Hong KongHong Kong Corporate Tax Rate: Understanding Taxation for Businesses

April 29, 2024by Tetra Consultants0
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  • The Hong Kong Corporate tax rate is recognized for its straightforward and low-tax approach, making it one of the most business-friendly environments globally. The system adheres to a territorial and flat-rate structure, imposing taxes solely on profits earned from operations within Hong Kong. Profits sourced from outside the region are exempt from taxation, even if remitted to Hong Kong.  
  • This approach enhances Hong Kong’s appeal as a hub for investment in the Asia-Pacific region. Tax incentives are also available to increase competitiveness and support business growth. If you plan to register company in Hong Kong, you will benefit from this advantageous tax regime. 

Hong Kong corporate tax rate 

In Hong Kong, corporations have two options for tax rates: 

Single tier Hong Kong corporate tax rate 

  • Under the single-tier corporate tax system, corporations in Hong Kong are subject to a 16.5% tax on their assessable profits, while unincorporated businesses face a 15% tax rate. 

Two-tier Hong Kong corporate tax rate 

  • The Two-Tier Profits Tax Regime in Hong Kong offers reduced tax rates for the first HK$2 million of assessable profits, benefiting both corporations and unincorporated businesses. This regime has been in effect since the 2018/19 assessment year and is designed to alleviate the tax burden on small and medium-sized enterprises (SMEs). Tetra Consultants can guide you through accounting and tax obligations, ensuring your company remains compliant with all accounting and tax requirements. 
  • For corporations, the first HK$2 million in profits is taxed at half the current rate (8.25%), while any profits beyond this threshold are taxed at the standard rate of 16.5%. 
  • For unincorporated businesses, the first HK$2 million in profits is taxed at half the current rate (7.5%), and profits above this level are taxed at the standard rate of 15%. 
  • Only one entity within a group of connected entities can benefit from the two-tier tax rates. The group must designate the entity that will receive this benefit and make the appropriate election. 

Tax rate: 

Assessable Profits 

Corporations 

Unincorporated Businesses 

First HK$2 million  8.25%  7.5% 
Over HK$2 million  16.5%  15% 

 

  • For the assessment year 2017/18, there was a one-time reduction of 75% on profits tax, with a cap of HKD 30,000 per case. 

Exclusions from the two-tiered profits tax regime 

  • Companies that have chosen preferential half-rate tax schemes such as professional reinsurance firms, captive insurance firms, corporate treasury centres, and aircraft leasing companies are not eligible for the two-tiered profits tax regime. 
  • Income from qualifying debt instruments, including interest, gains, or profits, is already taxed at half the usual rate (7.5% for unincorporated businesses and 8.25% for corporations). 
  • In groups of companies based in Hong Kong, only one company within the group can benefit from the two-tiered profits tax regime.
  • A concessionary tax rate of 50% of the standard profits tax rate will be applied to trading profits and interest income from qualifying debt instruments (QDIs) issued in Hong Kong, as well as to the offshore business activities of professional reinsurance companies. 
  • Profits from QDIs, which are taxed at 8.25% for corporations and 7.5% for unincorporated businesses, do not count toward the HK$2 million threshold for the two-tier tax rates. This allows businesses with profits from QDIs to maintain the half-rate benefit on all such income while also taxing their first HK$2 millions of assessable profits not from QDIs at 8.25% or 7.5%, respectively. 

Tax incentives available in Hong Kong 

Profits tax exemptions are available for eligible onshore and offshore funds operating in Hong Kong. These tax benefits include: 

  • Incentives for high-value manufacturing businesses include a 100% write-off on new expenditures for plant and machinery related to manufacturing, as well as for computer hardware and software owned by end-users. 
  • Renovation and refurbishment capital expenditure on business premises can be written off over a 5-year period. 
  • Mutual funds and trusts receive tax concessions. 
  • Interest derived from deposits placed in Hong Kong with authorized institutions after 22 June 1998 is tax-exempt, excluding financial institutions. 
  • Full deduction is available for capital expenditure on environmental protection machinery and environment-friendly vehicles. 
  • Since the 2010/11 assessment year, there is a 100% profits tax deduction for capital expenditure on environment-friendly vehicles in the purchase year. 
  • Captive insurers benefit from a 50% reduction in profits tax on offshore risk insurance business since the 2013/14 assessment year. 
  • Qualifying aircraft lessors and managers enjoy half the corporate tax rate on qualifying profits and a tax base concession on net lease rentals since 1 April 2017. 
  • All funds operating in Hong Kong can enjoy profits tax exemption on transactions in specified assets, starting 1 April 2019, given they meet certain criteria. 
  • Since 1 April 2018, profits tax deductions apply to capital expenditure for purchasing intellectual property rights such as patents, copyrights, trademarks, and more. 

How to file Hong Kong corporate tax rate? 

The Inland Revenue Department (IRD) in Hong Kong typically releases corporate profits tax returns on the first working day of April each year. Companies can request an extension within one month of receiving the Profit Tax Return (PTR). Depending on the circumstances, the deadline can be extended. 

Normal issue date  Accounting year ended between  Normal filing date (unrepresented / represented)  Due date for tax payment 
First working day in April  1 April to 30 November  2 May  As stipulated in the notice of assessment, generally between November of the year in which the return is issued to April of the following year. 
First working day in April  1 December to 31 December  2 May / 15 August  As stipulated in the notice of assessment, generally between November of the year in which the return is issued to April of the following year. 
First working day in April  1 January to 31 March  2 May / 15 November  As stipulated in the notice of assessment, generally between November of the year in which the return is issued to April of the following year. 

Conclusion 

  • Hong Kong’s corporate tax rate of 16.5% is competitive and advantageous for businesses seeking a favourable tax environment. From Tetra Consultants’ perspective, the low tax rate, along with the simplicity of Hong Kong’s tax system, makes the region an attractive destination for international companies. We offer various services, including corporate bank account opening and international trademark registration, to help businesses establish and thrive in Hong Kong. Our comprehensive suite of services ensures smooth navigation through the business landscape and successful market entry for our clients. 
  • Contact us to know more about Hong Kong corporate tax rate and our team will revert back in 24 hours. 

Tetra Consultants

Tetra Consultants is the consulting firm that works as your advisor and trusted partner in your business expansion. We tell our clients what they need to know, instead of what they want to hear. Most importantly, we are known for being a one-stop solution for our valued clients. Contact us now at enquiry@tetraconsultants.com for a non-obligatory free consultation. Our team of experts will be in touch with you within the next 24 hours.

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