Singapore vs. Dubai vs. Hong Kong: The Ultimate Location Comparison for German Exporters in 2025

Why Asia Represents the Future for German Exporters

Let me start with a story I experienced just a few weeks ago:

A client called me. Frustrated. His tax burden in Germany was above 45%. At the same time, he was keen to expand his export business into Asia. His question: “Richard, where can I legally save on taxes and still enter the Asian market in an optimal way?”

I hear this question every single day.

And here’s where a major misunderstanding lies:

Most German exporters think they have to choose between tax optimization and strategic market expansion. That’s simply not true.

In fact, you can combine both. Asia not only offers the world’s biggest growth markets—it also offers tax structures that can significantly reduce your overall burden.

Let’s look at the numbers: The Asian market already represents 36% of the worlds GDP (Source: Asian Development Bank, 2024). By 2030, 65% of the global population will live in Asia. In concrete terms: If you’re not present in Asia today, you’re missing out on the greatest economic opportunity of our time.

But where should you start?

Three locations clearly stand out: Singapore, Dubai and Hong Kong. Each offers unique benefits for German exporters. However, each also has its pitfalls.

That’s why today I’ll show you which location really fits your business model. No sales jargon. Just concrete figures and actionable implementation tips.

The Four Key Factors for Your Location Decision

Before we dive into the details, make sure you’re aware of these four criteria:

• Taxation: What’s the actual overall burden?
• Market Access: Which trade agreements and market entry advantages does the location offer?
• Legal Certainty: How stable is the political and legal environment?
• Operational Efficiency: How complex is day-to-day business management?

These four points will decide the success or failure of your Asia strategy.

Why Traditional Advisory Falls Short

Most tax advisors focus exclusively on the tax rate. That’s way too narrow. A low tax rate is useless if:

• You have no access to your target markets
• Economic Substance Requirements blow up your cost structure
• Political instability threatens your planning security
• Double taxation agreements are missing or unfavorable

That’s precisely why my approach as your tax mentor is different. I look at the big picture: your business model, your goals, your risk appetite.

Are you ready for an honest analysis of the top three destinations?

The Three Top Destinations: Strategic Overview

Let me give you a quick overview first. This table shows you the most important key facts at a glance:

At first glance, Dubai appears to be the clear winner. Lowest taxes, moderate substance requirements.

But wait.

The reality is more complex. Let me show you why superficial readings can be dangerous.

The Hidden Costs of Substance Requirements

All three jurisdictions require economic substance. This means you must prove your company is genuinely conducting business activities locally.

In practice, this means:

• Qualified staff: Depending on your activities, 1-3 local full-time employees
• Office premises: Proper local office space (not just a P.O. box)
• Management: Regular board meetings held on site
• Accounting: Local bookkeeping and annual financial statements

These requirements can increase your yearly costs by 50,000-150,000 EUR. Suddenly, the lowest tax rate isn’t as attractive anymore, right?

Market Access: More Than Just Tax Savings

Here’s the key for German exporters: The right location opens doors to your target markets.

Singapore, for example, has offered major customs advantages since 2019 thanks to the EU-Singapore Free Trade Agreement (EUSFTA). Your German products are often exportable to Southeast Asia either duty-free or at reduced tariffs.

Dubai, meanwhile, is your gateway to the MENA region (Middle East and North Africa) and to India—markets with over 2 billion consumers.

So the question isn’t: “Where do I pay the least tax?”

Rather: Which location maximizes my post-tax profit AND opens up the most valuable markets?

Timing Is Key to Your Success

Here’s a point many overlook: The optimal location depends on your current situation.

If you’re already an established exporter turning over more than 2 million EUR, your priorities are different from a startup with 200,000 EUR annual sales.

That’s why we’ll now look at each location in depth—with hard numbers and tailored to various business models.

Singapore: The Established Classic with EU Trade Agreement

Singapore is the “Mercedes-Benz” of Asian business locations. Expensive, but reliable and prestigious.

To be honest: Singapore is not the cheapest place to set up. But for many German exporters, it’s the smartest choice.

Why?

Singapore Tax Benefits for German Companies: The Real Figures

The official corporate tax rate stands at 17%. Not spectacular at first glance. But take a closer look:

• Partial Tax Exemption: The first 200,000 SGD (approx. 135,000 EUR) taxed at just 8.5%
• Start-up Tax Exemption: New companies pay even less in the first three years
• Pioneer Status: Only 5-10% tax for certain activities, for 5-15 years
• No capital gains tax: Profits from share sales are tax free
• No withholding tax: Dividends paid to German shareholders are not subject to withholding

This means: Your effective tax burden is often 8-12%, much lower than the nominal 17%.

