2023 Tax Filing Season: Key Dates in Hong Kong You Need To Know About
Get ready to add important dates to your 2023 calendar. Staying updated with tax deadlines can help you steer clear of penalties and non-compliance, so you can run your business with peace of mind.
It's time to get ready for a calendar of key deadlines to add to your 2023 calendar! Knowing the tax deadlines can help you avoid penalties and non-compliance, so you can have peace of mind running your core business.
Read on to find out all you need to know about Hong Kong’s taxes, and the important Hong Kong tax dates for a small business like yours.
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Overview of Hong Kong's Corporate Tax RateWho Should File Tax Returns in Hong Kong?
What Is the Income Tax Basis Period in Hong Kong?
What Is the Profits Tax in Hong Kong?
When Is the Tax Return Deadline?
What Tax Forms Are Required?
What Tax Incentives Are Available?
Do I Get Relief from Double Taxation in Hong Kong?
How Do I File a Corporate Tax Return?
What Is the Penalty for Late Tax Filing?
Managing Your Small Business’s Taxes
Overview of Hong Kong's Corporate Tax Rate
Hong Kong adopts a territorial system of taxation. This means that tax is payable on profits derived from or arising in a business, profession, or trade in Hong Kong. If profits are derived from a source outside of Hong Kong, profits tax will not be applicable.
This territorial principle means that residents and non-residents are regarded in the same manner.
For instance, if you are a Hong Kong resident with profits derived from outside of Hong Kong, you will not have to pay profits tax. Similarly, if a non-resident makes a profit from Hong Kong, they will have to pay profits tax.
Who Should File Tax Returns in Hong Kong?
Newly registered businesses
All companies that are newly incorporated will have to file profits tax return. Business owners will receive their first corporate tax return approximately 18 months from their company incorporation date, or commencement of business.
Continuing businesses
For continuing businesses, they will receive the corporate tax return on the first working day of April every year.
Upon receiving the corporate tax return, companies have a month from the issued date to file all corporate tax return and the necessary supplementary forms.
Businesses that are not required to submit return annually
Additionally, not all businesses will be sent a corporate tax return. In the event that the Inland Revenue Department (IRD) deems your business activities have yet to rise to assessable profits, your company may not receive the corporate tax return. However, if your company receives the corporate tax refunds, you will have to fill and file them even if there are no profits. IRD does that in some situations, to assess a company's future tax potential.
Freelancers and the self-employed
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Calculate your taxes here.
Are you a partner of a partnership business or sole proprietor? If you’re self-employed or freelancing and earning an income in Hong Kong, you have a tax obligation.
What Is the Income Tax Basis Period in Hong Kong?
In Hong Kong, corporate income tax is assessed in relation to a tax year or Year of Assessment (YA). The tax year starts on 1 April in a year, and ends on 31 March the following year. Therefore, the year ended 31 March 2023 is known as Year of Assessment 2022-23.
What Is the Profits Tax in Hong Kong?
| Profits | Tax rate |
|---|---|
| Tax rate for incorporated businesses | 8.25% on the first HKD $2 million 16.25% for profits over HKD $2 million |
| Tax rate for unincorporated businesses (e.g. partnerships and sole proprietorships) | 7.5% on the first HKD $2 million 15% for profits over HKD $2 million |
| Tax rate on shareholder dividends | 8.25% on the first HKD $2 million 16.25% for profits over HKD $2 million |
| Tax rate on capital gains | 8.25% on the first HKD $2 million 16.25% for profits over HKD $2 million |
| Tax rate on foreign-sourced income | 8.25% on the first HKD $2 million 16.25% for profits over HKD $2 million |
| If a company meets certain criteria under FSIE, then they are tax exempt | |
When Is the Tax Return Deadline?
As mentioned, IRD will issue the profits tax return to active corporations and partnership businesses at the start of April every year. For companies with different year-end dates, the deadline for filing profits tax returns will be different.
