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Taxation of a Partnership in Hong Kong

Taxation of a Partnership in Hong Kong

Partnerships are simple business forms that have lower incorporation costs compared to corporations. When two or more individuals decide to form this type of business, they should also consider the taxation of a partnership in Hong Kong.

One of our Hong Kong company formation experts can give you systematic advice for forming a partnership and concluding an agreement between the founders.

It is important to know that there are two types of partnerships in Hong Kong: the general partnership and the limited partnership and that their differences can be important when choosing to do business in Hong Kong.

Partnership taxation in Hong Kong

The taxation of a partnership registered in Hong Kong is made on its worldwide profits. The offshore profits and those derived from the sale of capital assets are excluded. The applicable corporate income tax rate in Hong Kong is 16.5%. The profits distributed to the partners are not taxable under the corporate taxation regime, however, they are considered personal income and taxed accordingly. 

The taxation of the partnership is divided between the existing partners in as such a manner that each one is taxed according to his/her share of the profits and losses. The share is equal to the contributions made to the partnership’s capital. Each partner submits self-assessment tax returns.

A Profits Tax Return (BIR52) is issued for partnerships in Hong Kong. When a sole proprietorship in Hong Kong is converted into a partnership, the change should be notified to the Business Registration Office and the profits tax return will be adjusted accordingly.

One of our company formation agents in Hong Kong can help you with more information on changing business structures and the requirements for annual reporting.

Partnership types in Hong Kong

The partnership is that business entity established by two or more business partners. In the general partnership, each partner is liable for the debts and obligations of the business. The limited partnership includes two types of partners: the general ones and the limited ones who are only partially liable, up to the extent of their contributions. 

Investors who want to open a Hong Kong company or a partnership can contact us for more information on taxation.