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Business Taxation for Expats in Hong Kong

Submitted: April 2014

This guide covers tax issues for limited companies. For tax issues regarding self-employment, please see: Taxation - Employment Taxation for Expats in the Hong Kong.

Registration

You are required to inform the Inland Revenue Department (IRD) within one month of a business starting activity.

Hong Kong treats all companies the same for tax purposes, regardless of structure or form.

The most commonly used forms of doing business in Hong Kong are:

  • limited liability companies (both public and private)
  • branches or representative offices
  • partnerships, and
  • sole proprietorships.

Hong Kong has a one-stop company incorporation and business registration process. The same process can be used for paper or electronic applications. The simplest method is using the online e-Registry at the Companies Registry. The application is made on Form N1 for non-Hong Kong companies, and Form NC1 for local companies. You must provide a business name, the nature of the business and the date of commencement of activities. In addition, you will need to provide a Memorandum and Articles of Association; these can be produced automatically using a standard set on the website. Business Registration Office Forms IRBR1 for Hong Kong companies, or IRBR2 for non-Hong Kong companies, are also provided for completion. The fee for business registration for three years is HK$5,950 for a three year certificate. Penalties exist for non-registration. For more information, see here & here.

If you need to contact the IRD on business tax matters, you can find the contact details here

Corporate Tax (Profits Tax)

Your company is only liable for profits tax on taxes trade or business profits arising in, or derived from, Hong Kong. The IRD tax year for companies runs from 1 April to 31 March.

A Hong Kong company must file an online Company Tax Return form BIR51, including any required supporting documents, within 1 month of the date of issue; which will depend on your company’s accounts year end date. Generally a newly registered business will receive its first return approximately 18 months after commencing activity. Hong Kong operates a provisional assessment system. Under this system, a first instalment of 75% of the previous year’s tax is payable in the final quarter of the tax year, with the remaining 25% due approximately 3 months later. Any adjustments, as a result of the actual tax return, are either added or subtracted from the following year’s first instalment: For more information on tax returns see here.

Hong Kong has a flat corporate tax rate on profits. For the year starting 1 April 2014 this is 16.5%. Exceptionally, the tax rate for unincorporated businesses is 15%.

There is no tax on dividends or capital gains in Hong Kong. In certain cases, profits tax will be payable on speculative profits from trading in capital assets. This is decided on a case by case basis.

 

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