only requires proof of income of about $750 per month. However,you must live there for six months each year or else your residence permit, and your territorial tax benefits, will expire.

Panama has the strongest offshore banks and is an open country for immigration, especially for citizens of Western countries. For these citizens, Panama’s Friendly Nations visa program offers instant permanent residence with a low bank deposit of $5,000 and one “economic tie”, usually a Panamanian company or the title deed to real estate. Learn more about residency in Panama.

Paraguay is well-known as a cheap second passport program. It allows foreigners to obtain instant permanent residence with a mere $5,200 bank deposit, and citizenship in three years. However, Paraguay also makes for an attractive second residency with the potential to get a passport later. Taxes on local source income are quite low at just 10%. Foreign source income is typically not taxed. Learn more about residency in Paraguay

Singapore is no tax haven for entrepreneurs. A company in Singapore is more costly to start and maintain than a Hong Kong Company. But, tax rates are 0-17% on corporate profits and a flat 20% on the high personal salary. On another hand, investors with around $4 million to invest can move to Singapore and enjoy no tax on bank interest, capital gains, or foreign profits. Learn more about residency in Singapore.

Get Your Second Passport

Top 7 Reasons To Get a Second Passport Today

1. More Financial Options

A second passport unlocks the door to international financial services… especially for US Citizens. To be a welcomed by foreign financial institutions, you need a passport from a different country.

2. Minimal Risk of Foreign Policy

Having a Passports with minimal risk of foreign policy blow back, you avoid being targeted if you happen to be in the wrong place at the wrong time.

3. More Visa Free Travel

A second Passport will give you visa free access to more Countries. Paraguay, it’s one of the easiest countries in the world to obtain a second passport from and will let you travel visa-free to 123 countries, including most of Latin American and European Countries.

4. Avoid People Control

Having a second Passport would permit you to leave the Country even if you have been restricted to do so. In U.S., for example, the government can cancel your passport if you are accused of a felony. They don’t even need to convict you.

That, of course, is not unique to U.S. Any government can revoke or cancel a Passport for whatever the any reason. Having a second passport dilutes this power.

5. Provides Mobility Insurance

A second Passport provides Mobility Insurance for you and your family. Regardless of how bad the economic or political situation might get in your home country, a second Passport gives you the legal right to live and work elsewhere.

6. Renunciation

If you decide to take the drastic step of renouncing your citizenship, a second Passport would give you huge tax and regulatory benefits if your home country

7. Generational Benefits

A second passport provides political diversification benefits to future generations. That means, you will be able to pass on multiple Citizenships to your children and grandchildren.

Unfortunately, a second Passport does not come easy and could be expensive. Billion City Limited (HK) can assist you to set up your offshore Paymaster Account. Ask for your FREE Guide “Easy Way to Second Passport” from office@billioncityltd.com

Paymaster can Receive SEPA Transfers

What are SEPA transfers?

SEPA transfers, or the Single Euro Payments Area, are the new format for cross-border Euro bank transfers. These aim to facilitate such cross border Euro transfers.

SEPA is made up of EU Countries plus other countries which also support Euro bank transfers.

SEPA Countries are as follows: Australia, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Gibraltar, Greece, Hungary, Iceland, Ireland, Italy, Latvia, Lichtenstein, Lithuania, Luxembourg, Malta, Monaco, Netherlands, Norway, Poland, Portugal, Romania, San Marino, Slovakia, Slovenia, Spain, Sweden, Switzerland, UK.

Funds sent from a bank based in a SEPA Country could use TransferWise’s Euro accounts, which has three Euro accounts based in Estonia, Germany and France. All three of these are ‘SEPA-compliant’. One account in Estonia is held with LHV Bank. Estonia is in Northern Europe, just south of Finland.

One account in Germany and is with Deutsche Handelsbank (owned by Deutsche Kontor Privatbank). It is also SEPA compliant. Should not be subject to any fees.

One account in France is held with Barclays. This is for customers with accounts registered in France.

