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Taxation of Sole Proprietorships in Hong Kong

Taxation of Sole Proprietorships in Hong Kong

Individuals who want to start their own business can be a self-employed individual if they choose to work as a sole proprietor or as a partner in a partnership. The sole proprietor is often chosen by many investors in Hong Kong who want to start their own business.

The taxation of the sole proprietorship in Hong Kong follows the territorial principle of taxation in Hong Kong, however, the requirements are different than those for corporations.

Our Hong Kong company formation agents talk about the taxation principles and the characteristics of the sole proprietorship.

Taxation and reporting for sole proprietorships in Hong Kong

Sole proprietorship owners in Hong Kong need to fill in a special tax return form and declare their gross income. The profits tax is payable at the standard rate in Hong Kong, for the assessable profits. Sole proprietors may claim expenses and deductions.

The standard corporate income tax rate in Hong Kong is 16.5% and a lower rate of 15% applies to unincorporated businesses. Hong Kong has a territorial taxation system, meaning that generally only the income derived from the city is subject to the profits tax.

Sole proprietorships in Hong Kong

Self-employed individuals who choose to work as a sole proprietor need to follow the basic record and accounting principles. These are lighter than in the case of corporations and can be summarized as follows:

– maintain the business records for at least seven years;

– prepare the accounts based on the existing accounting records;

– fill in and file the tax return (report the business profits and/or losses).

The sole proprietorship can be changed into a partnership in Hong Kong or vice versa, if investors decide that this is the most suitable option for their business.

One of our experts who specialize in company formation in Hong Kong can answer any questions about the sole proprietorship or any other business structures in the city.

Contact us for more information about taxation and other company formation matters in Hong Kong.