Tax Fact Basics
Hong Kong is one of the most tax-friendly cities in the world. The taxes ideas here are very straightforward and there are generous allowances and deductions which can reduct the taxable amount. The attractive low tax rates make many foreign investors to park their money. They enjoy the lowest taxes in the world, as the taxes provide generous allowance and tax deductions. In other words, outgoings and expenses that take part in your profit-generating activities are deductible from the taxes. There are only three direct taxes to be imposed, they are the profit tax, salary tax and property tax. 8.25 % of corporate profit tax are imposed for the first 2 million profit and 16.5% for the remaining amount. Salary tax is capped at 15% and property tax at 15%. However, if the profit of your business is sourced or generated outside Hong Kong, the tax rate will be 0% for the offshore corporation. Hong Kong does not impose withholding tax and estate tax. Dividends and capital gains are not taxable.
1. Why do wealthy foreigners register companies in Hong Kong?
Hong Kong does not tax income earned beyond its borders. In other words, profits generated outside of Hong Kong is non-taxable.
2. What are the corporate tax options in Hong Kong?
Hong Kong adopts a Two-Tier Profits Tax Regime. Corporations pay a tax of 8.25% on the first $2 million of assessable profits. The remainder of assessable profits is 16.5%. Please refer to the following table.
Tax Rate for Corporations
Corporate Income (in HKD)
Tax rate for corporations ~ First HK$2 million
Tax rate for unincorporated business ~ First HK$2 million
Tax rate on capital gains
Tax rate on shareholder dividends
Tax rate on foreign-sourced income
3. What is the corporate capital gain tax in Hong Kong?
Hong Kong does not tax capital gains.
4. What is the VAT in Hong Kong?
Hong Kong does not levy value added tax. There is no sales tax imposed in Hong Kong.
5. Is my company subject to the profit tax?
Only income and operations sourced in Hong Kong is subject to the profit tax.
6. What is the dividend tax in Hong Kong?
Dividend paid to the hands of shareholders is NOT subject to any tax.
7. What is the salary tax in Hong Kong?
Depending on the earned salary, the income tax rate is between 2% to 17%. Please refer to the following table.
Tax Rates for Individuals
Net Chargeable Income (in HKD)
Tax rate on capital gains
Tax rate on income earned overseas
Tax rate on dividends from a Hong Kong company
8. What is my tax year?
The basis period of a year of accessment is the accounting period ending in the year of assessment. It usually runs from 1 April to 31 March of the following year, otherwise a cycle of 12 months period your company desires.
9. When does a company file its profit taxes?
The Inland Revenue Department issues companies the profit tax returns on an annual basis, usually on the first business day of every April. The tax return is required to be filed within the prescribed time limit, e.g. within one month from the date of issue.
10. Can I require more time to file the profit tax form for my company?
Yes. If you appoint us as your tax representative, we can request IRD to grant additional time extension.
11. What if my company does not submit the profit tax form?
A penalty fee or a Magisrate court summon will be apply for failure to comply with the filing obligation.
12. What are the basic record keeping requirements in Hong Kong?
Each company in Hong Kong is required to keep sufficient and proper business records. Such records are asked to be kept for at least 7 years, either paper based method or electronic copy method. When requested by the IRD taxation officer, the company must also be able to produce a hard copy of record. Failure to do maintain proper accounting records can be fined up to a penalty of HK$100,000.
13. My company does not make any profits for the year nor commences business activity. Do I still need to submit a profit tax return form?
Yes. Every Hong Kong company is obligated to furnish the annual profit tax return to the Inland Revenue Departnment, regardless whether any profitx are made. A NIL return form is also required to submit and report.
14. What is considered as an offshore tax exempted company?
A company is classified as offshore when:
– it has no profits, no services, no products in Hong Kong.
– it has no customers or suppliers in Hong Kong
– the employees and owners of the corporate entity operate solely ourside of Hong Kong
– the daily business decisions are made outside of Hong Kong
15. How do I lodge the claim for the offshore tax exemption?
Company can lodge their claim for the offshore tax exemption when they submit for the Profit Tax Return to the IRD. An audited report is required to file with the tax return along. IRD taxation officer will usually take several months to examine the audit report, supporting documents and details.
