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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 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 profits tax rate is 16.5%, which is one of the lowest in the world. Effective from the year of assessment 2018/19, the two-tiered profits tax rates regime is enacted. The first HK$2 million of profits is taxed at 8.25%, and the remaining profits continue to be taxed at 16.5%, with certain exceptions.
- 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
- No withholding tax system
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
duedate 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||2022/23 Extended due date|
|Between 1 January and 31 March||Mid-November of the calendar year in which the financial year ended||15 November 2023|
|Between 1 April and 30 November||End-April of the following calendar year in which the financial year ended||17 May 2023|
|Between 1 December and 31 December||Mid-August of the following calendar year in which the financial year ended||29 August 2023|
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
Our Taxation Solution
With Corporate Hub Hong Kong, we offer the following taxation services:
- Tax planning – Providing tax savings advice and tax efficiency advice
- Tax filing – Filing of tax returns and tax computations for sole proprietors (including insurance agents), partnerships and limited companies (including auditing)
- Special tax engagements – Including tax field audit and advance ruling
- Tax compliance – Including replies to IRD enquiry letters
Corporate Hub Hong Kong can help you get a boost with your business! Contact us today and discover how our solutions can solve your taxation concerns!