Taxes collected in Hong Kong can be generally classified as: (1) Direct tax, including Salaries Tax, Property Tax and Profits Tax; the guiding statue is Inland Revenue Ordinance (Cap 112); (2) Indirect tax, including Stamps Duty, Betting Duty, and others.
Unlike most countries which apply both residential jurisdiction and territorial jurisdiction in determining the tax liability of a person, Hong Kong uses only the territorial source jurisdiction and disregards the concept of residence. Thus, only profits sourced in Hong Kong would be taxable whereas a person's overseas income will not be taxable. Tannet has collected the frequently asked questions about profits tax in Hong Kong.
Q: What is profits tax?
Hong Kong Profits Tax is a tax levied on the net profits on business. Companies and individuals (sole proprietors) carrying out business in Hong Kong will be liable to Profits Tax provided that the profits are sourced in Hong Kong. The source of profits is one of the most controversial topics in the context of Hong Kong taxation.
Q: What tax does Hong Kong company need to pay every year?
Hong Kong company needs only to pay Profits Tax every year, which is calculated by 16.5% of the profits (which is expected to be 8.25% for the first 2 million of profits). The company without profits needs to pay no Profits Tax.
.jpg "Hong Kong Business Setup")
Q: What is the year end of Hong Kong company?
It is generally 31 March to 31 December of each year for the basis period of taxation according to custom. Hong Kong company has maximum 18 months for the first year's basis period of taxation.
Q: What is Provisional Profits Tax payable?
Profits Tax shall be levied according to the actual profits of the taxable year. Since the profits of one year shall be determined only after the end of year, Inland Revenue Department will levy provisional tax before the end of that year. After the profits of relevant year are assessed in the following year, the provisional tax already paid can be deducted from the Profits Tax payable of this year.
Q: In which case will Hong Kong company be free from Profits Tax?
If the corporate profits do not arise from Hong Kong, and the company has not set up an office in Hong Kong nor hired Hong Kong employees, then its earned profits will be exempt from Profits Tax.
Contact Us
If you have further inquires, please do not hesitate to contact Tannet at anytime, anywhere by simply visiting Tannet’s website english.tannet-group.com, or calling Hong Kong hotline at 852-27826888 or China hotline at 86-755-82143422, or emailing to tannet-solution@hotmail.com. You are also welcome to visit our office situated in 16/F, Taiyangdao Bldg 2020, Dongmen Rd South, Luohu, Shenzhen, China.
Previous：Hong Kong Barcodes Application FAQs
Next：Chinese Visa FAQ