Hong Kong Taxation

Profit Tax Introduction

Profits tax is payable by every company carrying on a trade, profession or business in Hong Kong on profits arising in or derived from Hong Kong. Profits which have a foreign source (often termed "offshore profits") are generally beyond the territorial scope of Hong Kong's taxation system, including those derived by locally incorporated companies.

Tax Filing due date

Companies registered in Hong Kong are generally tracked by the tax authority and issued with a tax return for the first anticipated "year of assessment" after 18 month since incorporation. Even there is no tax return has been issued, however, the company has an obligation to notify the tax authority if assessable profits have arisen. The month in which the accounting period ends generally determines the deadline by which the company must file its tax return and financial statements for each year of assessment. Typical filing deadlines are,

Financial year ended		Filing due date
Between 1 January and 31 March		15th November of the calendar year in which the financial year ended
Between 1 April and 30 November		2nd May of the calendar year following which the financial year ended
Between 1 December and 31 December		15th August of the calendar year following which the financial year ended

Non-Taxable Items

• （1）Capital gains
• （2）Offshore profits
  
• （3）Deposit interest
  
• （4）Dividends

Provisional Profits Tax

Notice of assessment will be issued after the tax return has been filed with the tax authority. For tax collection purposes, provisional tax will be payable during the tax year based on the preceding year's tax liabilities. The provisional profits tax paid will be credited against the final profits tax assessed.

Double Tax Agreement / Arrangement (DTA)

Hong Kong tax liabilities and filing obligations can also arise on overseas payments for the use of intellectual property (normally 4.95% of the royalties payments but a reduced rate may be applied when a comprehensive double tax agreement / arrangement (DTA) is applicable and on Hong Kong consignment agents who sell goods on behalf of a non-resident (0.5% of the gross sales proceeds). These both operate like withholding taxes.

Hong Kong has so far entered into the DTA with Austria, Belgium, Brunei, Canada, the Czech Republic, France, Guernsey, Hungary, Indonesia, Ireland, Italy, Japan, Jersey, Kuwait, Liechtenstein, Luxembourg, Malaysia, Malta, Mexico, the Netherlands, New Zealand, the People's Republic of China (PRC), Portugal, Qatar, Spain, Switzerland, Thailand, the UK and Vietnam.

Salaries tax Introduction

Charged on Hong Kong sourced remuneration inclusive of certain benefits in kind. Housing benefit is one source of relief, and is subject to preferential tax treatment, generally at an equivalent rate of 10% of an employee’s non-housing remuneration. Other forms of relief include: (1)60 days exemption” rule for both Hong Kong and foreign employment. (2)Days-in-days-out” calculation rule for foreign employment.

Tax rates

The tax charge is the lower of: (1) the standard rate of 15% applying to net chargeable income before personal allowances. (2) the progressive rates applying to net chargeable income.

	2015/16	2016/17
First HK$40,000 at	2%	2%
Next HK$40,000 at	7%	7%
Next HK$40,000 at	12%	12%
On the remainder at	17%	17%

Personal allowances

	2015/16	2016/17
Basic allowance	120,000	132,000
Married person’s allowance*	240,000	264,000
Child allowance (each) 1st to 9th child
Year of birth	200,000	200,000
Other years	100,000	100,000
Dependent parent or grandparent allowance (each)
Aged 60 and above
Residing with taxpayer	80,000	92,000
Not residing with taxpayer	40,000	46,000
Aged 55 to 59
Residing with taxpayer	40,000	46,000
Not residing with taxpayer	20,000	23,000
Dependent brother or sister allowance (each)	33,000	33,000
Single parent allowance	120,000	132,000
Disabled dependent allowance (each)	66,000	66,000

Other Tax Deductions

	2015/16	2016/17
Self-education expenses	80,000	80,000
Home loan interest	100,000	100,000
Elderly residential care expenses	80,000	92,000
Mandatory contributions to recognized retirement schemes	18,000	18,000

Property Tax Introduction

Charged at the standard rate of 15% on 80% of the rent receivable on non-corporate owners of real estate in Hong Kong. Corporate lessors of real properties are subject to Profits Tax.