However, the tax year calendar is as follows— why not save yourself some hassle and download the key tax dates straight to your calendar?
| Accounting date | Standard deadline | Extended deadline |
|---|---|---|
| 1 April - 30 November (N code) |
2 May of next year |
No extension |
| 1 - 31 December (D code) |
15 August of next year |
No extension |
| 1 January - 31 March (M code) |
15 November of the same year |
31 January of next year for companies with statutory loss * |
*Extension application has to be submitted on or before 31 October.
Other key dates to bear in mind:
| What | When |
|---|---|
| Annual General Meeting (AGM) | Holding an AGM within 18 months from the date of incorporation is compulsory. Subsequently, it has to be held once every calendar year but not exceeding 15 months from your last AGM. |
| Annual Return (AR) | Due every calendar year (within 42 days of your company’s initial incorporation,except for the first year). |
What Tax Forms Are Required?
Depending on whether your business is a partnership business, corporation, or a non-resident person, you are required to file the following forms for your profits tax liability:
- For persons other than corporations: Form BIR52
- For corporations: Form BIR51
- For non-resident persons: Form BIR54
Let’s get you up to speed
Find out more about profits tax return here.
Additionally, starting from 1 April 2019, IRD has introduced 18 supplementary forms to Profits Tax Return (BIRS1 to BIRS18) for taxpayers to report information on tax incentives and preferential regimes. The supplementary forms are part of the profit tax return and should be filed together. You can download the applicable supplementary forms, fill the form digitally, and submit the signed form together with your tax return.
What Tax Incentives Are Available?
Foreign Investment Incentives
Hong Kong does not offer any specific incentives for foreign investment, but offshore funds may be exempted from profits tax depending on its circumstances.
Foreign Tax Credits
In the event that foreign taxes are paid by a Hong Kong tax resident on derived income from a territory that has entered a Comprehensive Double Taxation Agreements (CDTA) with Hong Kong, and that income is subject to tax in Hong Kong, foreign tax credits are available. Before making a tax credit claim, taxpayers have to adopt all reasonable steps to minimise the payable foreign tax.
Do I Get Relief From Double Taxation in Hong Kong?
For the uninitiated, double taxation is also known as source-residence conflict. It occurs when two countries impose a tax on the same taxpayer – and in this context, it refers to a business.This means that the company’s income is being taxed twice, with the first source from the country where income is generated, and the second being the country of residence where payment is made. The second-mentioned is typically the home country, or where the business is from.
Through domestic tax laws or tax treaties with other countries to avoid double taxation, countries can offer different tax relief types.
Since Hong Kong adheres to the territoriality basis of taxation, this means that only earnings or sourced income in Hong Kong are accountable for taxes. This means that if your earnings are attained from a jurisdiction outside of Hong Kong, it is not subject to taxation in Hong Kong. Additionally, if you pay foreign tax on an income, it is also subject to tax in Hong Kong – which makes it a tax deductible expense.
To reduce tax rates and provide further tax reliefs, Hong Kong has a network of over 35 tax treaties with different jurisdictions.
How Do I File a Corporate Tax Return?
You need to file your Profits Tax Return by yourself. To file corporate tax in Hong Kong, simply follow these steps:
- Login to your eTax account
- Click on "Submission of Profits Tax Return" on the menu bar, and select "Continue as Taxpayer”
- Follow the instructions provided by IRD, and begin your filing process.
What Is the Penalty for Late Tax Filing?
Non-compliance is a serious issue. If you do not file your tax returns by the deadline or extended due dates, IRD will issue estimated assessments and start penalty proceedings according to Section 80(2) or 82A.
If you are found in violation, you'll be fined, and there's no maximum penalty. Additionally, an additional tax within three times the amount of owed tax will also be imposed.
Managing Your Small Business’s Taxes
Filing your taxes does not have to be taxing. Stay on top of things by preparing ahead, and bear in mind tips for a better tax filing and planning strategy.
Taxes don’t need to be tough
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