Taxation
Hong Kong is one of the low tax regime in the world. Apart
from the simple tax system, Profits Tax liabilities only arise on profit deriving in Hong
Kong from trade, profession or business. In short, only "onshore profit"
are chargeable to HK Profits Tax and there is no Capital Gain Tax, Value Added Tax
(VAT), Sales Tax nor Dividend Tax . Interest earned from deposit with a financial
institution is also exempted from the HK Profits Tax.
The current Profits Tax rate is 17.5%.
Whether profit earned will be subject to HK Profits Tax is a
matter of fact. In general if a company satisfy the following requirement, their profits
are generally considered as offshore profit and is not liable to HK Profits Tax.
 |
There is no permanent establishment in HK, e.g. place of business,
office, shops or workshops |
|
There is an overseas office where the company's director and staff
resides and managing the business |
|
There is no staff employed in HK and the directors/staff travel to
HK on occasionally basis |
|
The sales and purchase contracts are negotiated and executed
outside HK |
|
There is no HK based supplier and customers |
|
The shipment of goods is directly from a port outside HK to
another port outside HK |
|
The goods physically inspected outside HK |
The company if find its transaction satisfies the above
requirements are suggested to claim their profit as offshore to the HK Inland Revenue
Department for assessment. However, it is necessary for the company to keep strong
evidence to prove the above. These may include telephone bills, faxes, memorandum of
meeting, shipping documents, overseas lease, sales orders and purchase orders.
For filing a Profits Tax Return (BIR51), an audited financial statements is required for the
Inland Revenue Department (IRD) to assess the profit. In additions, a "Tax
Computation" worksheet is required to reconcile the audited financial
statement to the assessable profit and providing details on the various allowances or
offshore profit claimed according to the Hong Kong Inland Revenue Ordinance.
In general case, we provide the tax computation and tax return
preparation at HK$2,000 per year of assessment. This does not include the
audited financial statements and the subsequent follow up work with IRD or
objection work if required.
N.B. It must be stressed the above information is provided
for reference and cannot be relied upon for any business decisions. Readers are suggested
to seek professional advice on your individual case or contact Mr. Keith Wong at (852)
2739 9312 or Biz@keithwongcpa.com for
further enquiry.