Why Expats in Thailand Open Hong Kong Companies (and When They Shouldn’t)

Hong Kong gives Thailand-based founders a simple, globally connected corporate base with territorial taxation, low profits tax, no VAT, free capital flows, and robust banking—if your fact pattern doesn’t create “permanent establishment” or Thai VAT obligations. The structure can be powerful for cross-border trading, invoicing and holding—but you need to navigate Thailand’s remittance rules, withholding taxes, and double-tax treaty paperwork carefully.

Why a Thailand-based expat might open a Hong Kong company

If you sell across borders from Southeast Asia, Hong Kong is purpose-built for simplicity: a territorial tax base (generally taxing only Hong Kong-sourced profits), a two-tier corporate profits tax with an 8.25% rate on the first HK$2 million of profits and 16.5% above that, and no VAT or GST at all.

Pair that with a hard-pegged currency to the US dollar, no foreign-exchange controls, a deep banking and payments stack, and a broad treaty network (including a double-tax treaty with Thailand), and you’ve got a clean operating hub—so long as your operations don’t inadvertently become taxable in Thailand.

The tax edge: territoriality, low rates, and no VAT

Territorial profits tax. Hong Kong taxes profits that arise in or are derived from Hong Kong—determined by what you actually did to earn the profits and where you did it (the “operations test”). That means genuinely offshore profits can be outside Hong Kong profits tax. This isn’t a blanket exemption: source is a practical, fact-heavy inquiry.

Low, two-tier rates. Corporations pay 8.25% on the first HK$2 million of assessable profits and 16.5% on the remainder. That’s competitive versus Thailand’s flat 20% corporate income tax rate.

No VAT/GST. Hong Kong has no value-added tax or goods-and-services tax and is a free port with tariffs only on a few dutiable goods (alcohol, tobacco, certain oils). If your supply chain runs through multiple countries, removing a VAT layer simplifies pricing and cash flow.

Caveat—FSIE regime for passive income. Since 2023, Hong Kong’s foreign-sourced income exemption (FSIE) regime deems certain offshore passive income taxable when received in Hong Kong by in-scope MNE entities unless substance or other reliefs apply. From 1 January 2024, the regime expanded to cover disposal gains on all asset types (not just equity). For most SMEs outside a multinational group, this may be a non-issue, but if you’re part of an MNE group, you’ll need to check substance, participation and nexus rules before parking passive income in Hong Kong.

How Hong Kong plays with Thai tax rules

Corporate tax in Thailand. Thai companies pay 20% CIT on worldwide income; foreign companies are taxed on profits arising from business carried on in Thailand. Thailand also requires Thai payers to withhold tax on certain payments to foreign companies not carrying on business in Thailand. Practically, that means if Thai customers pay your Hong Kong company for services “sourced in Thailand,” withholding can apply—even if you don’t have a Thai entity.

Your personal tax: the remittance rule changed. For years, Thai residents were generally taxed on foreign-sourced income only if they remitted it to Thailand in the same year earned. From 1 January 2024, tax authorities adopted a stricter interpretation: foreign-sourced income remitted by Thai residents is taxable regardless of the year earned. Transitional guidance clarified treatment of pre-2024 income, but the direction of travel is tighter. If you’re a Thai tax resident (180+ days in a tax year), think carefully about remitting profits, salaries or dividends from a Hong Kong company into Thailand.

The treaty safety net (and its paperwork). Hong Kong and Thailand have a comprehensive double-taxation agreement (CDTA). It caps Thai withholding on outbound payments to Hong Kong residents at: dividends 10%; interest 10% when paid to financial institutions or on vendor credit (15% otherwise); royalties 5% for copyright, 10% for patents/marks/models, 15% in other cases. It also defines when a Hong Kong company has a permanent establishment (PE) in Thailand—e.g., a fixed place of business or substantial service presence—beyond which Thailand can tax business profits. To benefit, expect residency certificates and forms; in practice, you’ll still see Thai withholding at source and then claim relief/refund.

