FAQs of Hong Kong Profit Tax
What tax does Hong Kong company need to pay every year?
Hong Kong companies are only required to pay profits tax annually. The profits tax rate for the first $2 million of the corporations’ profits is 8.25% and profits above that amount will continue to be subject to the tax rate of 16.5%; for unincorporated corporations in sole proprietorship or partnership, the two-tiered profits tax rate is 7.5% and 15%. If the company is not profitable, there is no need to pay profits tax.
What is the year end of Hong Kong company?
It is generally 31 March to 31 December of each year for the basis period of taxation according to custom. Hong Kong company has maximum 18 months for the first year's basis period of taxation.
In which case will Hong Kong company be free from Profits Tax?
If the corporate profits do not arise from Hong Kong, and the company has not set up an office in Hong Kong nor hired Hong Kong employees, then its earned profits will be exempt from Profits Tax.
My Hong Kong company only opens account at bank, to collect and pay bills for other China Company, then does this Hong Kong company need to process accounting, auditing and tax declaration?
Yes. Because company incorporation is profit-oriented, even if the company in Hong Kong only performs the role of collecting and paying for others, it shall be deemed as agency service business, and its income shall be the commission for collection and payment for others.
My Company only opens an account at a foreign bank in China and does not open account in Hong Kong; shall the business conducted by my company be free from tax declaration?
No. According to Hong Kong laws, all Hong Kong company has the obligation to declare its financial condition to Inland Revenue Department, whether its business takes place in Hong Kong or not. If this company does not have its source of income in Hong Kong, it can apply to Inland Revenue Department for exemption from taxation.