Hong Kong: Tax & Auditing Requirements

As per Hong Kong company law, every company formed in Hong Kong, must file a Tax Return (it’s also called Profits Tax Return in Hong Kong) along with its audited accounts on an annual basis with the Inland Revenue Department of Hong Kong (“IRD”).

IRD issues Tax Return filing notifications to companies on the 1st of April every year. For the newly incorporated companies, the notification is generally sent on the 18th month of the incorporation date. Companies must file their Tax Return within one month from the date of notification. Companies can request for an extension, if needed. You may incur a payment of penalty or even prosecution, if you fail to submit your tax return by the due date.

When filing the Tax Return, the following supporting documents must also be attached:

  • The company’s balance sheet, auditor’s report and Profit & Loss Account relating to the basis period
  • A tax computation indicating how the amount of assessable of profits (or adjusted losses) has been arrived at

Persons, including corporations, partnerships, trustees and bodies of persons carrying on any trade, profession or business in Hong Kong are chargeable to tax on all profits (excluding profits arising from the sale of capital assets) arising in or derived from Hong Kong from such trade, profession or business. There is therefore no distinction made between residents and non-residents.

The question of whether a business is carried on in Hong Kong and whether profits are derived from Hong Kong is largely one of fact, however some guidance on the principles applied can be found in cases which have been considered by the Hong Kong Courts and the Privy Council. No tax is levied on profits arising abroad, even if they are remitted to Hong Kong.

  • Profits Tax Rate
  1. Normal rate (for the year of assessment 2008/09 onwards):

    • Corporations: %17
    • Unincorporated Businesses: %15
  2. Concessionary rate, A tax rate at 50% of the normal profits tax rate will be applied to:

    • Trading profits and interest income received or derived from qualifying debt instruments issued in Hong Kong;
    • Profits of the offshore business of professional reinsurer, or authorized captive insurer (for the year of assessment 2013/14 onwards);
    • Qualifying profits of a qualifying corporate treasury centre (for the year of assessment 2016/17 onwards); and
    • Qualifying profits of a qualifying aircraft lessor or a qualifying aircraft leasing manager (for the year of assessment 2017/18 onwards)

Sources and Further Reading

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