Thai VAT still matters. If you “regularly” supply goods or services in Thailand and your annual turnover exceeds THB 1.8 million, VAT registration is required, with a standard 7% rate (currently extended through September 30, 2026). Services “used in Thailand” can be deemed Thai-sourced, even if performed offshore. That can catch Hong Kong invoicing if your team or customers sit in Thailand.

Foreign Business Act (FBA) restrictions. Operating in Thailand in certain sectors may require Thai majority ownership or a foreign business licence (unless you have BOI promotion). A Hong Kong entity does not bypass the FBA if the real activity is on Thai soil; it only helps if your services are truly cross-border.

Banking, currency and payments: less friction, more predictability

Hong Kong’s banking system is deep, internationally plugged-in, and increasingly friendly to SMEs (including virtual banks). Critically, Hong Kong has no foreign-exchange controls, and the Hong Kong dollar is hard-pegged within a 7.75–7.85 band to the US dollar under the Linked Exchange Rate System—useful if you invoice in USD or maintain USD-linked cash flows from Thailand into global markets.

Market access: China gateway and treaty network

If your Thai business increasingly touches Mainland China—suppliers, customers, or capital—Hong Kong offers privileged access through the Mainland–Hong Kong Closer Economic Partnership Arrangement (CEPA) and a set of “connect” schemes. CEPA gives qualifying Hong Kong service suppliers easier market entry in many sectors. Even if you don’t need CEPA status, Hong Kong’s role as China’s international financial hub can materially reduce friction when you start dealing with RMB or Mainland counterparties.

Incorporation and compliance are straightforward (and fast)

Forming a private company limited by shares in Hong Kong is efficient, with e-filing available and familiar common-law company law. You need at least one director who is a natural person and a Hong Kong-based company secretary; the sole director cannot also be the company secretary. Expect annual statutory audit for most companies and audited accounts with your profits tax return. None of that is exotic—but it’s real work you should budget for.

The best-fit use cases for Hong Kong (when you live in Thailand)

1. Cross-border trading and distribution. If your revenue is mainly from customers outside Thailand (e.g., ASEAN, EU, US) and your procurement or logistics already involve Hong Kong or Southern China, a Hong Kong trading company can simplify contracting, customs and payments—without adding VAT. Ensure warehouse, sales, and contract execution steps that generate the profit are outside Thailand if you want to avoid Thai PE exposure.

2. Regional B2B services with global clients. Consulting, software, and digital services delivered to non-Thai clients may cleanly sit in a Hong Kong company, provided the revenue-generating activities happen outside Thailand (or you can ring-fence Thai presence below PE thresholds). Watch Thai withholding and VAT if services are used in Thailand.

3. Holding and IP companies. For holding regional subsidiaries or IP, Hong Kong’s territoriality and robust legal infrastructure are attractive. For passive income (dividends, interest, disposal gains) within an MNE group, assess the FSIE regime’s substance requirements before you assume a full exemption.

4. China-facing expansion. If Thai business is pulling you towards Mainland customers, CEPA pathways and Hong Kong’s connect infrastructure make Hong Kong a pragmatic control tower.

   
   

The tripwires to respect

1) Permanent establishment (PE) in Thailand. If you (or your team) habitually conclude contracts in Thailand, have a fixed office, or render services there over a substantial period, Thai tax can apply even if the contracting entity is in Hong Kong. The Hong Kong–Thailand CDTA spells this out (including service-PE concepts). Get local advice early if sales or delivery happen in Thailand.

2) Thai withholding on payments to a foreign company. Thai payers commonly withhold on fees to overseas vendors; the treaty can reduce or eliminate the final tax, but you’ll need forms and often a refund process. Set expectations with Thai customers and price for the admin.

3) Thailand’s personal remittance rule. If you’re a Thai tax resident and you wire dividends/salary from your Hong Kong company into Thailand, that remittance can now be taxable regardless of when earned (from 2024). Planning distributions, living expenses, and timing matters more than it used to.

