The Scope of Charge
Profits tax is charged on company carrying on a trade, profession or business in Hong Kong in respect of its profits arising in or derived from Hong Kong (excluding profits arising from the sale of capital assets).
There are three conditions under s.14 for profits tax in Inland Revenue Ordinance, as follows:
- the company must carry on a trade, profession or business in Hong Kong;
- the trade, profession or business derives profits; and
- the profits must be profits arising in or derived from Hong Kong.
Territorial Source Principle
Hong Kong adopts a territorial source principle of taxation. Only profits which have a source in Hong Kong are taxable here. Profits sourced elsewhere are not subject to Hong Kong Profits Tax. The principle itself is very clear but its application in particular cases can be, at times, contentious.
Tax Filing Requirements and Deadlines
The Inland Revenue Department (“IRD”) will issue tax return to individuals, sole proprietors, partnerships, property owners and limited companies. Such persons and corporations should complete and file the tax return together with the required documents to IRD. First set of profits tax return will be issued by 18 months from incorporation date. Should the person haven’t received the profits tax return from IRD, he/she should notify IRD its chargeability of Hong Kong Profits Tax.
The tax return of the limited company or partnership is generally posted in April of each year and the salaries tax return is usually posted in May of each year from Inland Revenue Department.
The deadline for submission of tax returns is 1 month.
Hong Kong DOES NOT have
- Sales tax
- Value added tax (“VAT”)
- Dividend tax
- Capital gain tax
Our Professional services
Our professional accountants are specialised and experienced in the Hong Kong Taxation System. Based on your situation, tailor-made a tax planning solution to minimise your overall tax liability. We offer the following practical tax solutions and services:
- Application for tax extension;
- Preparation and filing a tax return;
- Calculating the estimated tax liability;
- Tax advisory and planning preparation;
- Assist customers to reply any inquiries issued by IRD; and
- Act as the tax representative.
We also specialised in the following tax area
- Profits Tax;
- Profits Tax for self-employed (a sole proprietor or a partner of a partnership business);
- Salaries Tax for employee;
- Property Tax; and
- Stamp Duty.