As TransferWise sends Euros via SEPA transfer, there shouldn’t be any receiving fees. TransferWise can’t tell which banks do or don’t charge. Iit is worth checking with the Receiving bank.

Once sent out, the recipient of a Euro transfer should receive the money within 1-2 working days.

Please note – TransferWise can only make transfers which include a currency conversion. For example, it’s not possible to transfer from your Euro account to another Euro account.

New Private Equity Fund tax exemption for Hong Kong

Hong Kong’s position as Asia’s leading hub for Private Equity (PE) should be given a significant boost once the Government legislates the proposed new PE fund tax exemption in 2015. The Hong Kong Government recently completed industry consultation in relation to these proposed changes.

The new rules are designed to exempt offshore PE funds from tax in Hong Kong in respect of investments made outside of Hong Kong. The changes are also expected to contain an exciting development to promote the use of Hong Kong companies as an investment holding platform. SPVs established in Hong Kong to hold offshore investments should be exempt from tax in Hong Kong on the investment returns made by a PE fund. This is something which the industry has been seeking for some time, and the proposed changes are likely to be wider reaching than an equivalent exemption which applies in Singapore.

The proposed changes were initially announced by the Financial Secretary in his 2013/14 budget speech. It is expected that draft legislation will be introduced to the Legislative Council in coming months.

Existing Offshore Funds tax exemption

Hong Kong’s existing Offshore Funds tax exemption has been in place since 2008 and generally works well for hedge funds which operate in Hong Kong. However, for PE funds, the existing exemption has not been as effective because the exemption did not apply to investments in private companies
Briefly the qualifying conditions for the existing offshore funds tax exemption include:

• The fund is a non-resident fund;
• The profits of the fund result from transactions in specified (section-type) transactions or transactions incidental to specified transactions; and
• The transactions are carried out through or arranged by a specified person

Where all of the qualifying conditions are satisfied, the investment profits of the offshore fund would be exempt from Hong Kong profits tax.

The existing requirements contain a few key limitations which affect the ability of PE funds to rely on the exemption. In particular, gains from investments in private companies are not covered by the exemption.

A further limitation is that the investments need to be arranged by a person licensed with the Securities and Futures Commission (SFC) of Hong Kong. In practice, many PE funds are not required to obtain an SFC license so would need to enter into an arrangement with a licensed person in order to satisfy this requirement.

Expected changes

Following the completion of the consultation process, it is expected that the current exemption will be broadened to cover most types of transactions entered into by PE funds. The key changes proposed by the Government include:

• Amending the scope of the exemption to cover transactions in private companies incorporated outside of Hong Kong
• Waiving the requirement for transactions to be carried out through or arranged by a person with an SFC license, if the PE fund is a bona fide private equity fund
• Extending the scope of the offshore funds exemption to cover profits from investments made by SPVs owned by an offshore PE fund, including SPVs established in Hong Kong

Transactions in private companies

The current exemption will be expanded to cover a broad range of private companies.
An investment in a private company incorporated outside of Hong Kong will be covered by the exemption, unless one of the following applies at any time in the three years prior to the relevant disposal of securities in that company:

• The private company carried on business in Hong Kong through a permanent establishment;
• The private company directly or indirectly held equity interests in one or more private companies which carried on business in Hong Kong through a permanent establishment and the aggregate value of those equity interests was more than 10% of the value of the private company’s total assets; or
• The private company held real estate in Hong Kong, or the private company directly or indirectly held equity interests in one or more private companies’ with direct or indirect holdings of real estate in Hong Kong; in addition, the aggregate value of the Hong Kong real estate held by the private company plus the value of the equity interests held in the other private companies exceeded 10% of the value of the private company’s

Exempt investments in private companies includes investments in shares, stocks, debentures, loan stocks, funds, bonds or notes. As such, this should be broad enough to cover most types of transactions typically entered into by PE funds, including many debt and hybrid debt/equity investments issued by companies.

