Corporate Tax in Hong Kong

Hong Kong is renowned for its low tax regime which makes it a place where foreign investors choose to engage in business activities. The corporate tax system in Hong Kong follows a two-tiered rate and territorial principle. In addition, many tax incentives have been introduced in order to increase the region’s competitiveness. For further details on corporate tax in Hong Kong and other legal tax issues, it is recommended to seek counsel from a Hong Kong law firm.

Current Hong Kong corporate tax rate

Corporate tax rate in this region has been 16.5% since 2008/09 (with a two-tiered regime since 2018/19) and it has reached 17.5% in 2003/04-2007/08 and 16% in 1998/99-2002/03. Momentarily the corporate tax rate in Hong Kong is as follows:

– 8.25% on the first HK$2 million of assessable profits and 16.5% on the remainder for corporations;

– 7.5% on the first HK$2 million of assessable profits and 15% on the remainder for unincorporated businesses.

Hong Kong has adopted a territorial basis of taxation, therefore tax is payable by every person (including corporations, sole proprietorships, and partnerships) engaging in trade, a profession or a certain business on its territory, on the profits arising from those operations carried on in Hong Kong. Tax residence is generally irrelevant for profits tax and matters mainly under double tax treaties, where a company is treated as a Hong Kong resident if it is incorporated in Hong Kong or managed/controlled from the city.

Corporate tax is not applicable on profits derived from carrying on a business, a profession or a trade whose source is outside Hong Kong. Our lawyers in Hong Kong can provide you with further details on profits tax and its implications.

The territorial principle applies to both residents and non-residents, thus, if a non-resident gains profit from Hong Kong, he is liable to pay the corporate tax in the area.

There is no surtax applicable in Hong Kong; however, for fiscal years beginning on or after 1 January 2025, a 15% global minimum tax (IIR and the Hong Kong minimum top-up tax) applies to multinational groups with consolidated revenue of at least EUR 750 million. The Special Administrative Region has no special holding company regime, but since 1 January 2023 the foreign-sourced income exemption (FSIE) regime exempts foreign-sourced dividends and equity disposal gains received by multinational group entities that meet the economic substance or the participation requirement. 

Requirements when filing corporate tax in Hong Kong

Generally, every year in April, the Inland Revenue Department (IRD) issues the corporate tax returns. Businesses should file the profits tax return in a month’s time after the date of issue. For newly registered businesses, the IRD issues the profits tax return eighteen months after the date of incorporation.

A set of returns has to be filed by the company, which includes:

• • the specific profits tax return form (as received from the IRD);
• • an additional form (for the company’s tax and financial data);
• • a certified copy of the balance sheet;
• • a tax computation stating the profit and loss.

The tax year in Hong Kong starts of April 1 and ends the next year on March 31. Companies in Hong Kong may receive an extended period for filing tax returns if their financial year ends on a different date. 

Our law firm in Hong Kong can advise you on any legal tax issues, as well as on corporate tax in Hong Kong, so do not hesitate to contact us.