Hong Kong’s corporate tax rates are the lowest among the international financial city.
16.5%, if annual net profits are HK $ 2,000,000 or more.
8.25% if annual net profits are below HK $ 2,000,000.
In addition to the above, given that Hong Kong adopts a territorial taxation system, if a Hong Kong company’s source of income is originated from a source outside of Hong Kong, such company may apply for an offshore tax exemption. Upon Inland Revenue Department’s approval, part or all of it will be exempt from their corporate tax.
Audit obligations
All Hong Kong Limited Companies must undergo an annual audit by a licensed CPA. For completeness, such audit is not necessary for collective partnerships, partnerships, and sole proprietors.
Newly incorporates companies have exemption where such company may complete the audit within 18 months after the establishment.
Tax Return (Profits Tax Return)
Hong Kong corporations are required to file tax returns every year. A tax return (Profits Tax) will be sent to the registered address every year. The deadline for submission is one month after issuance in principle, but the deadline for submission varies depending on the accounting period.
If there is a settlement date between April 1, 2020 and November 30, 2020, “Code N”
If there is a closing date between December 1, 2020 and December 31, 2020, “Code D”
If there is a closing date between January 1, 2021 and the end of March 31, 2021, “Code M”
The deadline for submission for each code is as follows
Code N: Until June 15, 2021
Code D: Until August 30, 2021
Code M (if profitable) until January 31, 2022
If the annual gross revenue is HK$2,000,000 or less, the audit report does not need to be attached when the corporation submits a tax return.
Tax treatment when a Hong Kong corporation invests
When a Hong Kong corporation invests, there is no tax on the return on the investment if certain requirements are met. The Inland Revenue Department Tax Department determines various factors such as the business itself is not an investment business, the investment is long-term, and the return on investment is outside Hong Kong. The auditor should first decide whether or not investment income is subject to taxation.