Know About the Corporate Tax Regime in Hong Kong

Hong Kong Tax Rules: Be More Aware of the Corporate Tax Regime in Hong Kong

You might have heard it before, and if not, Hong Kong has one of the best tax regimes in the world. The tax rates in Hong Kong have been devised with the sole purpose of making business simple in the place. And if you are thinking of starting a business in Hong Kong, then you are thinking of being benefitted by one of the most attractive tax schemes in the world. Well, here’s everything you need to know about the corporate tax regime in Hong Kong.

 

Corporate Tax Regime in Hong Kong: How Much is the Tax

The corporate tax in Hong Kong can go to a maximum 16.5% on the income derived in Hong Kong. This used to be the only case till last year, but the Hong Kong company tax rate 2018 has been made it even simpler for businesses. As of now, in the YA 2018/19, Hong Kong corporates pay 8.25% for the first HKD 2 million they make and 16.5% for anything after that. This system is also known as the two-tiered tax system, and in case there are two or more connected business entities, the two-tiered tax system is only applicable to one of them.

To be straightforward, that is the only company tax you need to pay on Hong Kong. Hong Kong businesses don’t have to pay any other taxes, so Hong Kong Capital Gains Tax, as well as the Hong Kong Dividend Tax rate, is 0%. Another plus point is that there is no Value Added Tax or VAT in Hong Kong. Hong Kong companies only receive taxes for the income they make inside the borders and any, so dividends from overseas are not subject to any tax.

Well, this is all about the numbers. Anyway, there are some other facts you should know about the taxation in Hong Kong.

 

Who is Subject to the Corporate Tax Regime in Hong Kong?

To make things clearer, the Inland Revenue Ordinance has issued these conditions to specify the parties needing pay the Hong Kong Profits Tax.

• The individual carries a trade, profession or business in Hong Kong
  
• Trade, profession or business generates profit
  
• The profits have been made in or derived from Hong Kong

 

 Other Tax Rates in Hong Kong

Well, you know about the Hong Kong corporate tax rate, which is cool, but you will need to know about other taxes especially if you are a foreigner moving to Hong Kong to run the business. The good thing is that the Hong Kong income tax for foreigners is the same as for the residents of Hong Kong, so you don’t necessarily need a special calculator. The personal income tax progresses from 2% to 17% depending on the income level. The standard rate in Hong Kong is taken to be 15%. One thing to note is that depending on your country; you might need to file tax returns back home, too.  

Any person residing in Hong Kong for more than two months are subject to the salary tax, or the income tax. The table below elucidates more on the Hong Kong personal taxes.

 

Income	Taxes
1-40,000	2%
40,001-80,000	7%
80,001-120,000	12%
Above 120,000	17%

 

Note that all these rates are in Hong Kong Dollars (HKD). 1 HKD is equal to approximately USD 0.13. Of course, it depends on when you are reading this article.

 

Hong Kong Corporate Tax Filing Date and Where You File it

The corporate tax regime in Hong Kong is moderated by the Inland Revenue Department. Accomplish the filing of tax returns in Hong Kong within a month from the date of company registration. This goes the same for the personal income tax and depending on the type of the taxes you are filing; there are different forms you need to fill. Here are the links for that.

For Profit Tax Returns for Companies, click here. 
Find Profit Tax Returns for Individuals here. 
For Profit Tax Returns for Non-Resident Individuals, click this link. 

As you can see, the corporate tax regime in Hong Kong is just suited for those who want a great location to work in their business.