4) VAT exposure in Thailand. Regular supplies “in Thailand” or services used in Thailand can trigger VAT registration once you cross THB 1.8 million in turnover. This is true even if you invoice from Hong Kong. Track where value is actually delivered and used.

5) Substance and documentation. If you want to argue Hong Kong profits are offshore (and thus outside HK profits tax), align the “profit-producing operations” with locations outside Hong Kong, and keep evidence (contracts, communications, logistics). If you’re in an MNE group, check FSIE substance rules for passive income and keep transfer-pricing files where thresholds apply in Thailand (generally > THB 200m revenue).

6) Big-co wrinkle: global minimum tax. For very large groups (EUR 750m+ revenue), both Thailand and Hong Kong are implementing the OECD 15% Pillar Two rules, including a Hong Kong domestic top-up tax. This won’t affect most SMEs, but it’s essential for group tax teams.

A practical decision tree

• Your customers are mostly outside Thailand, and your delivery happens outside Thailand → Hong Kong can be a clean contracting hub. Add the Hong Kong–Thailand treaty to your playbook (paperwork up front).

• You sell mostly to Thai customers or perform work in Thailand → a Thai entity (possibly BOI-promoted) may be simpler for VAT, payroll, and withholding. You can still keep a Hong Kong parent or regional treasury—just manage transfer pricing and PE boundaries.

• You are (or will become) a Thai tax resident and plan to live on distributions remitted from abroad → consider Thai personal tax planning and the new remittance interpretation before routing your own income through Hong Kong.

Incorporation “nuts and bolts” in Hong Kong (for Thailand-based founders)

• Structure: Private company limited by shares.

• Officers: ≥1 natural-person director; Hong Kong-based company secretary (the one director can’t also be the secretary).

• Compliance: Annual audit for most companies under the Companies Ordinance; audited accounts accompany the Profits Tax Return.

• Tax rates: 8.25% on first HK$2m of profits, 16.5% thereafter; no VAT, no WHT on dividends/interest; limited royalty withholding mechanics.

• Currency & banking: HKD linked to USD; no FX controls; multi-currency accounts common.

Example scenarios

A. ASEAN e-commerce sourcing from China. You’re in Bangkok but your customers are in the US/EU and you source from Shenzhen. A Hong Kong trading company contracts with suppliers and customers; fulfillment and title transfer occur outside Thailand; you pay yourself modest Thai-taxed salary for Thai work (if any), and retain profits offshore for reinvestment. You still watch Thai PE/VAT thresholds and the personal remittance rule before bringing surplus cash into Thailand.

B. Regional consulting with some Thai delivery. You sell projects to Singapore and UAE clients but spend part of the year in Thailand. Keep Hong Kong for contracts and billing; ensure key profit-creating activities (negotiation, signing, performance) happen outside Thailand to manage Thai PE/service-PE risk. If Thai work grows, spin up a Thai entity and put an intercompany agreement in place.

C. China market entry from Thailand. You plan to serve Mainland customers. Incorporate in Hong Kong for bankability and as your CEPA gateway (if you qualify as a “Hong Kong Service Supplier”), then decide later whether to set up in the Mainland.

What this is not

Setting up in Hong Kong is not a magic wand to avoid Thai taxes if your real business is in Thailand. Thailand’s Revenue Code, withholding regime and VAT rules still bite on Thai-sourced income; the treaty mitigates double taxation but isn’t a shield against local substance reality. Likewise, Hong Kong’s IRD will look at where your profit-producing operations happen before blessing an “offshore claim.” Build your facts—and your files—to match your structure.

Bottom line

For a Thailand-based expat with cross-border revenue, a Hong Kong company can deliver a cleaner tax position, easier invoicing, and predictable currency and banking—with the Hong Kong–Thailand treaty as a helpful bridge. The structure works best when your customers and operations are primarily outside Thailand, and when you respect Thai PE, withholding and VAT boundaries, plus the newer remittance rules on personal income.

If your growth tilts toward Thailand customers or local headcount, blend the two: a Thai operating company for local delivery, and a Hong Kong parent or regional treasury to keep cross-border finance smooth.