On top of that is the excellent Double Taxation Agreement (DTA) with Germany—one of the most generous in the world.

Market Access to Southeast Asia: Your Strategic Advantage

This is where Singapore truly shines. The city-state has signed over 25 free trade agreements (FTAs). The most important for German exporters:

• EU-Singapore FTA (EUSFTA): Duty-free exports for many German products
• ASEAN Free Trade Area: Privileged access to 650 million consumers
• Comprehensive and Progressive Trans-Pacific Partnership (CPTPP): Access to Japan, Australia, Canada
• Regional Comprehensive Economic Partnership (RCEP): Direct access to China

In real terms: A German engineering company can frequently export its products to ASEAN markets with 5-15% lower duties via Singapore.

With an export volume of 5 million EUR per year, you could save 250,000-750,000 EUR annually in duties alone.

Substance Requirements: Demanding but Transparent

Singapore’s substance requirements are high but clear. The Monetary Authority of Singapore (MAS) checks strictly:

• At least 2 local employees (salary: 36,000-60,000 SGD per year)
• Appropriate office space (3,000-8,000 SGD/month)
• Quarterly Board Meetings locally
• Local accounting via a qualified service provider

Realistic annual costs for substance requirements: 120,000-180,000 EUR.

Sounds high? It is. But these costs are predictable and legally secure.

When Singapore is the Right Choice For You

Singapore is your best fit if:

• Your annual sales exceed 2 million EUR
• Your main focus is exports to ASEAN markets
• Legal certainty is your top priority
• You’re ready to invest in genuine local presence
• Your business model is IP-driven (software, patents, licenses)

The Downsides: Where Singapore is Lacking

Honesty is part of my advice. Singapore also has disadvantages:

• High cost of living: Singapore is one of the world’s most expensive cities
• Strict compliance: Zero tolerance for rule violations
• Limited markets: Primary focus is on ASEAN, less on China or India
• High entry costs: Not suitable for smaller businesses

And authorities are thorough—compliance errors can be costly.

Case Study: German Engineering Company in Singapore

One of my clients, a machine builder from Baden-Württemberg, set up a Singapore structure in 2022:

• German business: 8 million EUR revenue, 45% tax burden
• Singapore structure: IP holding for patents, licensing to the German GmbH
• Result: Overall tax burden reduced to 28%, plus better ASEAN market access
• Annual savings: 680,000 EUR after all costs

Important: This structure only works with genuine economic substance in Singapore.

Dubai: The Emerging Trade Hub Between East and West

Dubai is the newcomer getting all the attention. 9% corporate income tax from 2023. Tempting, right?

But let me tell you the whole story.

In recent years, Dubai has undergone a remarkable transformation—from an oil hub to a diversified trading center. This creates unique opportunities for German exporters.

Dubai vs. Hong Kong: The New Reality

Many of my clients ask: “Richard, why choose Dubai over Hong Kong?” The answer is straightforward:

Dubai is politically more stable and offers better access to growth markets.

While Hong Kong is still grappling with the consequences of political tensions, Dubai is positioning itself as a neutral hub connecting Europe, Asia, and Africa.

The New Tax Structure: What You Really Need to Know

Since June 2023, corporate tax in the UAE stands at 9%. Still attractive. But be wary of the details:

• Exemption amount: The first 375,000 AED (approx. 102,000 EUR) is tax free
• 9% tax: Applies to all profits above the exemption
• Freezone regime: Qualified freezone companies continue to pay 0%
• No withholding tax: Dividends, interest and royalties are not subject to withholding
• No personal tax: Individual income tax remains at 0%

So: A company with 500,000 EUR profit effectively pays only 6.8% in tax.

But here’s the catch: The freezone regime has become much stricter.

Freezone vs. Mainland: What Suits Your Business Model?

Dubai offers two main options for your company:

For most German exporters, mainland has now become the better choice. Why?

The criteria for 0% tax in freezones are very strict. You must prove that at least 70% of your actual business activity is conducted within the freezone.

