Does my company need to pay Hong Kong taxes ?
8 mins read l Published: January 14, 2025 l Updated: January 14, 2025
Do I need to pay Hong Kong profits tax if my Hong Kong limited company don't have operation in Hong Kong ?
In Hong Kong, a limited company is subject to profits tax only on income that is sourced in Hong Kong. If your company has no operations in Hong Kong and its income is derived from outside of Hong Kong, it generally would not be liable to pay profits tax.
However, it's important to maintain proper documentation to support the claim that your income is sourced outside of Hong Kong. Additionally, you should file an annual tax return, even if you anticipate no tax liability.
For specific cases or detailed advice, it's advisable to consult a tax professional or legal advisor familiar with Hong Kong tax laws.
Profits Tax Overview
Tax Rate:
The standard profits tax rate for corporations in Hong Kong is 16.5% on assessable profits. A lower rate of 8.25% applies to the first HKD 2 million of assessable profits for qualifying corporations.
Sourcing of Income:
Income is considered sourced in Hong Kong if it arises from activities carried out in Hong Kong.
Examples of Hong Kong-sourced income include:
- Sales of goods that are manufactured in Hong Kong.
- Services rendered in Hong Kong.
No Operations in Hong Kong:
If your limited company operates entirely outside of Hong Kong and derives income from foreign sources (e.g., overseas sales, foreign services), it is typically not subject to profits tax. You must be able to demonstrate that the profits are not sourced from Hong Kong.
Filing Requirements:
Even if no profits tax is owed, companies are required to file an annual tax return. It is essential to keep accurate records and documentation to substantiate the claim of income being sourced outside of Hong Kong.
Exemptions and Reliefs:
Certain types of income may be exempt from profits tax, such as capital gains and dividends from other corporations. There are also specific reliefs and incentives for certain industries, such as research and development.
Compliance and Regulations:
Companies must comply with the Inland Revenue Ordinance and other relevant regulations. It is advisable to consult with tax professionals to ensure proper compliance and to take advantage of any available deductions or exemptions.
Recommendations
Consult a Professional: Given the complexity of tax laws and the potential for changes, consulting with a tax advisor or accountant who specializes in Hong Kong taxation is highly recommended.
Maintain Documentation: Keep detailed records of your business activities, income sources, and any relevant contracts or agreements to support your tax filings.
Take a look at : "A Simple Guide on The Territorial Source Principle of Taxation" issued by Inland Revenue Department.