Hong Kong tax system is quite simple, Hong Kong ranks No 1 in The Heritage Foundation 2015 for economic business freedom.
Your company is offshore: if you don’t do business in and from Hong Kong, as example if your suppliers are in China and your clients in Europe, if you don’t have a permanent office (other than your HK registered address) and a team employed in the city then you are basically achieving a Hong Kong offshore status.
With an offshore status you will NOT pay taxes in Hong Kong, while having a business registration as well as a tax certificate (business registration) in HK.
Your company is onshore: you have an office, staff in the city and you are often in Hong Kong, in this case the Hong Kong tax system is as below:
Hong Kong Profit tax : 16.5%
Hong Kong Salary tax : 15%
NO tax on Capital Gain
NO tax on Dividends
NO VAT
One of the questions often asked is about obtaining an offshore status in Hong Kong, it’s a quite delicate subject. In fact most of the clients chose to declare their activities after the first exercise this means between 12 and 18 months after the start of their operations.
By doing so you should have a very clear picture of what you do and make sure that the IRD (Inland Revenue Department) couldn’t consider that part or totality of your profits derives from a Hong Kong activity.
The Hong Kong offshore status could also be requested before starting your activities, in this case you will have to supply a lot of information and documents to a Certified Public Accountant whom will request a pre-ruling.
The pre-ruling will cost you time and money but for high turnover and profits with complex structuration it should be adopted, so you will run safely your company without worrying about the Hong Kong tax system. Total cost will be between USD 8’000 and USD 12’000.
Foreigners are often amazed by the Hong Kong tax system, considered as lax compared to their home country, you could as a matter of facts input a lot of expenses to your company and reduce your tax importantly (if you are subject to tax mainly by living in Hong Kong or having an office and employees).