Company in the BVI, in Estonia and Hong Kong - the pros and cons
In creating a legal entity there are always both advantages and disadvantages. The founder of the Polyglot project, Andrei Prudko, wrote about the pros and cons of registration in the BVI, in Estonia and Hong Kong, and why they even started to look for new ways to do business fully.
First of all, briefly about the factors that influenced our choice to exit. The focus of our project is to simplify the search for freelance translators, tutors, copywriters and guides working in any geographic location (international platform). To make it clear - service users sell and buy services in the language sphere, the Polyglot project works through the website, the Customer can use the services on the site only once. But for this ... According to Ukrainian legislation, in order to receive money from non-residents, our service is obliged to conclude an agreement with each foreign user and exchange documents with him within 90 days. In addition, income tax - 18%. NBU changes the restrictions on currency transactions ( read more ). Since, as already mentioned, our service is international, similar features of Ukrainian legislation have forced us to look for other ways of conducting mutual settlements and withdrawing funds. Our company ordered a study, it was done by professional lawyers, we share some of this information here.
')
So, what opportunities can an entrepreneur get by registering a legal entity abroad?
To create or not jur. face abroad?
Positive points
• There are countries where the laws themselves are primarily more favorable for doing business:
• Climate of search and attraction of investments is more favorable;
• The opportunity is available to search for new customers, entering new markets;
• The possibilities of currency management, for example, are wider, for the parties to the contract more freedom in settling relations. There are fair competition laws and laws that prohibit enticing customers;
• There are tax preferences;
• The judicial system is more effective;
• For some businesses, a positive point may be the lack of direct simplified access to information about the company's activities for tax and law enforcement agencies.
Negative points
• Record and communicate in a non-native language;
• It is necessary to find and attract an accountant with a fairly good level of competence in local legislation;
• There may be additional costs for opening an account in a foreign bank (you may have to attend in person);
• Since If you are not a resident, there may be difficulties in lending to foreign banks.
In choosing a country to register a legal entity, each will be guided by their needs, based on their individual characteristics. The needs of our business have narrowed the choice to the British Virgin Islands (BVI), Estonia and Hong Kong.
British Virgin Islands
A standard offshore company created, including in the BVI, is fine if you are not going to use it for operational purposes in the American and European markets. The most commonly used constituent forms in the BVI are as follows:
- Limited liability company (BVI private company limited by shares);
- Company with the liability of participants limited warranty (BVI private company limited by guarantee);
- Joint-stock company (BVI Public Company).
An offshore company is needed as a tax planning tool, and later, in order to do business in Europe, you can register a company in another, more “respected” jurisdiction.
Positive moments (BVI)
• To create a company you need only one director (physical or legal entity) and there is no need for a secretary;
• Share capital - the minimum paid $ 1, standard announced $ 50,000;
• Depending on whether the statutory fund exceeds $ 50,000, the annual state duty will be $ 350 or $ 1,100;
• The official language is English, the currency is USD, the legal system is Anglo-Saxon;
• There is no need to confirm the company's activities with financial statements; there is no currency control;
• Growth or transfer of capital, sale of property, heritage - are not taxed, there is no VAT. Tax and state. duties are only for real estate;
• The level of confidentiality of recipients of payments is high. Information about the beneficiaries is available only by court order.
Negative moments (BVI)
• BVI's reputation - offshore for “black” business. As a result, the level of trust among respectable customers is low;
• Providing services to residents of the BVI will be prohibited to you;
• Although financial statements are optional, checks can and sometimes need to be provided;
• Since your company will be offshore, you will not be able to own real estate in the BVI.
Estonia
The Baltic countries, and in particular Estonia, have recently been popular with the IT business. Start-up culture here is at a high level, which causes a lot of interest and attention to the local market from investors. The IT infrastructure in this area is also one of the most developed in the European Union. There are two legal and organizational forms for companies, according to Estonian law:
- Limited liability company;
- Joint-Stock Company.
It should also be noted that monitoring the status of the company will be easier, due to its close geographical location to the CIS countries.