Market Access: MENA Region, Your Gateway to 2 Billion Consumers

This is Dubai’s true strength. The UAE has strategic trade agreements with:

• Gulf Cooperation Council (GCC): Duty-free trade with Saudi Arabia, Qatar, Kuwait
• Comprehensive Economic Partnership Agreement (CEPA) with India: Reduced tariffs for 90% of all products
• Abraham Accords with Israel: Direct market access without intermediaries
• Africa Continental Free Trade Area (AfCFTA): Export to Africa via Dubai

Example: A German automotive supplier can export products with 15–25% lower tariffs to Saudi Arabia and India via Dubai.

With a 3 million EUR export volume, that’s savings of 450,000-750,000 EUR per year.

Substance Requirements: Pragmatic but Not to be Underestimated

Dubai’s substance requirements are the most pragmatic among the three:

• At least 1 local employee (often sufficient for smaller businesses)
• Office space: Real office, not a virtual address
• Local bookkeeping: By a certified accountant
• Annual board meeting: At least once a year on site

Realistic annual costs: 60,000-120,000 EUR for full compliance.

That’s significantly less expensive than Singapore.

The New Double Taxation Agreement with Germany

Since 2010, there’s been a DTA between Germany and the UAE. It’s solid, but not as generous as the Singapore DTA.

Key points:

• Dividends: 5% withholding tax (for holdings over 25%)
• Royalties: 0% withholding tax
• Interest: 0% withholding tax
• Company profits: Taxation only in the country of actual management

When Dubai Is the Right Choice For You

Dubai is the right fit if:

• You want to export into the MENA region or India
• Your annual sales are between 500,000 and 5 million EUR
• You prefer a pragmatic environment with moderate compliance requirements
• You want to take advantage of low personal taxes (especially for entrepreneurs)
• Your business model revolves around trading or distribution

The Challenges: What You Need to Keep in Mind

Dubai isn’t perfect. You should be aware of these points:

• New tax laws: 9% corporate tax is still newly implemented
• Banking challenges: Opening an account can be difficult
• Cultural differences: Business culture differs significantly from Europe
• Currency risk: AED is pegged to USD

Case Study: German E-Commerce Entrepreneur in Dubai

A client of mine set up a Dubai structure for his e-commerce business in 2023:

• Starting point: 1.2 million EUR in sales, 42% tax burden in Germany
• Dubai structure: Mainland company for MENA expansion
• Result: Tax burden reduced to 9%, along with a 300% revenue growth in the MENA region
• Annual savings: 396,000 EUR with significantly higher revenue

The key was genuine market entry. Dubai was not just a tax vehicle, but a real business location.

Hong Kong: Your Gateway to China Despite Political Challenges

Hong Kong has become more complicated. I have to be upfront about that.

Previously, Hong Kong was the undisputed king for doing business with China. Today, the situation is much more nuanced.

But before you write Hong Kong off completely, let me show you why it can still be highly attractive for certain business models.

The Political Reality: An Honest Assessment

Since the protests in 2019 and the National Security Law in 2020, Hong Kong has become a different place. This has direct implications for your business:

• Legal certainty: Still high, but with uncertainty factors
• International reputation: Many Western companies have become more cautious
• Banking relationships: Some international banks have withdrawn
• Compliance requirements: Additional reporting and controls

Still: Hong Kong continues to operate as a financial and trade center. The question is: Does it fit your risk profile?

Tax Advantages: Still Highly Competitive

From a tax perspective, Hong Kong remains attractive:

• Corporate tax: 16.5% (8.25% on the first 2 million HKD profit)
• Territorial principle: Only Hong Kong-sourced income is taxed
• No withholding tax: On dividends, interest, royalties
• No capital gains tax: Share sale profits are usually tax free
• Simple tax structure: Less complex than many jurisdictions

The territorial principle is especially interesting. Profits from business outside Hong Kong can often remain tax free.

China Access: Still Unbeatable

This is Hong Kong’s ace. Despite all political change, it remains the gateway to China:

• Closer Economic Partnership Arrangement (CEPA): Privileged access to the Chinese market
• Cross-border financing: Simple capital flow between Hong Kong and Mainland China
• Legal system: Common law, internationally recognized
• Currency: HKD is freely convertible and pegged to USD

For German companies seriously targeting China, Hong Kong is very often the best entry point.

Substance Requirements: Moderate but Clear

Hong Kong has clear but not overly burdensome substance requirements:

• Local director: At least one director domiciled in Hong Kong
• Business address: Genuine business address (not just a P.O. box)
• Local accounting: By a qualified accountant
• Annual Return: Filed annually at the Companies Registry

Realistic annual compliance costs: 25,000-60,000 EUR.

