Is Hong Kong Still Safe For Australian Business Owners? When A Hong Kong Company Actually Makes Sense

• WATCH THE HONG KONG EPISODE FIRST
• This article is based on the Hong Kong episode of The Wealth Safe Country Series – “When Does A Hong Kong Company Actually Make Sense?”
• If you prefer video, watch the episode above for the full discussion with Virna White.
• The article below expands on the tax, residency and business questions Australian business owners, founders and investors should consider before setting up a Hong Kong company.

Is Hong Kong Still Safe Given China’s Influence?

One of the questions I am regularly asked by Australian business owners considering Hong Kong is this: is Hong Kong still safe, given China’s increasing influence?

It is a legitimate question, and one we address thoroughly with our clients. I believe concerns like these should neither be dismissed nor exaggerated. They should be properly explained and evaluated against the facts, so you can make an informed decision based on the actual risks rather than assumptions or fear.

Hong Kong remains one of Asia’s most established international business centres, with its own legal system, taxation framework and corporate infrastructure. And despite the political changes and China’s increasing influence, Hong Kong continues to play an important role in international business.

But what matters is not simply whether Hong Kong is a suitable jurisdiction. It is how Hong Kong is used within your broader international arrangements. That is an important distinction.

At Wealth Safe, we assess these considerations as part of our strategic planning, so you understand both the opportunities and the relevant risks before making decisions. And for many Australian business owners, Hong Kong remains a commercially attractive and practical jurisdiction for international business.

Hong Kong Company, Zero Tax? Why Australian Business Owners Consider Hong Kong

Despite those concerns, Hong Kong continues to attract Australian business owners for some very practical commercial and taxation reasons.

Set up a Hong Kong company. Pay zero tax on your international profits. That is the opportunity attracting Australian business owners to Hong Kong. And there is a reason for that.

Hong Kong offers a recognised legal and corporate environment, access to Asian and global markets, international banking opportunities and a territorial profits tax system.

Under that system, profits genuinely sourced outside Hong Kong may not be subject to Hong Kong profits tax, depending on the applicable rules and circumstances.

But here is what Australian business owners need to understand.

Does A Hong Kong Company Remove Your Australian Tax Obligations?

Not on its own. Having a Hong Kong company does not mean your Australian tax obligations disappear.

You could have a Hong Kong company, international customers and overseas bank accounts, and still have significant Australian tax exposure.

This is where Australian business owners need to be particularly careful. If you already operate through an Australian company, establishing a Hong Kong company does not automatically transfer your business offshore. Your Australian company remains subject to its applicable Australian tax and reporting obligations, and its existing contracts, assets, customers, and commercial activities need to be considered.

Your personal tax residency is a separate question. And even a company incorporated overseas may be treated as an Australian tax resident in certain circumstances, including where relevant management and control requirements are met.

So you cannot simply establish a Hong Kong company, redirect international invoices and assume those profits are no longer taxable in Australia.

Before establishing a company, you need to understand what happens to your existing Australian business, where your international operations will be conducted and where you will personally live. Those decisions can determine whether Hong Kong is suitable in the first place.

Can A Hong Kong Company Legally Pay Zero Tax?

Can a Hong Kong company legally earn profits that are not subject to Hong Kong profits tax? Yes, potentially. But the important question is whether those profits actually qualify.

Hong Kong generally taxes profits arising in or derived from Hong Kong. Profits genuinely sourced outside Hong Kong may fall outside that tax charge, subject to the applicable rules.

But having international customers does not automatically mean your profits are offshore-sourced. Neither does issuing invoices from Hong Kong, receiving payments into a bank account or simply having a Hong Kong company. The activities that generate the profits, and where those activities take place, are critical.

Certain foreign-sourced income may also be affected by Hong Kong’s foreign-sourced income exemption regime. And even where profits are not subject to Hong Kong profits tax, taxation may arise in Australia or another jurisdiction.

So the tax outcome needs to be determined from the actual business arrangements. The opportunity is real. But the tax treatment is not automatic.

How One Australian Business Owner Used Hong Kong

I worked with a business owner, Andrew, who was based in Brisbane. He operated a successful online coaching and digital education business, with customers in Australia, the United States, the United Kingdom, Europe, and Asia. His business was already international, but everything was operating through his Australian company.

Andrew was also relocating to Thailand. He wanted to continue expanding internationally while establishing a new lifestyle overseas, and he wanted to understand whether Hong Kong could provide a more suitable commercial and taxation environment for his international business.

After assessing his circumstances, Hong Kong was selected as part of his international structure. But that decision involved more than establishing a new company. We needed to determine what should remain in Australia, what could legitimately operate internationally and how the transition should be implemented. That is where the real planning began.

His Australian company was retained for an appropriate domestic role, while a Hong Kong company was established for the international business activities. The structure needed to reflect where the activities were genuinely performed, how the companies interacted and the commercial purpose of each entity.

His relocation to Thailand was another important part of that planning because changing your personal tax residency and restructuring your business are separate processes. One does not automatically achieve the other.

The objective was to establish an international operating structure that could support his business activities and be assessed under the relevant tax rules.

Five Questions To Answer Before Setting Up In Hong Kong

So, should Australian business owners consider Hong Kong? Absolutely. For the right business, it can be a highly effective international commercial centre.

But before establishing a company, I would want five questions answered:

• What happens to your existing Australian business?
• Where will you personally live, and what will your tax residency position be?
• Where will the international business actually operate and be managed?
• Can the banking arrangements support your activities?
• And is the expected tax treatment genuinely achievable?

Those are the questions that need to be answered before deciding how to structure the business.

At Wealth Safe, we do not begin by selling you a Hong Kong company. We begin by assessing your Australian starting position, your international business activities and what you are trying to achieve.

As Chief Strategist, my role is to design the appropriate architecture and bring in the specialist expertise required to validate and implement it.

Conclusion

Hong Kong can be commercially attractive for the right business owner, but a Hong Kong company does not, on its own, remove your Australian tax obligations.

The country is not the strategy.

If you are considering Hong Kong or another international jurisdiction, you can request a complimentary 15-minute Suitability Assessment to explore whether Wealth Safe may be suitable for your circumstances.

Frequently Asked Questions

Disclaimer: This information is general in nature and provided for educational purposes only. It does not constitute legal, tax, or financial advice. You should obtain independent professional advice before acting on any information in this article.