Q: Does Hong Kong need to levy tariffs on imported/exported commodities?
Generally imported/exported commodities need not be levied tariffs, except tobacco, liquor and petroleum. But import/export commodities must be declared at customs.
Q: What restriction will Inland Revenue Ordinance have on deduction for donation?
Donation granted to recognizable charitable organisation is permitted to be deducted, but total donation as required shall not be less than $100 and not more than 35% of assessable profits.
Q: What is the year end of Hong Kong company?
It is generally 31 March to 31 December of each year for the basis period of taxation according to custom. Hong Kong company has maximum 18 months for the first year’s basis period of taxation.
Q: Can the profits of a Hong Kong company offset the losses of previous year?
Losses incurred in a taxable year can be carried forward and used to offset the profits of the company in subsequent years.
Q: In which case will Hong Kong company be free from Profits Tax?
If the corporate profits do not arise from Hong Kong, and the company has not set up an office in Hong Kong nor hired Hong Kong employees, then its earned profits will be exempt from Profits Tax.
Q: My Hong Kong company only opens account at bank, to collect and pay bills for other China Company, then does this Hong Kong company need to process accounting, auditing and tax declaration?
A: Yes. Because company incorporation is profit-oriented, even if the company in Hong Kong only performs the role of collecting and paying for others, it shall be deemed as agency service business, and its income shall be the commission for collection and payment for others.
Q: What is Provisional Profits Tax payable?
A: Profits Tax shall be levied according to the actual profits of the taxable year. Since the profits of one year shall be determined only after the end of year, Inland Revenue Department will levy provisional tax before the end of that year. After the profits of relevant year are assessed in the following year, the provisional tax already paid can be deducted from the Profits Tax payable of this year.
Q: My Company only opens an account at a foreign bank in China and does not open account in Hong Kong; shall the business conducted by my company be free from tax declaration?
A: No. According to Hong Kong laws, all Hong Kong company has the obligation to declare its financial condition to Inland Revenue Department, whether its business takes place in Hong Kong or not. If this company does not have its source of income in Hong Kong, it can apply to Inland Revenue Department for exemption from taxation.
Q: What tax does Hong Kong company need to pay every year?
A: Hong Kong companies are only required to pay profits tax annually. The profits tax rate for the first $2 million of the corporations’ profits is 8.25% and profits above that amount will continue to be subject to the tax rate of 16.5%; for unincorporated corporations in sole proprietorship or partnership, the two-tiered profits tax rate is 7.5% and 15%. If the company is not profitable, there is no need to pay profits tax.
FAQs of Hong Kong Taxaton 1

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