Corporate Income Tax in Hong Kong

Profits tax (corporate)

Hong Kong levies profits tax on income arising in or derived from a trade, profession or business carried on in Hong Kong (territorial basis). A two-tiered rate applies, and there is no tax on capital gains or on dividends/interest paid to non-residents.

• Corporation rate — first HKD 2,000,000 of assessable profits — 8.25% % (Inland Revenue Ordinance (Cap. 112), Schedule 8)
• Corporation rate — profits above HKD 2,000,000 — 16.5% % (Inland Revenue Ordinance (Cap. 112), Schedule 8)
• Unincorporated business rate — first HKD 2,000,000 — 7.5% % (Inland Revenue Ordinance (Cap. 112), Schedule 8)
• Unincorporated business rate — above HKD 2,000,000 — 15% % (Inland Revenue Ordinance (Cap. 112), Schedule 8)
• Two-tiered rate — group restriction — Only ONE entity within a group of connected entities may elect the lower-tier (8.25%/7.5%) rate in a year of assessment (Inland Revenue Ordinance (Cap. 112), Schedule 8AA)
• Tax base — Profits arising in or derived from a trade, profession or business carried on in Hong Kong (excluding profits from the sale of capital assets); offshore-source profits generally not chargeable (Inland Revenue Ordinance (Cap. 112), section 14)
• Capital gains — Not taxable — Hong Kong has no capital gains tax (Inland Revenue Ordinance (Cap. 112))
• Withholding tax on dividends — 0% % (no withholding tax on dividends) (Inland Revenue Ordinance (Cap. 112))
• Withholding tax on interest — 0% % (no withholding tax on interest) (Inland Revenue Ordinance (Cap. 112))
• Withholding tax on royalties to a non-resident (non-associate) — Effective 4.95% (16.5% on deemed assessable profits of 30% of gross); 2.475% on first HKD 6,666,667 where two-tiered rate applies % (Inland Revenue Ordinance (Cap. 112), section 15(1)(a)/(b) and 21A)
• Withholding tax on royalties to an associated non-resident (IP previously HK-owned) — Effective up to 16.5% (deemed assessable profits = 100% of royalties); 8.25% on first HKD 2,000,000 where two-tiered applies % (Inland Revenue Ordinance (Cap. 112), section 21A)
• Profits tax return filing — Issued on first working day of April; due within 1 month, with block extensions by accounting-date code (e.g. 'D' code 31 Dec year-end ~mid-November; 'M' code 31 Mar year-end ~mid-August) ((approx — confirm)) (Inland Revenue Ordinance (Cap. 112), section 51)
• Provisional profits tax — Provisional profits tax for the following year is charged with the final assessment and is generally payable with the final tax in instalments ((approx — confirm)) (Inland Revenue Ordinance (Cap. 112), Part X)