That’s far less expensive than Singapore or Dubai.

The DTA with Germany: A Solid Foundation

The Double Taxation Agreement between Germany and Hong Kong is established and works well:

• Dividends: 5% withholding tax (for holdings over 25%)
• Royalties: 7% withholding tax
• Interest: 10% withholding tax
• Company profits: Taxable only where actual management occurs

When Hong Kong is Still the Right Choice

Hong Kong fits if:

• China is your primary target market
• You’re an established company with stable cash flows
• You can handle political uncertainty
• Your business model is based on the territorial principle (offshore profits)
• You want low compliance costs

The Risks: What You Absolutely Need to Consider

I wouldn’t be an honest advisor if I didn’t mention the risks:

• Political uncertainty: Further changes are possible
• Reputation risk: Western partners may have concerns
• Banking compliance: Additional due diligence at international banks
• Brain drain: Many skilled Hong Kongers are leaving the city

Case Study: German Industrial Goods Producer in Hong Kong

A client of mine leverages Hong Kong successfully for his China business:

• Starting point: Specialist in industrial automation, 15 million EUR sales
• Hong Kong structure: Trading company for China import/export
• Special feature: 80% of profits arise outside of Hong Kong (territorial principle)
• Effective tax burden: Only 3.2% on Hong Kong-sourced profits

Important: This structure requires careful planning and regular reviews of the source-of-income rules.

My Honest Take on Hong Kong

Hong Kong isn’t the right choice for everyone. If you’re risk-averse or primarily focused on tax optimization, there are better options.

But if China is genuinely your strategic target market and you can deal with uncertainties, Hong Kong remains a highly interesting choice.

The decision depends on your individual circumstances. That’s exactly why we’re now moving to the direct comparison.

Direct Comparison: Taxes, Market Entry and Legal Certainty

The moment of truth: Which location really is best for your specific business model?

Here’s my honest, data-driven analysis. No marketing spiel. Just facts.

Total Tax Burden: The Truth Behind the Numbers

Nominal tax rates only tell half the story. Let’s look at the actual burden in different scenarios:

*Depending on the share of Hong Kong-sourced income

These numbers show: There’s no single winner for all situations.

International Tax Planning in Asia: Factor in Compliance Costs

Actual costs of your Asia structure go far beyond taxes:

These figures are sobering. A Singapore structure will cost you at least 228,000 EUR per year—before taxes.

That means: You need at least 1.5-2 million EUR profit for Singapore to be worthwhile.

Market Access: Which Location Opens Which Doors?

Here’s the strategic analysis for different target markets:

Southeast Asia (ASEAN)

• Singapore: ⭐⭐⭐⭐⭐ (Optimal access)
• Dubai: ⭐⭐ (Limited access)
• Hong Kong: ⭐⭐⭐ (Good access, but not optimal)

China

• Singapore: ⭐⭐⭐ (Via RCEP)
• Dubai: ⭐⭐ (Limited)
• Hong Kong: ⭐⭐⭐⭐⭐ (Unbeatable)

India

• Singapore: ⭐⭐⭐⭐ (Very good)
• Dubai: ⭐⭐⭐⭐⭐ (Optimal through CEPA)
• Hong Kong: ⭐⭐ (Limited access)

MENA Region

• Singapore: ⭐ (Very limited)
• Dubai: ⭐⭐⭐⭐⭐ (Perfectly positioned)
• Hong Kong: ⭐⭐ (Limited access)

Legal Certainty: The Deciding Factor

Here’s my honest assessment based on current developments:

Singapore

• Political stability: ⭐⭐⭐⭐⭐
• Legal system: ⭐⭐⭐⭐⭐
• International reputation: ⭐⭐⭐⭐⭐
• Planning security: ⭐⭐⭐⭐⭐

Dubai

• Political stability: ⭐⭐⭐⭐
• Legal system: ⭐⭐⭐⭐ (Improving steadily)
• International reputation: ⭐⭐⭐⭐
• Planning security: ⭐⭐⭐ (New tax laws)

Hong Kong

• Political stability: ⭐⭐ (Uncertainty factors)
• Legal system: ⭐⭐⭐⭐ (Still functional)
• International reputation: ⭐⭐⭐ (Declined)
• Planning security: ⭐⭐ (Unpredictable changes)

The ROI Comparison: When Does Which Location Pay Off?