Positive moments (Estonia)
• Estonia is a member of the EU and the Eurozone, therefore, it has unlimited access to the common market of member countries;
• The local population knows English well, and often Russian;
• In order to open an account with an Estonian bank, it is not necessary to be located geographically there;
• Resident companies of the country, have unlimited opportunities to open accounts in foreign banks, and can conduct transactions in any currency;
• No currency control;
• The tax system here is quite loyal. If you decide to reinvest the profit, you will be exempt from the tax on profits;
• An effective contractual system allows you to avoid double taxation: at a rate of 6%, foreign income of a non-resident is exempt from repatriation tax;
• Submission of all accounting and tax reports in Estonia is carried out electronically;
• Property is not taxed;
• Visas are issued for owners and managers of Estonian companies for a long time, and, if desired, obtaining citizenship will be simplified.
Negative moments (Estonia)
• In matters of company ownership structure, confidentiality is low;
• The minimum share capital established for an LLC is € 2500. Its payment can be postponed until the event specified in the law (for example, until capital is reduced or increased, until dividends are paid). However, sooner or later it will still have to be done;
• High tax jurisdiction; corporate tax rate is quite high (almost 26.6%). But, only distributable profits are taxed. In this case, the distribution of capital includes: expenses and payments, payment of dividends, reduction of the share capital;
• Financial statements you will be required to submit annually.
Hong Kong
This state is a member of APEC (APEC - Asia-Pacific Economic Cooperation), also, not only in Asia, but also in the world, Hong Kong is considered one of the largest centers of business and trade. The proximity of Hong Kong to such large markets in Southeast Asia as Thailand, Malaysia, Indonesia, is very favorable for developing business ties. Well, the close proximity to China provides access to its huge market and contributes to very effective business communications.
In Hong Kong, the most common form of enterprise is a limited company (Limited Company).
Positive moments (Hong Kong)
• The actions required for registering a company in Hong Kong can be carried out remotely, you can not be personally present;
• Two official languages - Chinese and English, Anglo-Saxon legal system;
• For authorized capital, there are no restrictions in the types of currencies and amount of the contribution;
• Rather mild business conditions - the income tax rate is very low (16.5%), there is no VAT;
• The legislative climate is favorable for foreign investors. To be the owner of the company, it is not necessary to be a resident (except for the cases of the company's belonging to some strategic industries);
• Income earned in this administrative region will not be taxed if its source, as well as its business, is geographically outside Hong Kong;
• If your Hong Kong company has a registered capital of no more than 10,000 Hong Kong dollars (about $ 1,300), then the minimum government license fee will be about $ 300. In general, such a fee depends on the size of the share capital and is paid by the company annually;
• It is not necessary to collect directors and shareholders of a Hong Kong firm every year. And you can hold such meetings wherever convenient, anywhere in the world;
• Since there are no restrictions in the procedures of mergers and acquisitions, antimonopoly, etc., then you can go out of business easily.
Negative points (Hong Kong)
• Remotely, you can not open a bank account;
• It is obligatory to have a corporate secretary - a resident of Hong Kong (physical or legal entity);
• Accounting and annual audit, for Hong Kong companies is mandatory. At the same time, auditors have serious requirements - all the necessary primary accounting documents (orders, invoices, contracts, etc.) must be available;
• For tax planning, the lack of an Agreement on the avoidance of double taxation with some countries, in particular with Ukraine and Russia, may prove a disadvantage;
• In the register of companies, information on shareholders and directors (with the exception of nominal services) is publicly available.
And in conclusion - short conclusions.
As can be seen from the information provided, in each of the jurisdictions considered above, there are both positive and negative points.
In Hong Kong , despite the favorable investment climate, lack of VAT and pleasantly low corporate income tax rates, there is a strict approach to reporting and auditing. To open a bank account, you will have to attend in person.
In Estonia , you can easily open a corporate account in one of the easiest and most popular ways - remotely. This convenience is important if we take the Google Play policy as an example (the company's bank account must be located in the same country as it). Also, the positive point is the well-developed electronic reporting in Estonia.
