Tweet

Hong Kong Corporate Tax - Explained

Written by: Lawrence Smith

Article Overview: Hong Kong is a popular location for business ventures and offshore activities given key attractive factors in its government, its jurisdiction and its policies on trade and investment. Tax is also a decisive point in Hong Kong company incorporation and offshore business ventures. Hong Kong’s corporate tax rate is reputably low and Hong Kong boasts a tax system that is intricately designed to benefit its companies while being simple and straightforward to understand. This article summarizes the main elements of Hong Kong corporate tax.

Hong Kong Corporate Tax - Explained

Hong Kong is a central hub for business in Asia. It is extremely popular for a variety of reasons, including political stability, economic freedom and tax benefits. Hong Kong has one of the lowest tax rates in the world for a developed country, and has an intricate and effective tax system that allows companies to conduct business without being overpowered by their tax liabilities. Indeed, Hong Kong is rated as the world's 3rd friendliest tax system by Forbes (Tax Misery & Reform Index 2009).

Corporate Tax in Hong Kong

Given the large number of companies that operate in Hong Kong or have an offshore business in Hong Kong, an understanding of Hong Kong tax implications begins with corporate tax.

In Hong Kong, any company conducting business on or offshore can be liable to corporate tax. Profits sourced in Hong Kong are taxed at a low rate of 16.5%, and unincorporated businesses are taxed at 15%. Profits that are sourced overseas, also known as ‘offshore profits', benefit from a zero tax rate, even when remitted back to Hong Kong. Profits derived from operating ships in Hong Kong are treated as ‘offshore profits' and are not liable to tax, but profits derived by professional reinsurers for reinsuring offshore risks will be taxed at 8.25% -i.e. half the corporate tax rate.

To note: offshore payments for intellectual property usage are liable to tax at 4.95%, goods sold by Hong Kong consignment agents on behalf of non-residents are also liable to tax on 0.5% of gross proceeds. On the other hand, bank deposit interest, interest on Tax Reserve Certificates, interest income on long-term debt instruments, dividends and capital gains are free from tax.

With the low tax rates there are also other regulations that protect business from unjustified taxes. Hong Kong is fully committed to its double tax agreement with thirty three nations, including PRC, Thailand and Belgium, to relieve companies from having to pay two taxes on one set of profits, as a result of multinational enterprise and multiple jurisdictions. For full details on Hong Kong's double tax agreements, see the website for the Inland Revenue Department of Hong Kong (IRD).

Companies that conduct business through a branch in Hong Kong or are incorporated in Hong Kong cannot offset losses against the profits of other members in a group of companies -through consolidated accounting systems, however the Hong Kong jurisdiction allows losses to be carried forward indefinitely. Assets are depreciated at authorized prescribed rates of depreciation, for example, computer equipment can be depreciated at 100% in the first year.

The general procedure for corporate taxation after incorporation in Hong Kong is straightforward. Typically a Hong Kong incorporated company will be tracked by the Hong Kong authority and sent a tax return at year end. Even when no tax return is issued to a company, they are responsible for notifying the government of any profits liable to tax. In standard practice, estimated tax assessments will be issued provisionally during the tax year based on historic profit information. A final assessment will then be released after filing of the tax return.

It should be noted that the Hong Kong tax year begins on April 1st. Also, companies liable to tax in Hong Kong are required to fulfill accounting and auditing standards i.e. be audited by a firm of Hong Kong accountants.

Other Taxes

In Hong Kong, people also benefit from zero sales tax, zero value added tax and zero annual net worth taxes.

Related Articles
  Setting Up An Offshore Company In Hong Kong
  Choosing Hong Kong For Company Registration
  Company Set Up Procedures in Hong Kong - How to Set Up Your Business in Hong Kong
  Startup your business in Hong Kong
  Why Hong Kong For Offshore Banking?