Here are the realistic calculations for different profit levels:

With 500,000 EUR annual profit:

• Germany: 225,000 EUR in taxes (45%)
• Singapore: 50,000 EUR in taxes + 250,000 EUR costs = Loss!
• Dubai: 36,000 EUR in taxes + 150,000 EUR costs = 39,000 EUR savings
• Hong Kong: 41,250 EUR in taxes + 80,000 EUR costs = 103,750 EUR savings

With 2 million EUR annual profit:

• Germany: 900,000 EUR in taxes (45%)
• Singapore: 240,000 EUR in taxes + 300,000 EUR costs = 360,000 EUR savings
• Dubai: 171,000 EUR in taxes + 180,000 EUR costs = 549,000 EUR savings
• Hong Kong: 165,000 EUR in taxes + 100,000 EUR costs = 635,000 EUR savings*

*Based on optimal use of the territorial principle

My Recommendation Based on Your Profile

After 15 years of experience in international tax planning, here are my clear recommendations:

Choose Singapore if:

• Your annual profit exceeds 2 million EUR
• ASEAN is your main target market
• You need maximum legal certainty
• You’re prepared to invest in genuine substance

Choose Dubai if:

• Your annual profit is between 500,000 and 5 million EUR
• You want to expand into MENA or India
• You prefer pragmatic compliance
• You also want to benefit personally from low taxes

Choose Hong Kong if:

• China is clearly your main market
• You can deal with political uncertainty
• Your business relies on the territorial principle
• You want low compliance costs

Important: These are guidelines. Your individual situation may require a different solution.

Practical Implementation: Your Step-by-Step Roadmap

Enough theory. Let’s get practical.

Have you decided on a location? Perfect. Here’s how to set up your Asia structure efficiently and in full legal compliance.

In my experience, 70% of international tax structures fail not due to strategy but to execution. We’ll prevent that.

Phase 1: Preparation and Structure Design (Weeks 1–4)

Week 1: Analysis of Your Current Situation

Before you do anything, understand your starting position:

• Analyze your business model: Which activities can be relocated?
• Cash flow structure: Where are your profits really generated?
• Review existing contracts: What needs to be adjusted?
• Calculate German tax burden: How much can you realistically save?
• Compliance status: Are all your German tax returns up to date?

Tip: Carry out an honest SWOT analysis. Only then can you spot potential stumbling blocks early.

Week 2–3: Structure Design and Optimization

Now develop your optimal structure:

1. Define holding structure: Do you need an intermediate holding?
2. Function and risk allocation: Which activities go where?
3. IP structure: Can you relocate patents, trademarks or know-how?
4. Transfer pricing: How are intragroup transactions set up?
5. Exit strategy: How can you adapt the structure later?

Important: Think in scenarios. What happens if you grow? Or hit problems? If laws change?

Week 4: Legal and Tax Validation

Have your structure checked by specialists:

• German tax law: Is it AO-compliant?
• Local law: Does it meet local requirements?
• DTA optimization: Are you leveraging all advantages?
• Substance requirements: Are all criteria feasible?

Phase 2: Incorporation and Set-Up (Weeks 5–12)

Singapore: The Incorporation Process

1. Reserve company name: ACRA search and reservation (1–2 days)
2. Pay in minimum capital: 1 SGD is sufficient, 10,000–50,000 SGD recommended
3. Appoint local director: Singapore resident required
4. Registered office: Business address in Singapore
5. ACRA registration: Online application (1–2 days)
6. GST registration: If turnover exceeds 1 million SGD
7. Open bank account: DBS, OCBC or UOB (2–4 weeks)

Duration: 6–8 weeks

Costs: 3,000–5,000 EUR (excluding running costs)

Dubai: The Incorporation Process

1. Decide freezone vs mainland: Based on your strategy
2. Get company name approved: DED or Freezone Authority (1–3 days)
3. Minimum capital: Varies by activity (usually 50,000–300,000 AED)
4. Sign office rental lease: For business premises
5. Apply for trade license: Depending on your business activity
6. Apply for Emirates ID: For all shareholders
7. Open bank account: Emirates NBD, ADCB or ENBD (4–8 weeks)

Duration: 8–12 weeks

Costs: 5,000–8,000 EUR (excluding running costs)

