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Hong Kong provides tax advantages such as a simple tax regime, an opportunity to gain tax-free profits, and low taxation rates for companies engaging in the business world. As a great location for international businesses searching for a tax-friendly environment, Hong Kong is no doubt an exceptional choice.

In comparison to other countries, Hong Kong runs a simple taxation system with different major taxes, which include profits tax and salaries tax. There are no capital gains taxes, sales taxes, and withholding taxes on the dividends. Keep in mind that taxation in Hong Kong is based on the territorial source principle instead of the taxpayer’s residency status. The impact of this principle is companies in Hong Kong will only have to pay tax on earned profits from activities, which takes place in Hong Kong. If no activities were done in Hong Kong, then the company will qualify for an exemption and there’s no liability to tax in the city.

If you still find Hong Kong’s taxation complicated, there is nothing you should worry about because we are here to help you!

5 Major Features of the Taxation System in Hong Kong

Source concept - Hong Kong's taxation system is based on source and not on a residency concept. Unlike other countries such as the United States, Canada and Mainland China, which tax their tax residents on worldwide income, Hong Kong has a simple tax system in which only income arising in or derived from Hong Kong is taxable. Offshore income is not taxable. The distinction between resident and non-resident companies is generally not relevant under the Hong Kong taxation system.
Low rate of taxation - Hong Kong operates a two-tiered profits tax system. For corporations, the first HK$2 million of profits is taxed at a reduced rate of 8.25%, with the remaining profits taxed at the standard rate of 16.5%, with certain exceptions. Hong Kong boasts one of the lowest tax rates in the world, making it an attractive destination for businesses and investors, particularly when compared to other developed economies.
Simple tax administration - The tax administration is very simple in Hong Kong. There are only three types of direct taxes in Hong Kong, namely, profits tax, salaries tax and property tax. There is no turnover tax, i.e. VAT or goods and services tax, which is common in most developed countries.
No capital tax regime - In Hong Kong, there is no capital gains tax, meaning profits generated from the sale of capital assets such as stocks, bonds, or real estate are not subject to taxation.
No withholding tax system - Hong Kong does not impose withholding taxes on dividends, interest, or royalties. This makes it easier for businesses to distribute profits or make payments to non-residents or foreign entities without having to deduct tax at the source, simplifying cross-border transactions.

Profits Tax Return Submission Deadline

For a newly incorporated company, the first profits tax return is normally issued 18 months after the company is incorporated. You will have 3 months to submit it.
After that, the profits tax return due date will depend on when the company’s financial year is ended.

The following table shows the profits tax return filing due dates for taxpayers who are represented.

Financial year ended	Profits tax return filing due date	2023/24 Extended due date
Between 1 January and 31 March	Mid-November of the calendar year in which the financial year ended	15 November 2024
Between 1 April and 30 November	End-April of the following calendar year in which the financial year ended	30 April 2024
Between 1 December and 31 December	Mid-August of the following calendar year in which the financial year ended	15 August 2024

Free Quotation for Low Cost Audit and Tax Services

Domestic Tax Planning Strategies

Capital gain claim
Financial year-end date
Interest income taxability
Utilization of companies with tax losses
Apportionment of onshore and offshore profits and expenses
Segregation of onshore and offshore businesses and profits
Capital expenditure timing and classification
Expenses deduction, etc

International Tax Planning Strategies

Cost-sharing arrangement
Cross-border activities
Risks and taxation exposure segregation
Holding structures, etc