Bona fide private equity fund

Officials have acknowledged that a significant proportion of Hong Kong based investment advisors to offshore PE funds are not licensed with the SFC as they do not fall within the licensing regime. As such, if the exemption required PE funds to be licensed by the SFC when in fact they do not need to be, this would create an un-level playing field across the PE industry.
As result, the Government is looking to introduce the concept of a bona fide private equity fund.

This definition should capture most genuine PE funds being defined as an offshore PE fund which at the final close of the fund has more than 5 investors (associates being aggregated) which collectively have committed more than 90% of the capital of the fund. In addition, the originator of the funds (and their associates) should not be entitled to receive more than 30% of the net proceeds arising from transactions of the fund. Funds which satisfy these requirements would not need to have transactions carried out through or arranged by a person with an SFC licence in order to benefit from the offshore funds exemption.

SPVs

Perhaps the biggest opportunity for Hong Kong under the new PE fund exemption will be the ability for PE funds to use Hong Kong companies as an investment holding platform for holding their offshore investments. This will enable PE funds to make use of the substance that they already have in Hong Kong to use Hong Kong as an investment holding jurisdiction. The changes proposed in relation to SPVs represent a significant development which should help to level the playing field with Singapore when PE funds are looking at jurisdictions in which they choose to establish investment platforms. They are also complementary with the efforts being made by Hong Kong to expand Hong Kong’s double tax treaty network and promote Hong Kong as an investment holding jurisdiction.
During industry consultation, officials have acknowledged that SPVs are commonly used by PE funds when structuring investments and that exit events can often involve a sale by an SPV instead of by the fund itself. They have agreed that the offshore funds exemption should also apply to both profits derived by an SPV from an investment in a private company and profits derived by an offshore fund from the disposal of an SPV which holds an investment in a private company.
It is expected that SPV will be defined quite broadly to include corporations, partnerships, trustees and non-corporate bodies. However, the SPV would need to be owned by a non-resident, be established only for the purpose of investing in private companies and would not be able to carry on any other trade or activity.
Importantly, an eligible SPV can include a Hong Kong incorporated company. This is a key change as such companies are already commonly used by PE funds to hold investments in China and are gradually being used more frequently to hold investments in other countries as the Government expands Hong Kong’s double tax treaty network.

Comment

The key benefit of the expected changes is that it will provide investment professionals based in Hong Kong with greater flexibility as to how they undertake their daily tasks without the concern that they may create a tax exposure in Hong Kong for the fund that they represent. This is something that will no doubt be welcomed by many deal teams across town.

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Set up Company in Hong Kong

Hong Kong requires no taxation on earnings from outside the Country. This makes it a very attractive location for foreign Company formation. It is the financial capital of the world and the gateway to Mainland China. You must decide if the names of the Shareholders and Directors of the Company are required to be open to the public scrutiny. As part of our service, we offer the option of using Nominee Shareholders and/or Nominee Directors in order to remain invisible to public searches.

Advantages in setting up an Offshore Company in Hong Kong

– Hong Kong is the financial capital of the world
– Hong Kong is the gateway to Mainland China
– Zero Tax on Income generated outside Hong Kong
– No minimum Paid up Capital required
– Zero Tax on Capital gains and Dividend Income
– Low tax rate of 16.5% for business done in Hong Kong
– Fast Incorporation service. Usually 7-10 Days.

Corporate Documents supplied upon registration:

– Business Registration Certificate
– Certificate of Incorporation
– Memorandum and Articles of Association
– NC1 Form
– Two D2A forms
– First Resolutions
– Share Certificate
– Set of Registers

Service Fee to set up Company in Hong Kong includes:

– Company Registration Fee
– Corporate Documents supplied
– Government Fees paid for 1 year
– Registered Office for 1 year
– Express delivery of Corporate Documents

The Fees from 2nd year onwards will cover: Payment of Government Fees + Registration of Office for 1 year .