At the BVI , there will be no annual fixed payment (tax rate) for your company and mandatory financial reporting. But there may be some mistrust on the part of some customers due to the reputation of this jurisdiction.
First of all, briefly about the factors that influenced our choice to exit. The focus of our project is to simplify the search for freelance translators, tutors, copywriters and guides working in any geographic location (international platform). To make it clear - service users sell and buy services in the language sphere, the Polyglot project works through the website, the Customer can use the services on the site only once. But for this ... According to Ukrainian legislation, in order to receive money from non-residents, our service is obliged to conclude an agreement with each foreign user and exchange documents with him within 90 days. In addition, income tax - 18%. NBU changes the restrictions on currency transactions ( read more ). Since, as already mentioned, our service is international, similar features of Ukrainian legislation have forced us to look for other ways of conducting mutual settlements and withdrawing funds. Our company ordered a study, it was done by professional lawyers, we share some of this information here.
')
So, what opportunities can an entrepreneur get by registering a legal entity abroad?
To create or not jur. face abroad?
Positive points
• There are countries where the laws themselves are primarily more favorable for doing business:
• Climate of search and attraction of investments is more favorable;
• The opportunity is available to search for new customers, entering new markets;
• The possibilities of currency management, for example, are wider, for the parties to the contract more freedom in settling relations. There are fair competition laws and laws that prohibit enticing customers;
• There are tax preferences;
• The judicial system is more effective;
• For some businesses, a positive point may be the lack of direct simplified access to information about the company's activities for tax and law enforcement agencies.
Negative points
• Record and communicate in a non-native language;
• It is necessary to find and attract an accountant with a fairly good level of competence in local legislation;
• There may be additional costs for opening an account in a foreign bank (you may have to attend in person);
• Since If you are not a resident, there may be difficulties in lending to foreign banks.
In choosing a country to register a legal entity, each will be guided by their needs, based on their individual characteristics. The needs of our business have narrowed the choice to the British Virgin Islands (BVI), Estonia and Hong Kong.
British Virgin Islands
A standard offshore company created, including in the BVI, is fine if you are not going to use it for operational purposes in the American and European markets. The most commonly used constituent forms in the BVI are as follows:
- Limited liability company (BVI private company limited by shares);
- Company with the liability of participants limited warranty (BVI private company limited by guarantee);
- Joint-stock company (BVI Public Company).
An offshore company is needed as a tax planning tool, and later, in order to do business in Europe, you can register a company in another, more “respected” jurisdiction.
Positive moments (BVI)
• To create a company you need only one director (physical or legal entity) and there is no need for a secretary;
• Share capital - the minimum paid $ 1, standard announced $ 50,000;
• Depending on whether the statutory fund exceeds $ 50,000, the annual state duty will be $ 350 or $ 1,100;
• The official language is English, the currency is USD, the legal system is Anglo-Saxon;
• There is no need to confirm the company's activities with financial statements; there is no currency control;
• Growth or transfer of capital, sale of property, heritage - are not taxed, there is no VAT. Tax and state. duties are only for real estate;
• The level of confidentiality of recipients of payments is high. Information about the beneficiaries is available only by court order.
Negative moments (BVI)
• BVI's reputation - offshore for “black” business. As a result, the level of trust among respectable customers is low;
• Providing services to residents of the BVI will be prohibited to you;
• Although financial statements are optional, checks can and sometimes need to be provided;
• Since your company will be offshore, you will not be able to own real estate in the BVI.
Estonia
The Baltic countries, and in particular Estonia, have recently been popular with the IT business. Start-up culture here is at a high level, which causes a lot of interest and attention to the local market from investors. The IT infrastructure in this area is also one of the most developed in the European Union. There are two legal and organizational forms for companies, according to Estonian law:
- Limited liability company;
- Joint-Stock Company.
It should also be noted that monitoring the status of the company will be easier, due to its close geographical location to the CIS countries.
