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Taxes

Hong Kong is a perfect place to start your international business due to its business-friendly tax climate. Taxes matter to business as they affect many areas such as competitiveness, job creation, health of the country’s economy, etc.

Taxation in Hong Kong

Income Tax

  • Corporate – 16.5%
  • Individual – 15%

Social Security

  • Employer – 5%
  • Employee – 5%

VAT0%

Withholding

  • Dividend – 0%
  • Interest – 0%
  • Royalties – 5%-16.5%

Source: Lowtax.net,. ‘Lowtax – Global Tax & Business Portal | Headline Tax Rates Around The World’. N.p., 2015. Web. 6 Oct. 2015.

 

“NIL” Profit Tax Return

0% rate of Income Tax applies if the company has not commenced business.

 

Offshore Tax Exemption

0% rate of Income Tax applies if the company’s income comes from outside Hong Kong.

 

Time for filing

 

All Hong Kong companies are required to file a Profit Tax Return (“PTR”) with the Inland Revenue Department.

The first Profit Tax Return is issued by Inland Revenue Department (“IRD”) Hong Kong Tax Authority within 1-2 months before the 2nd anniversary of the company’s date of incorporation. Once the PTR is issued, Startupr will send an email notification advising you to submit the PTR within 3 months. Profit tax returns must be filed no later than 18 months after the company’s incorporation date.

1. Determine the date for your company’s fiscal year end

2. If your company has commenced business you will need to prepare the following documents:

– All invoices

– All bank statements
– All expense receipts
– General ledger and management account (Balance sheet, trial balance, income statement)
3. Submit the PTR to IRD
The submission deadline of the annual PTR, together with the audited nancial statements for your second PTR and thereafter, is shown in the following example:

Fiscal year end (example)

Tax filing date

Documents ready for audit

1) March 31, 2015

Nov. 15, 2015

No later than Sept. 1, 2015

2) December 31, 2014

August 15, 2015

No later than June 1, 2015

3) Dates other than (1) or (2) above; e.g. June 30, 2014

April 30, 2015

No later than mid-Feb., 2015

The profit tax rate is 16.5% for corporations.

If the company has not yet commenced business, a “NIL” PTR may be filed with the Inland Revenue Department. The company director or company secretary must submit a declaration that business has not yet commenced. Even if a business has not commenced, it must still provide annual audited financial statements.

 

Offshore tax exemption claim

 

If all the company’s income is from outside Hong Kong, you may claim offshore exemption, relieving your firm of Hong Kong tax.

– The company must submit the PTR and financial statements
– The company must file an offshore exemption claim

– IRD will issue an offshore claim query letter for the company to establish proof

– The company must provide IRD with passports of all company directors and/or all company sales representatives, company invoices, contracts, arrangements, shipping documents, etc.
– If verified, IRD will confirm your company’s Hong Kong offshore tax exemption
Offshore tax exemption is effective for approximately 5 years for offshore profits only.

For further information on the Hong Kong tax system please visit Inland Revenue Department or check out our Profit Tax Return Guide.

For information about the People’s Republic of China tax system please click here.