How Does Hong Kong Profits Tax Work?

Profits tax is charged on profits arising in or derived from Hong Kong. Profits sourced outside Hong Kong are generally not taxable, though you must apply for an offshore tax exemption if eligible.

Key points:

• Tax applies to both corporations and unincorporated businesses.
• The tax rate for the first HK$2,000,000 of profits is 8.25% for corporations and 7.5% for unincorporated businesses.
• Profits above HK$2,000,000 are taxed at 16.5% for corporations and 15% for unincorporated businesses.
• There is no distinction between residents and non-residents - tax depends on the source of profits.

Filing:

• The Profits Tax Return (PTR) is issued by the HKIRD, normally on the first working day of April each year.
• Deadlines: Depending on your financial year-end, the PTR is due between one month after issue (for Nov year-ends) and 15 November (for March year-ends).
• Newly incorporated businesses receive their first PTR 18 months after incorporation.

Required documents:

• Profits Tax Return forms (PTR + supplementary forms).
• Certified Balance Sheet, Auditor’s Report, and Profit & Loss Account.
• Tax computation showing assessable profits or adjusted loss.

Offshore profits: Profits derived outside Hong Kong may qualify for 0% profits tax, subject to HKIRD approval and Offshore Claim requirements.