Hong Kong Asset Protection - The Legal Issues

Asset protection is becoming an increasingly valid reason for corporate offshore banking and setting up offshore investment businesses

. With the advent of the no-fault divorce through much of the world, and the rise of an increasingly litigious society, it has become more important than ever to protect your assets from badly-reasoned and disproportionate claims. Asset protection in Hong Kong is one of the favored strategies of business owners and company directors worldwide.

It means that while a legitimate claim on your assets may still be processed, anybody seeking frivolous compensation is markedly discouraged by the length of the process, the heightened legal fees involved, and the fact that the outcome of their claim is not assured. Here experts in Hong Kong asset protection share some tips on timing issues and tax issues associated with the practice.

The key timing issue with Hong Kong asset protection is that you should determine and implement your plan before any problems occur. In many cases, with the advent of a claim upon your assets, you'll find them immediately frozen pending the outcome of a court case - not the ideal time to start discussions with business consultancy managers. The ideal time to have plans in place is now - however the slow nature of litigation activity means that asset protection in Hong Kong can actually occur at rather late stages, in some cases.

Moving your assets offshore cannot be used to defraud creditors - that practice is illegal in most countries. Use the advice of business consultancy managers to ensure that your asset movement couldn't be construed as such - or you may face more serious penalties than simply the loss of some of your wealth.

If you are seeking to 'protect' your assets from taxation, this is considered tax evasion. Not only do countries actively pursue this type of asset protection', in most cases it is effectively prevented by a new raft of double tax avoidance agreements which means that the taxation departments of various countries share their information.

Anything you rearrange for asset protection in Hong Kong should have already had its tax applied. A formal change of ownership will also incur some taxation obligations in some cases, for example, a new charge of capital gains tax. If you choose business consultancy managers that are located in more than one country, you'll have the advantage of two 'native' perspectives on the legal and monetary issues of your asset protection strategy.

Obviously this potential CGT liability is massively offset by the potential reduction in income tax and future capital gains flowing from the assets. Inheritance taxes may also be subject to reduced rates - however professional advice is recommended in every case.

While not strictly timing or tax related, your choice of jurisdiction for asset protection does touch on both of these issues. The recent Swiss banking debacle has meant that an increasing number of countries now share information regarding company profits and assets with other countries.

The aim seems legitimate enough on the face of it - if a person is not trying to avoid tax in their home country, then there is nothing to fear by having their financial particulars divulged. Those aiming for asset protection have taken obvious issue with this; yet investment management services can still recommend some strategies to get around this.

by: Gregory Smyth

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