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FAQ - Hong Kong Taxation

1.

What are the profit tax rates for companies in Hong Kong?

2.

What is meant by territorial system of taxation?

3.

What is the taxation policy of foreign-sourced income remitted into Hong Kong?

4.

When is the tax filing deadline for Hong Kong companies?

5.

My business has not commenced yet. Do I still need to file a tax return?

6.

How to determine whether my business has commenced or not?

7.

Are profits distributed to shareholders taxable in Hong Kong?

8.

I am a director of a Hong Kong company and I am residing overseas. The company pays me salary and director's fee. Am I liable to pay tax in Hong Kong?

9.

What is the tax treatment of business losses incurred by a Hong Kong company?

10. 

What is the basis period for profits tax assessment in Hong Kong?

 


   
   
   

 

   

1.

What are the profit tax rates for companies in Hong Kong?

 

Hong Kong has a flat corporate tax rate of 16.5% both for resident and non-resident companies incorporated in Hong Kong.

 

 

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2.

What is meant by territorial system of taxation?

 

Hong Kong adopts a “territorial source principle” of taxation. Only profits which have a source in Hong Kong is chargeable to tax under the Inland Revenue Ordinance. Profits sourced elsewhere are not subject to Hong Kong profits tax.

 

For more information, please refer to our Hong Kong Profits Tax Guide.


 

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3.

What is the taxation policy of foreign-sourced income remitted into Hong Kong?

 

Hong Kong follows a territorial system of taxation. In other words, taxes are only levied on income "derived from or arising in" Hong Kong and not on foreign sourced income, even if the profits arising abroad are remitted into Hong Kong.

 

For more information, please refer to our Hong Kong Profits Tax Guide.


 

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4.

When is the tax filing deadline for Hong Kong companies?

 

The Inland Revenue Department of Hong Kong generally issues the corporate profits tax returns on the 1st of April every year. Normally, businesses should file the profits tax return within 1 month from the date of issue.

 

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5.

My business has not commenced yet. Do I still need to file a tax return?

 

Yes. As per Hong Kong law, every company is obliged to furnish the Inland Revenue Department with annual tax returns, irrespective of whether or not business has commenced or profits were made.  In case of business not yet commence, the company still needs to file "NIL" tax return.

 

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6.

How to determine whether my business has commenced or not?

 

Generally, there are 2 interpretations.

 

(1) The company has no transactions incurred during the period.

 

(2) The company has no sales / income transactions taken place during the period.

 

Interpretation (2) is narrower than (1) above, and is commonly adopted for tax treatment purpose.  However, Inland Revenue Department may adopt different interpretations for different nature of business. Therefore, to avoid mis-understanding, the safest approach is to adopt (1) and follow the duty of keeping proper proper business records and auditor report.

 

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7.

Are profits distributed to shareholders taxable in Hong Kong?

 

No. Shareholders are not liable to pay any tax on the dividends they receive from a company. There is no dividend tax in Hong Kong.


 

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8.

I am a director of a Hong Kong company and I am residing overseas. The company pays me salary and director's fee. Am I liable to pay tax in Hong Kong?

 

In general, if you are a director of a Hong Kong resident company, your full income derived from that office in Hong Kong is chargeable to salaries tax, irrespective of whether you are residing in Hong Kong or not.

 

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9.

What is the tax treatment of business losses incurred by a Hong Kong company?

 

Losses made in an accounting year can be carried forward and set off against future profits of that trade. A company carrying on more than one trade may have losses in one trade offset against profits of the other trade. To qualify for deduction, losses should have arisen during the course of carrying on a business in Hong Kong. Losses can be carried forward indefinitely until they are fully utilized, subject to certain conditions such as no substantial change in shareholders. 


 

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10. 

What is the basis period for profits tax assessment in Hong Kong?

 

The basis period for profits tax assessment is the period of the assessment year during which the company earns profits. Generally, the year of assessment commences on 1 April and ends on 31 March of the following year.

 

 

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