By Vlad Cuc, specialist in company formation matters
The corporate tax rate in Hong Kong is set at 16.5%. Because Hong Kong is a special administrative region of the People’s Republic of China, this corporate tax applies to profits produced by Hong Kong companies only in Hong Kong. Other profits are exempt from tax in most cases and profits derived from certain securities or types of business are exempt from tax or have a special tax rate.
The basis of corporate taxation in Hong Kong is residence: any type of company is considered a tax resident if it is incorporated in Hong Kong or it is managed from Hong Kong.
After opening a company in Hong Kong, foreign investors must register the company for tax purposes and observe the applicable legislation for companies and the adjacent taxation method. Our company formation specialists in Hong Kong can help you in this matter with specialized tax advice.
The video below summarizes the principles of corporate taxation in Hong Kong:
Corporate taxation in Hong Kong
Hong Kong has a low and simple taxation regime. This makes it an ideal destination for investments in the Asian region. The Hong Kong tax system is territorial and tax is levied on income produced in the city. Any profits produced by a company operating here are subject to the corporate tax, also known as the profits tax. The general rate is 16.5% but a reduced rate of 15% applies for unincorporated companies. There is no surtax and no alternative minimum tax. No participation exemptions apply and there is no special holding company regime.
Companies in Hong Kong, including partnerships, trustees, and persons carrying out any trade are charged on their profits made in Hong Kong, excluding sales of capital assets. Residents and non-residents are treated in the same way when it comes to the profits tax. An exemption from the profits tax can be applicable in the case of offshore funds.
Other taxes in Hong Kong
The corporate tax is not the only applicable tax for companies in Hong Kong. Other taxes like the property tax or the stamp duty apply. Also, business owners need to comply with the tax obligations for business operators. Our company formation agents in Hong Kong can give you complete details regarding these obligations and the provisions regarding tax returns in Hong Kong.
Hong Kong imposes no withholding tax on dividends and interest and foreign companies, including branches and subsidiaries, can benefit from the double tax treaties signed between the city and other tax jurisdictions.
Usually, one financial year in Hong Kong is assessed from April 1st to March 31st the second year. However, the end date can be variable and the month in which the company’s financial year ends determines the end date for submitting the tax returns and financial statements.
Hong Kong has signed a number of double tax treaties with countries worldwide that allow for a single point of taxation (in the country where the profit is produced) when the investor is a resident of both jurisdictions that have signed the treaty.
Our company incorporation representatives in Hong Kong can help you with tax advice and tax planning in Hong Kong. Please contact us for more information.