What is the corporate profit tax rate in Hong Kong?
Hong Kong adopt a territorial source principle of taxation. Only profits which are sourced in Hong Kong are taxable. In other words, you must not have customers, suppliers and employees in Hong Kong. If you apply for offshore status, the tax rate is 0%.
If you do not apply for the offshore status, the profit tax rate is 8.25% for the first HK$2 million in profit. Rest of the profit is taxed at 16.5%.
Does Hong Kong have capital gain tax?
No. Hong Kong does not have capital gain tax. Profits from the sale of assets such as shares, property, or other long term investments are generally not taxable unless the transactions are considered part of a trading business, i.e. frequent buying and selling of property or securities as a business.
Does Hong Kong have Value Added Tax (VAT)?
No. Hong Kong does NOT have value added tax (VAT). This is one of the reasons why Hong Kong is consistently ranked among the easiest places in the world to start and run a business. Unlike many jurisdictions where VAT or sales tax adds complexity and cost to transactions, Hong Kong’s tax regime is simple and business friendly.
Are Dividends taxable in Hong Kong?
No. Dividends are not taxable in Hong Kong. This is one of the major advantages for both businesses and investors, reinforcing Hong Kong’s reputation as one of the world’s most business‑friendly jurisdictions.
For Onshore companies, what are deductible expenses?
In general, all outgoings and expenses that help your company to generate chargeable profits are allowed as deductions, except for expenses of a domestic or private nature and capital expenditure.
Can you give some examples of what are deductible expenses?
In Hong Kong, many ordinary business expenses are deductible when calculating profits tax. For example, rent for office premises are deductible,business travel such as flight tickets, hotel stays, and other travel costs incurred for business purposes are deductible. Employee salaries and benefits such as wages, bonuses, and mandatory retirement fund contributions are deductible.
The key principle is that expenses must be wholly and necessarily incurred in producing assessable profits. Personal or non‑business expenses are not deductible.
Can you give an example of what is a domestic or private nature?
For example, travel expenses to visit a friend’s home are considered private in nature. Similarly, entertainment with friends or family members is also classified as personal. To qualify as deductible, an expense must be directly related to your business activities and incurred wholly and exclusively for generating assessable profits.
Is it easy to obtain the offshore 0% tax status?
Yes, it is straightforward to obtain the offshore 0% tax status in Hong Kong. In practice, the key requirement is that your company must not have customers, suppliers, or employees physically based in Hong Kong.
The Inland Revenue Department (IRD) applies a territorial tax system, meaning only profits sourced from Hong Kong are taxable. If your business activities and income are generated entirely outside Hong Kong, those profits can qualify for the offshore exemption, i.e. 0% tax in Hong Kong.
No tricks, no games: The application is fact‑based. The IRD reviews your company’s operations, contracts, and records to determine whether profits are offshore in nature.
Would an accounting firm (GSHK) be classified as a supplier?
Accounting firms, company secretaries, and address service providers are not classified as “suppliers” under Hong Kong law when considering offshore tax status. In this context, suppliers generally refer to those who directly help you generate profit by providing the goods or services that form part of your trading activity.
Example. If your business is selling TVs, and you purchase TVs in Hong Kong to sell in Japan, the Hong Kong TV seller is your supplier, because they supply you with the product that generates profit.
In short, only parties directly tied to your revenue producing activities count as suppliers. Generally speaking, administrative services do not affect offshore status.
Are banks in Hong Kong considered suppliers, and would that impact my offshore status?
No, banks are not classified as suppliers. Having a Hong Kong bank account does not affect your company’s offshore tax status. Banks are considered service providers for financial transactions, not suppliers of goods or services that generate profit. Offshore status is determined by where your customers, suppliers, and employees are located, not by where you hold your bank account.
What is the typical timeline for filing taxes in Hong Kong?
The first Profit Tax Return is issued about 18 months after the company’s incorporation date. The Inland Revenue Department then grants an additional 3 months to prepare the required reports, this means you have up to 21 months to finalize your records.
After submitting the first tax report at 18–21 months, when are subsequent reports due?
After the first tax report is submitted at 18–21 months, subsequent reports are due annually thereafter.
Can GetStarted manage all communication with the tax department on my behalf?
Yes. We will act as your tax representative and guide you through preparing all required tax reports. By listening to our professional CPA advice and ensuring accurate information is provided, we make sure your filings are correct and fully optimised.
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