Hong Kong: The Incorporation Process

1. Check company name: Companies Registry search
2. Minimum capital: 1 HKD sufficient, 10,000 HKD recommended
3. Submit incorporation form: NNC1 form
4. Business registration: At the Inland Revenue Department
5. Order company seal: For official documents
6. Open bank account: HSBC, Standard Chartered or Hang Seng (2–6 weeks)

Duration: 4–6 weeks

Costs: 2,000–4,000 EUR (excluding running costs)

Phase 3: Operational Set-Up (Weeks 13–20)

The Critical First Steps

Once your company is registered, the real work begins:

• Set up accounting system: Local GAAP-compliant software
• Hire employees: To fulfil substance requirements
• Set up office: Establish actual business activity
• Restructure contracts: Integrate new structure into existing business
• Register for taxes: With all relevant authorities

How to Avoid the Most Common Implementation Mistakes

These are the pitfalls I see most often:

1. No real substance: Just a mailbox company with no real activity
2. Incorrect transfer pricing: Unrealistic intercompany transactions
3. Insufficient documentation: Poor bookkeeping
4. Ignoring German regulations: CFC rules and more
5. Relocating profits too quickly: Moving all profits abroad right away

Phase 4: Ongoing Operation and Optimization

Monthly To-Dos for Legally Secure Structures

• Keep accounting up to date: All receipts properly recorded
• Document substance: Staff lists, office costs, meetings
• Monitor transfer pricing: Ensure arm’s length standards
• Maintain a compliance calendar: Keep all deadlines in mind

Quarterly Reviews

• Tax developments: Stay updated on changes in relevant countries
• Business progress: Does the structure still fit your business?
• Optimization potential: Can anything be improved?
• Exit strategies: Are adjustments needed?

Critical Success Factors for Sustainable Structures

After hundreds of structures I’ve assisted, these are the decisive factors:

1. Real economic substance: No tricks—genuine business activity
2. Proper documentation: Everything must be traceable and audit-proof
3. Continuous compliance: Rules change; you must keep up
4. Professional support: Local experts in every relevant country
5. Long-term perspective: Think in years, not months

Important: An international tax structure is not a “set and forget” project. It requires ongoing attention and adaptation.

Ready to invest the effort? Then let’s look at the typical pitfalls you absolutely need to avoid.

Common Pitfalls and How to Avoid Them Successfully

Let me tell you a story that could save you a lot of money and headaches:

A client came to me two years ago. Desperate. He had built a Dubai structure. Looked great on paper. 9% tax instead of 45% in Germany.

The problem? The German tax office categorized his Dubai entity as a “mailbox company.” CFC (Controlled Foreign Company) taxation. Tax back payment: 340,000 EUR plus interest.

His mistake? He thought a low tax rate was enough.

To keep you from the same fate, here are the most common pitfalls—and how to avoid them.

Pitfall 1: Misunderstanding Substance Requirements

The classic error. Many entrepreneurs think a mailbox address is sufficient for an international structure.

Wrong.

All three locations now have strict Economic Substance Requirements (ESR). In practice, this means:

What Real Substance Means:

• Qualified staff on site: Not just admin staff
• Adequate business premises: Matching the scope of business activity
• Genuine decision-making: Board meetings with substantive resolutions
• Operational activities: Real business—not just administration
• Appropriate expenses: Costs in line with the business scale

How to Do It Right:

Document everything meticulously. Keep detailed records of:

• Employee contracts and qualifications
• Office costs and usage
• Board meeting minutes with major decisions
• Operational business and customer relationships
• Expenses relative to generated income

Pitfall 2: Underestimating CFC Taxation

The German Fiscal Code §§ 7–14 (CFC rules) is a minefield. Many completely underestimate it.

The rule is simple: If your foreign entity is not genuinely doing business, the profits are taxed in Germany.

What the Tax Office Checks:

1. Passive income: Are there passive earnings (interest, dividends, royalties)?
2. Management and control: Where are real decisions made?
3. Economic activity: Is there substantive business?
4. Income qualification: Does it match the stated business model?

How to Protect Yourself:

• Use Safe Harbor: With genuine trading activity, risk is minimal
• Activity evidence: Document all substantive deals
• Local management: Decisions must be made locally
• Appropriate compensation: Use realistic transfer prices

Pitfall 3: Incorrect Transfer Pricing

Transfer pricing is the backbone of any international structure. 80% of audits fail here.

The problem: Many set completely unrealistic prices between their companies.