Positive moments (Estonia)
• Estonia is a member of the EU and the Eurozone, therefore, it has unlimited access to the common market of member countries;
• The local population knows English well, and often Russian;
• In order to open an account with an Estonian bank, it is not necessary to be located geographically there;
• Resident companies of the country, have unlimited opportunities to open accounts in foreign banks, and can conduct transactions in any currency;
• No currency control;
• The tax system here is quite loyal. If you decide to reinvest the profit, you will be exempt from the tax on profits;
• An effective contractual system allows you to avoid double taxation: at a rate of 6%, foreign income of a non-resident is exempt from repatriation tax;
• Submission of all accounting and tax reports in Estonia is carried out electronically;
• Property is not taxed;
• Visas are issued for owners and managers of Estonian companies for a long time, and, if desired, obtaining citizenship will be simplified.
Negative moments (Estonia)
• In matters of company ownership structure, confidentiality is low;
• The minimum share capital established for an LLC is € 2500. Its payment can be postponed until the event specified in the law (for example, until capital is reduced or increased, until dividends are paid). However, sooner or later it will still have to be done;
• High tax jurisdiction; corporate tax rate is quite high (almost 26.6%). But, only distributable profits are taxed. In this case, the distribution of capital includes: expenses and payments, payment of dividends, reduction of the share capital;
• Financial statements you will be required to submit annually.
Hong Kong
This state is a member of APEC (APEC - Asia-Pacific Economic Cooperation), also, not only in Asia, but also in the world, Hong Kong is considered one of the largest centers of business and trade. The proximity of Hong Kong to such large markets in Southeast Asia as Thailand, Malaysia, Indonesia, is very favorable for developing business ties. Well, the close proximity to China provides access to its huge market and contributes to very effective business communications.
In Hong Kong, the most common form of enterprise is a limited company (Limited Company).
Positive moments (Hong Kong)
• The actions required for registering a company in Hong Kong can be carried out remotely, you can not be personally present;
• Two official languages - Chinese and English, Anglo-Saxon legal system;
• For authorized capital, there are no restrictions in the types of currencies and amount of the contribution;
• Rather mild business conditions - the income tax rate is very low (16.5%), there is no VAT;
• The legislative climate is favorable for foreign investors. To be the owner of the company, it is not necessary to be a resident (except for the cases of the company's belonging to some strategic industries);
• Income earned in this administrative region will not be taxed if its source, as well as its business, is geographically outside Hong Kong;
• If your Hong Kong company has a registered capital of no more than 10,000 Hong Kong dollars (about $ 1,300), then the minimum government license fee will be about $ 300. In general, such a fee depends on the size of the share capital and is paid by the company annually;
• It is not necessary to collect directors and shareholders of a Hong Kong firm every year. And you can hold such meetings wherever convenient, anywhere in the world;
• Since there are no restrictions in the procedures of mergers and acquisitions, antimonopoly, etc., then you can go out of business easily.
Negative points (Hong Kong)
• Remotely, you can not open a bank account;
• It is obligatory to have a corporate secretary - a resident of Hong Kong (physical or legal entity);
• Accounting and annual audit, for Hong Kong companies is mandatory. At the same time, auditors have serious requirements - all the necessary primary accounting documents (orders, invoices, contracts, etc.) must be available;
• For tax planning, the lack of an Agreement on the avoidance of double taxation with some countries, in particular with Ukraine and Russia, may prove a disadvantage;
• In the register of companies, information on shareholders and directors (with the exception of nominal services) is publicly available.
And in conclusion - short conclusions.
As can be seen from the information provided, in each of the jurisdictions considered above, there are both positive and negative points.
In Hong Kong , despite the favorable investment climate, lack of VAT and pleasantly low corporate income tax rates, there is a strict approach to reporting and auditing. To open a bank account, you will have to attend in person.
In Estonia , you can easily open a corporate account in one of the easiest and most popular ways - remotely. This convenience is important if we take the Google Play policy as an example (the company's bank account must be located in the same country as it). Also, the positive point is the well-developed electronic reporting in Estonia.
At the BVI , there will be no annual fixed payment (tax rate) for your company and mandatory financial reporting. But there may be some mistrust on the part of some customers due to the reputation of this jurisdiction.
Source: https://habr.com/ru/post/293394/
All Articles