All about business tax in Hong Kong 

Running an offshore company in Hong Kong is the easiest way to thrust an enterprise into international realms. Hong Kong has a business driven economy with a flexible tax system that leaves most of the profits to the investor. Once you have set up a company to take advantage of the stable administrative system and the enormous market potential, you also need to understand business tax obligations. Here is all about business tax in Hong Kong

What part of business proceeds is taxable?

The system of tax is constructed on territorial revenue generation principle as opposed to management and control. Therefore, as a Hong Kong-based company, your only tax obligation is for profits generated in Hong Kong.

Today, the tax is 16.5% on assessable profit. Besides, there is no inheritance tax, no taxes on capital gains, no withholding taxes on interest paid to foreign creditors, and no withholding taxes on dividends paid to foreign shareholders.

Period of assessment and badges of trade

The year of evaluation commences April 1st and ends on March 31st in the subsequent year. IRD accepts the estimate of profits completed by a certified accountant for the year drawing to a close. The tax law also follows the same period.

Notably, all businesses are subject to pay their taxes unless a professional accountant can proof that no profit was made. To proof the nature of any trade, Hong Kong administration considers the following badges.

  • The intention of making profit by tax profit
  • Subject of disposing of a commodity (was it to make a profit)
  • Period of ownership
  • Frequency of related transactions
  • key reasons for disposing of a commodity

How to do business and not pay tax in Hong Kong?

Hong Kong is a major destination for foreign investors from all over the world. When clients come to Hong Kong, they can build their operations and operate tax-free even when the management is based there.

However, it is important to seek expert advice to operate tax-free to avoid getting into conflict with the Hong Kong administration. Because Hong Kong is a business economy, it does not provide a tax haven. Therefore, all companies have to pay their taxes on all the profits they make in Hong Kong and not abroad.

Hong Kong’s favourable double tax treaties with Luxembourg and Belgium

The Hong Kong administration entered into double tax agreements with Belgium and Luxembourg.

This is a unique parent –subsidiary structure of operations between Hong Kong and any of two countries for higher tax efficiency for investors. If you come from Belgium or Luxemburg, this arrangement will make it easy to file returns, retain more profits and take your company to the next level.