Optional Services

– Set up Bank Account with Top Bank in Hong Kong – USD 3,500.00. The Fee includes legalization of all required Corporate documents by the Bank
– Nominee Director (Including apostilled Power of Attorney) – USD 400.00
– Nominee Shareholder – USD 300.00
– Notarized set of all Corporate Documents – USD 550.00

Service Fee to set up Company + Bank Account in Hong Kong is USD 5,000.00

These additional services are available only to our registered Clients.

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Hey, stop wasting your Money on Taxes

Embrace Hong Kong’s low rate

Forget the parallel life you might be living elsewhere and embrace Hong Kong. It has much to offer, financially. You won’t be able to resist.

Make sure you have slipped off the shackles of tax-residency elsewhere, taking expert advice on this if necessary. US citizens have a hard time, as American shackles are tight wherever they live. For the rest of us, once we are no longer tax resident elsewhere, it is only income and gains on assets left behind that might be subject to tax there.

For those assets left behind, out of sight is not out of mind. File any required home tax returns each year, and budget for supporting cash and tax flows, especially on rented properties.

Once you are clear of other jurisdictions, Hong Kong is refreshing.

Sure, accommodation is expensive, but you are only taxed on income earned in the SAR, not elsewhere.
Income tax, at a maximum of 15 per cent, is strikingly modest. Added to that is the delight of completing a Hong Kong salaries tax return in a mere 15 minutes. It is also not uncommon for the government to pay a dollop of cash back to everyone.
A pitfall is spending your tax money, as employers are not required to remit tax as you earn. You can use the tax reserve certificate scheme to pay tax as you earn to keep things clear.

It takes a little while to appreciate that taxes on investment earnings here are almost non-existent.
You might consider moving your assets to Hong Kong. This can be done easily and without a wicked tax backlash at home. It is also a reason to keep savings and investments here.

But note that Asia’s World City is a candy shop of investment choices – often with pure peddlers behind the counters. So tread carefully. Make sure you stay flexible and keep a strict eye on currency movements. Ensure your bank allows for ease of changing and receiving foreign currencies at competitive rates. Avoid borrowing in a foreign currency, as this can go wrong very quickly.
The lower taxes here actually offer the opportunity to invest in low-risk assets and still achieve your objectives. Many of us accumulate wealth at a faster rate in Hong Kong than elsewhere. My rule of thumb for Australians was that a year of earning in Hong Kong was equal to three at home. That was before Sydney and Melbourne came third and fifth on the Economist Intelligence Unit’s list of the world’s most costly cities. Hong Kong ranked 14th.

InvestHK uses the slogan “Right place, Right time, Right now”. That is about right. But, bear in mind the tide can easily turn. Make sure you have cash on hand to cover reversals, especially if your contract is with an investment bank, as they can be fickle. Networking is the main game in town, so join chambers, clubs and associations early on to build your life rafts.

We can help you make the move. Send email to: office@billioncityltd.com and will assist you to set up your Company and Bank Account in Hong Kong

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Legal and regulatory requirements

Legislation

Anti-Money Laundering and Counter-Terrorist Financing (Financial Institutions) Ordinance (Cap. 615)
Drug Trafficking (Recovery of Proceeds) Ordinance (Cap. 405)
Organized and Serious Crimes Ordinance (Cap. 455)
United Nations (Anti-Terrorism Measures) Ordinance (Cap. 575)

Guidelines on anti-money laundering and counter-terrorist financing

Guideline on Anti-Money Laundering and Counter-Terrorist Financing (July 2012)
Prevention of Money Laundering and Terrorist Financing Guideline issued by the Securities and Futures Commission for Associated Entities (April 2012)

Fining Guidelines

SFC Disciplinary Fining Guidelines issued under the Anti-Money Laundering and Counter-Terrorist Financing (Financial Institutions) Ordinance (Cap. 615)

FAQs

FAQs on Anti-Money Laundering and Counter-Terrorist Financing (Financial Institutions) Ordinance (March 2012)