# New HK Ltd. with WOFE in China - American



## designsensei (Oct 20, 2014)

Hi All,

I apologize in advance if this topic has already been discussed. I am new here and currently in HK.

I'm looking to connect with any American specifically that may be able to help out. It seems that FACTA is a real PAIN for American expats now.

My friend (business partner) and I would like to start a design service/ creative agency with a HK Ltd.

He is a Chinese citizen although educated in US, and I am American.

We would get clients from the mainland as well as US and eventually HK. We know we would need to get a WOFE in China.

Apparently it is easy to get a HK Ltd but not a corporate bank account. I have talked to HSBC and they essentially told me to go away since I'm American (FACTA), and Citibank requires a physical office in HK (not a business center office). 

I'm also wondering if this is even worth doing now if it is going to be a HUGE pain come tax time in the US. Are there other Americans here in HK that are able to get around these banking hurdles as well as give some insight on what I'm up against on taxes in the US?

I'm still in the research phase, although time is running. I know I have a lot to learn and won't give up that easily.

Thanks!


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## Bevdeforges (Nov 16, 2007)

First of all, it's FATCA (think "fatcat" which is the nickname I prefer anyhow).

You fall under FATCA if you own 10% or more of the company or are considered a "director" though the rules are fuzzy about just what that means. Oh, and your share of the company (or rather the total of all your assets that are reportable under FATCA) would have to total $200,000 or more. Unfortunately, some banks don't bother with the subtleties of the law and just say "no Americans."

The real tricky part about this is that, if you fall under the law (i.e. have a 10% or more interest) then you are supposed to file full financials - in local currency AND US $ according to US GAAP - each year with the IRS to fulfill your FATCA obligation. (And it's the company that is responsible for filing their information return, not the individual.) 

Start here for more information: Foreign Account Tax Compliance Act
Cheers,
Bev


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## StewartPatton (Aug 5, 2014)

FATCA is going to do two things to you: (i) perhaps make it slightly more difficult to open a bank account and (ii) perhaps require you to include on additional form with your tax return each year. That's it. As long as you report everything you are required to report, FATCA is just not that big of a deal.

On the first point, it's interesting that HSBC turned you away--there was an article yesterday where HSBC Hong Kong said it was not turning away Americans. Here it is: Fatca seen as threat for some Hong Kong banks, opportunity for others | South China Morning Post 

In any event, just keep looking, you will find a bank that will gladly take your money. Banks are still open for business after all--those that are fine working with Americans will gladly take the business from those that aren't. 

On the second point, FATCA requires you to file a form called IRS Form 8938 to disclose certain foreign assets (including stock of a non-U.S. corporation) if it's worth more than $200,000 (or double that if you are married filing jointly). Your corporation will NOT be required to file full financials each year. You will be required to file IRS Form 5471 in at least the first year, and maybe subsequent years as well, and this form will include financials for the first year and perhaps subsequent years as well (note that this form is old as the hills--it's not new because of FATCA). Exactly how the 5471 will apply to you depends on how much of the corporation you and your partner own, but it's just paperwork ultimately.

Overall, it would be worth your time to talk with an experienced tax professional. Many (like, me, for example) offer free initial consultations.


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## designsensei (Oct 20, 2014)

Thanks for the information, All, and tax advice. 

Interesting article on HSBC as well. It is contrary to my experience with a 'banker' at the main headquarters at Central who even used his fingers to create the X sign to my face, meaning 'No can accept you, Please go away.' 

Still working on different banks. Apparently if you just walk in and explain your story to a bank, you are likely to get rejected. However, if you go through a professional accounting firm or some other that has a connection to the bank already, and provide all of your 'business proofs' you will have a far higher chance of landing a corporate bank account.

More later, as my story unfolds.


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## Bevdeforges (Nov 16, 2007)

I think you're right in saying that it's all how you approach the situation. I've heard any number of Americans claim that their bank "won't allow them" to keep their accounts if they move overseas unless they maintain a US mailing address. I find this really bizarre because I just moved and sent the banks a change of address form. No one ever said I couldn't do this, though a couple of the banks had some difficulties fitting my "foreign" address into their data base fields so that it would show up right on an envelope. 

As they say, it's usually easier to get forgiveness than permission. Do keep us posted how things are going for you. It should be possible - it may just take a bit of tweaking your plans.
Cheers,
Bev


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