Classic Mistakes:

• Excessive royalties: 15% of revenue for an ordinary trademark
• Bloated management fees: 500,000 EUR for minimal consultancy
• Unrealistic trade margins: 50% margin for basic distribution
• No documentation: No rationale for the pricing

The Right Approach:

1. Function and risk analysis: What does each company actually contribute?
2. Benchmarking: What do unrelated parties pay for similar services?
3. Documentation: Written reasoning for all transfer prices
4. Regular reviews: Prices must remain at arm’s length

Tip: Have your transfer pricing validated by a specialist tax advisor. It’ll cost 5,000–15,000 EUR, but could potentially save you millions.

Pitfall 4: Misunderstanding Double Taxation Agreements

DTAs are more complex than they appear. A frequent mistake: Thinking a DTA automatically prevents double taxation.

No. DTAs only determine which country has the right to tax. They don’t prevent both countries from wanting to tax.

Critical DTA Aspects:

• Tax residency rules: Where is your company considered resident?
• Tie-breaker rules: What if there’s dual residency?
• Permanent Establishment: Do you have a business presence in Germany?
• Withholding tax rules: How are cross-border payments treated?

Practical Tips:

• Certificate of tax residency: Obtain proof of residency
• Avoid permanent establishments: Keep German presence below the threshold
• DTA-compliant structure: Optimize money flows accordingly
• Advance Pricing Agreements: For large setups, pre-clarify with the tax office

Pitfall 5: Missing Compliance Deadlines

International structures have complex compliance requirements—across three countries or more.

A missed annual return can jeopardize your entire structure.

Key Deadlines at a Glance:

My Compliance System:

1. Digital calendar: All deadlines in one system
2. Local partners: Qualified advisors in each country
3. Quarterly reviews: Regular status checks
4. Backup systems: Redundant reminders and processes

Pitfall 6: Neglecting Exit Strategy

Most only plan their entry, not their exit. That can become expensive.

Political changes, new laws or personal circumstances can require a rapid strategic pivot.

Typical Exit Scenarios:

• Political instability: Sudden changes in your target country
• Legal changes: New tax laws or DTA cancellations
• Business model change: Your strategy shifts
• Personal circumstances: Relocation, retirement, sale
• Compliance issues: Problems with local authorities

How to Plan It Right:

• Modular structures: Each part can be adjusted independently
• Flexible contracts: Termination clauses and options to adapt
• Liquidity planning: Sufficient cash for restructuring
• Alternative scenarios: Plan B and C in advance

Pitfall 7: Overlooking Personal Taxation

Many focus only on company taxes—neglecting their personal tax situation.

As a German citizen, you’re frequently still taxable in Germany, even with foreign structures.

Key Points:

• Unlimited tax liability: If resident or present in Germany
• Extended tax liability: Up to 10 years after moving abroad with German shareholdings
• CFC rules: Passive income in foreign entities
• Transparency rules: Reporting requirements for foreign holdings

Solutions:

• Clarify tax residency: Where are you really resident?
• Optimize payout policy: Timing and amount of dividends
• Alternative compensation: Salary vs. dividends vs. loans
• Long-term planning: Consider a complete exit from Germany

The most important rule: Plan your personal situation as carefully as your business structure.

All these pitfalls are avoidable—provided you know them and plan accordingly. That’s why getting professional advice is so crucial.

My Conclusion: Which Location Best Fits Your Business Model?

After 4,000 words of deep-dive analysis, it’s time for clear recommendations.

Let me be frank: There’s no perfect location for everyone. But there is an optimal location for YOU.

Your decision depends on four factors: your business model, your target markets, your risk appetite and your available budget.

My Recommendation Matrix for 2025

Choose Singapore if…

• Your annual profit exceeds 2 million EUR
• You want to enter ASEAN markets
• Legal certainty is your top priority
• You have an IP-intensive business model
• You’re willing to invest in genuine local substance

Typical candidates: Established software firms, engineering companies with patents, consulting businesses with an ASEAN focus

ROI break-even: From 1.5 million EUR annual profit

Choose Dubai if…

• Your annual profit sits between 500,000–5 million EUR
• You aim to expand into the MENA region or India
• You prefer pragmatic compliance
• You also want to benefit personally from tax advantages
• Your business model includes trading or e-commerce

Typical candidates: E-commerce entrepreneurs, trading companies, digital service providers

