| Hong Kong Tax and Accounting Regulations |
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The tax system in Hong Kong is simple and straightforward. Hong Kong’s taxation policy is based on the principle of territorial source rather than residency. It means that individuals and companies born in Hong Kong need to pay tax only on the income or profits earned from activities actually taking place in Hong Kong. If you are not involved in any activities in Hong Kong, you may not pay tax at all.
Hong Kong taxes are categorised in to the following: |
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Profits Tax – tax imposed on a company’s trading profit |
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Salary Tax - tax imposed on an individual’s income |
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It is to be noted that there are no taxes on capital gains, and no withholding taxes on dividends or interests. There are no sales taxes as well.
Brooks Consulting offers you the most efficient tax strategy to improve your business. To offer you a coherent offshore tax planning strategy, Brooks Consulting guides you to identify the tax payable and guide you as to which jurisdictions offer the best tax structure. We also advice you on the exemptions and incentives available from the tax plan. A coherent offshore tax planning strategy will help you maximise the efficacy of your company.
We identify the most favourable and tax efficient jurisdiction where you can incorporate your company. Our tax planning advice will help you identify the tailor-made tax strategy to suit your business.
Hong Kong is a low-tax zone with a territorial tax system. While Hong Kong is considered as an ‘offshore’ jurisdiction for many, the government classifies it otherwise. Because the tax rates are relatively simple and low in Hong Kong, Hong Kong is considered as having an advantageous low tax rate featuring a Territorial Tax System. |
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| How are the Taxes Rated in Hong Kong? |
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Corporation Tax – The rate for Corporation Tax rate is currently 16.5% .
Income Tax – Since Hong Kong follows a territorial taxation principle, any income earned outside Hong Kong is not subject to income tax in Hong Kong. Here taxes are not imposed on the residential status of the tax payer, but on the basis of the territory where the profit is earned. For this reason, income earned from foreign sources is exempt from income tax in Hong Kong.
The following cases define income not derived from Hong Kong: |
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If contract is agreed and signed outside Hong Kong |
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If services are rendered outside of Hong Kong |
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If capital of the company is employed outside of Hong Kong |
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If title of goods is passed outside Hong Kong |
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If payment of expenses incurred for providing services or delivery of goods is conducted outside Hong Kong |
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If the goods are stored and maintained outside Hong Kong |
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Hong Kong income and deemed Hong Kong source income are subject to income tax, so if any of the activities mentioned above are conducted in Hong Kong, the revenue generated will be considered as Hong Kong income and is subject to income tax.
It is to be noted is that any purchase or sales of commodities manufactured in Hong Kong is considered as Hong Kong source income. However, trade in commodities is treated as wholly offshore or onshore for tax assessment. Even if a small trading activity conducted in Hong Kong contributes to the whole profit, it will be classified as originating onshore and is therefore subject to income tax in Hong Kong. For issue of agency agreements, the source of income is assumed to be originated from where the duties are performed. |
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| NOTE: |
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Capital Gain Tax (CGT) - There is no CGT in Hong Kong.
Withholding Tax – There is no withholding tax on interest paid to non-residents. However, any royalty income received from a Hong Kong source is subject to income tax.
Dividends – Income from dividend is excluded from income tax. There is no withholding tax on outgoing dividends.
Capital Duties – A capital duty or 1.01 % is payable on increase of share capital. |