Article Tags: business ventures, corporate tax, corporate tax rate, decisive point, hong kong, hong kong company, hong kong company incorporation, hong kong corporate tax, hong kong tax, investment tax, jurisdiction, offshore activities, offshore business, tax



Related Forum Posts
Re: How to develop sales contacts? - [quote="gary_2000":3epzzq7u]I’m pretty new in the business and I've just gotten into selling and yesterday I made about 35 calls. Turned with two major prospects, but I was just wondering what are some other ways that you all use to make contacts?[/quote:3epzzq7u] We were in the same boat some time ago. We launched a large advertising campaign and in the end we received about 3 clients from it. The marketing was good but the distribution killed us (Canada Post sucks!). Anyways, we serviced those 3 clients like you would not believe, went above and beyond for them, and satisfied everything we possibly could. Now those 3 customers have brought us a significant amount of revenue and led to more leads throughout the time they have been with us. Our business depends on referrals and that’s how we’ve built the business. In the 2 years we’ve been running we catered to little over 250 customers world wide. We have clients in London, Hong Kong, Shanghai, Sydney, and evenly distributed through North America. We started with just 4 clients in the beginning! Keep making those calls and servicing them well! Good luck!!
The importance of a name - [quote="Takuya":3fcem7it]Thank you everyone. She will be a daddy's girl. Girls are so fun! Kevin, Names... I need to ALWAYS name my children by the way it can also be spelled in Japanese. All of my kids are dual citizens and Japanese don't carry letters like, V, TH, L, and most words tend to end with A, I, U, E, O or so I choose REINA, which is a Japanese name, yet can be said in English or even in Spanish (means Queen I found out) in order to have passports issued with the same spelling. My first boy is Kai - so once again, it sounds Japanese yet can be said in English. His middle name is Ichiro after the famous baseball player and I figured it should be his middle name instead of first because if you don't follow baseball, that's a hard name to remember. So even if my wife (Chinese American) wants English names like Jack, Sam, Kevin, Andy .... I'd have to spell out Jakku, Samu, Kebin, Andii -- you know, bit different. This way, REINA instead of more common RAYNA.[/quote:3fcem7it] Hi Takuya, I love the logic behind the naming of your children because it's like branding in business. Your kids have names that are easy to say and remember, yet they are spelled in a way that has cultural significance. On a side note, I've found that many Asian people (i.e. former co-workers and even my own family members from Hong Kong) spell and pronounce my name as Kelvin, Calvin or Keven.
Corporate Resource Speakers in Australia - Where can we find one of the best Corporate Resource Speakers in Australia?
Seeking advice on working procedure of Convenience Store Fra - I have some queries about the working of the franchises. How does the relationship between the Store Owner, Suppliers and Corporate works exactly? How does the store owners get reimbursed when they sell commodities like coke in fewer prices than others?
Need a book recommendation for writing better - I'm always looking for ways to improve my writing skills, so I was just wondering if anyone could recommend a good copywriting or copyediting book? I was actually thinking of reading "The Copywriter's Handbook : A Step-by-Step Guide to Writing Copy That Sells" by Robert W Bly [u:w3cg00nn]OR[/u:w3cg00nn] "The Copyeditor's Handbook: A Guide for Book Publishing and Corporate Communications" by Amy Einsohn. Would anyone know if these books are any good? Thanks


Share this article with your friends. Fund someone's dream.

Leave a comment below or share on the left and you'll help support entrepreneurs in Africa through our partnership with Kiva. Over $50,000 raised and counting - Please keep sharing! Learn more.

Tweet

Newsletter

Get advice & tips from famous business
owners, new articles by entrepreneur
experts, my latest website updates, &
special sneak peaks at what's to come!

Name:
Email:

Popular Articles

Why Small Businesses Don't Survive

Suggestions

Email us your ideas on how to make our
website more valuable! Thank you Sharon
from Toronto Salsa Lessons / Classes for
your suggestions to make the newsletter
look like the website and profile younger
entrepreneurs like Jennifer Lopez.