For many doctors and dentists who run their private practice in Hong Kong, the idea of incorporation is still distant from prevalent. In fact, when using service companies to try to lower their tax burden, a few of them may have got into trouble due to the lack of professional advice. Sadly, it turned out to be that some found the loss outweighs the gain.
Nevertheless, we would like to distinguish incorporation with service companies by which some may have confused. Reliance has been coordinating seminars with different professional bodies since 1999, explaining the concept of incorporation and how to incorporate your professional practice.
Over the past sixteen years, we have been advising our clients to incorporate their medical and dental practice. By closely working with other professionals (including accounting and legal) in giving advice, we help our clients set up incorporations and build up their best practice. Indeed, incorporations being set up upon our advice are all operating smoothly up till now, never been questioned by the relevant authority.
The opportunities and benefits of incorporation
Apart from enjoying the tax efficiency like other businesses that operate under a limited company, you can also integrate your personal wealth management plan with your business plan after the incorporation of your professional practice, in order to attain maximum efficiency.
Although most doctors and dentists may have attracted to the idea of incorporation, with tax minimization being their primary goal. However, many of these professionals have turned out to find lots of other benefits especially related to wealth management after incorporated.
As you start establishing your career, let us help you work out a blueprint that covers every aspects of your financial needs so that you can walk along with solid footing.
Retirement Planning under incorporation
More tax deductible contributions, more benefits
According to the prevailing Mandatory Provident Fund Schemes Ordinance (MPFO), the tax deductible pension contribution for a self-employed (such as a sole proprietor) person is limited to HK$1,500 per month or HK$18,000 per year (with effect from 1 June 2014). Apart from the above mandatory contribution, while you may like to make more contributions for your retirement voluntarily, you are however not eligible for any tax concession as a sole-proprietor. With incorporated medical or dental practice, it will be up to you to decide if you want to make more retirement contributions and these contributions can be deductible as expenses, possibly tax-free upon withdrawal.
More possible retirement options
For doctors and dentists who operated as a sole proprietor, retirement is equal to the end of his/her career because he/she is the professional business. However, your personal retirement decision may not necessarily equivalent to the closure of your professional business – for an incorporated practice.
Chiny Liu, Principal Adviser
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This website is intended to provide general information and guidance for the clients of Reliance International Financial Planners Limited. It does not purport to be comprehensive or to render legal advice.