ROI break-even: Starting at 400,000 EUR annual profit

Choose Hong Kong if…

• China is your main target market
• You can handle political uncertainties
• Your business model uses the territorial principle to best effect
• You prefer low compliance costs
• You already have established China connections

Typical candidates: Import/export businesses with China focus, industrial goods producers, commodities traders

ROI break-even: From 300,000 EUR annual profit

The Reality-Check Questions

Before making your decision, answer these questions honestly:

1. Substance: Are you willing to build a real business presence on the ground?
2. Compliance: Can you handle complex, multi-country bookkeeping?
3. Cost: Does your tax saving justify the 60,000–400,000 EUR extra annual costs?
4. Time: Do you have the capacity for regular travel and meetings?
5. Risk: How will you deal with regulatory changes?

If you hesitate on more than two questions, reconsider your strategy.

My Top 3 Alternatives for Smaller Companies

For many German exporters, the big three are too much effort. Here are my alternatives:

1. Estonia (EU presence with retained profits privilege)

• Tax rate: 0% on retained earnings, 20% on distributions
• Advantages: EU single market, digital government, low costs
• Best for: EU expansion, digital business models

2. Cyprus (EU holding company with IP advantages)

• Tax rate: 12.5% corporate income tax, 0% on dividends
• Advantages: Excellent DTAs, IP box regime, EU directives
• Best for: Holding structures, IP-intensive businesses

3. Malta (EU location with refund system)

• Tax rate: 35% nominal, but up to 30% refundable
• Advantages: Effective 5% tax with optimal structure
• Best for: Trading activities, service exports

The 5 Critical Success Factors

No matter which location you choose, these will decide your success or failure:

1. Real economic substance: Invest in genuine business activity
2. Professional local support: Don’t cut corners on advisory costs
3. Continuous compliance: Stay up to date—always
4. Meticulous documentation: Keep thorough records
5. Long-term view: Think in years, not just quarters

My Final Advice

After 15 years in international tax planning, my advice is: The best structure is the one you can sustain for the long term.

A 20% tax rate you can handle for 10 years is better than 5% with constant compliance headaches.

So: Be honest with yourself. Don’t overestimate your capacity. Don’t underestimate the complexity.

And most importantly: Get professional help. A well-planned structure not only saves you taxes, but also spares you nerves and sleepless nights.

The investment in good advice always pays off.

Ready for the next step?

Yours, RMS

Frequently Asked Questions

Can I simply transfer my German GmbH to Asia?

No—a direct transfer is practically impossible. You’ll need to set up a new company in your target country and gradually shift your activities there. Along the way, be sure to consider German exit taxation regulations.

What are realistic all-in costs for an Asia structure?

Annual costs vary widely: Hong Kong 60,000–140,000 EUR, Dubai 120,000–250,000 EUR, Singapore 250,000–450,000 EUR. This covers substance requirements, compliance and local advisors.

Do I have to move there myself?

Not necessarily, but you must demonstrate regular business activity on the ground. That means at least 4–6 trips per year and real board meetings. For optimal tax advantages, relocating your residence may make sense.

How long does it take to set up a fully operational structure?

Plan on 4–6 months for full establishment. Incorporation alone takes 4–12 weeks, but building real substance and operational processes takes time.

What happens during a German tax audit?

If your structure is proper and has real substance, you have nothing to fear. The key is seamless documentation: proof of local business activity, arm’s-length transfer pricing and full compliance with substance requirements.

Can I keep serving existing German clients?

Yes, but with caution. You must not create a German permanent establishment. Sales activities should take place from abroad. You can still have German clients, but contract initiation and processing must happen abroad.

What impact does Brexit have on these structures?

Brexit has actually increased the appeal of Asia structures. Many businesses are seeking alternatives to London. Singapore particularly benefits thanks to the EU-Singapore Trade Agreement.

Are cryptocurrencies a problem for international structures?

Each country has differing crypto regulations. Singapore is very crypto-friendly, Dubai is developing a clear framework, Hong Kong has become more restrictive. Plan based on your crypto exposure.

How do OECD initiatives like BEPS impact my structure?

BEPS increases substance requirements. The upside: with real economic substance, you’re protected. Shell companies are increasingly targeted. Genuine activity has never been more important.

Is an Asia structure worthwhile for e-commerce?

Absolutely! Dubai is especially well-suited to e-commerce. You can use it as a gateway to the MENA region and India. Singapore is ideal for ASEAN e-commerce. Important: warehousing and local customer service are essential for real substance.