The Guide to Filing Hong Kong’s Profits Tax Returns [2025]

Hong Kong is well-known for having a simple tax system with a low tax rate. But how would you actually file your tax returns and calculate your assessable income? This article will cover details of how an average company in the territory files their annual profits tax return.

What are the current profits tax rates in Hong Kong?

Hong Kong applies a different two-tiered profits tax rate for both limited companies and sole proprietorships / partnerships. Qualified limited companies can have their assessable income taxed by 8.25% on the first HK$2 million profits, and 16.5% on any remaining profits over HK$2 million. Meanwhile, sole proprietorships and partnerships pay 7.5% and 15% on those same profits respectively.

Limited Companies

Sole Proprietorships and Partnerships

What if I control multiple companies?

If a single person or holding company controls multiple companies, only one of the companies is qualified to take advantage of the two-tiered profit tax rate. The Hong Kong IRD refers to these companies as “connected entities”, which is defined where one company controls another company in a parent and subsidiary relationship, or where both companies are controlled by the same person or holding company.

When do I need to file my profits tax returns?

The Hong Kong fiscal year begins on April 1st and ends on March 31st of the following year. However, the tax filing date of each company will depend on the financial year end date the company chooses. The table below shows the annual Hong Kong corporate tax filing due dates for each financial year end.

As the financial year of the company closes each year, the Hong Kong IRD allows companies approximately 6 to 9 months to prepare all necessary documents for their corporate tax filings. Newly registered businesses will be issued their first profits tax return 18 months after incorporation.

What do I need to prepare with my profits tax return?

Along with a filled profits tax return form issued by the IRD, limited companies will need to include some additional documents as support, such as:

• A certified copy of the auditor’s report, your balance sheet and P&L account
• The tax calculation of the assessable profits
• A supplementary form from the IRD of your tax and financial data

Do dormant companies in Hong Kong need to file profits tax returns?

If a dormant Hong Kong company has received a Profits Tax Return from the Hong Kong IRD, the company will need to file the Return before the due date, but will be allowed to submit it without supporting financial statements.

Do offshore companies in Hong Kong need to file profits tax returns?

An offshore company in Hong Kong is a business that sources all its profits from outside of Hong Kong. These companies usually do not employ any staff within Hong Kong and carry out their business activities outside of Hong Kong. Despite their lack of activity, these companies still need to file their profits tax returns and offshore claim annually. An offshore claim provides  an argument to the IRD as to why the business qualifies as an offshore company, and may sometimes be asked to provide additional back up evidence to the IRD to support their claim.

How do I calculate my assessable income? What deductions are available?

On top of the two-tiered tax rate, the IRD also offers numerous deductions for tax payers to reduce their assessable profits. Once you have the amount of your total profit for the year, the additional steps to calculate your assessable profits are as follows: 

1. Deduct non-assessable profits

Profits that are non-assessable include:

• Capital from the sale of capital assets such as land, buildings, and machinery, or stocks and bonds
• Previously assessed dividends or profits
• Interest income from deposits made in Hong Kong

2. Deduct qualified business expenses

Expenses that go into generating business income are qualified as deductible, and include items like:

• Rent from buildings or land
• Charitable donations
• Costs from purchasing patents, copyrights, trademarks and registered designs
• Expenses related with lending money
• Foreign taxes paid on income
• Expenses related to the repair, refurbishment, and replacement of machines or equipment
• Research and development expense
• Contributions to a retirement scheme
• Technical education fees
• Trademark and patent registration costs

Non-deductible expenses include:

• Domestic or private expenses, such as commuting fees between work and home
• Expenses unrelated to generating profit
• Improvement costs
• Other taxes paid (excluding employees’ salary tax)
• Payments for the benefits of spouses or partners

3. Deduct incurred losses

If your business has incurred losses over the past financial year, it can be deducted from either the company’s income in the same assessment year or can be deducted from income in the following assessment years. Losses must have been from business conducted in Hong Kong to be qualified for deduction.

4. Add balancing charges

A balancing charge occurs when the sale of a capital asset is more than the value on paper.The balancing charge is the difference between the amount a capital asset sold for from its value on paper. As an example:

Value of an office in a building: HK$50 million

The price the office was sold for: HK$55 million

Balancing charge: HK$55 million – HK$50 million = HK$5 million

5. Deduct capital allowances

Capital allowances are deductions that you can claim from the wear and tear on fixed assets used to generate profit for your business such as land, buildings or equipment. Tax deductions are available for capital expenditure sustained from the construction of buildings or structures and machinery and plants for trade or business purposes. There are three types of capital allowances

After these calculations are complete, the tax rate can be applied to the result respectively and entered into the profits tax return issued by the IRD.

How do I fill in my profits tax return?

In a typical year, the IRD will issue the Profits Tax Return form (BIR51 for limited companies, BIR52 for sole proprietorships and partnerships, BIR54 for non-resident business owners) at the end of your financial year. If your company’s financial year end matches the government’s financial year end of March 31, then you should receive the form at the beginning of April in your mail. This kicks off the return process, which gives you until the end of April to file. Afterwards:

1. Companies should notify their tax representative that they have received a Profits Tax Return.
2. The tax representative will then file for a block extension.
3. Companies should provide documents to an auditor so they can prepare an Auditor’s Report.
4. Once the audit report has been completed, companies should submit it along with the filled Profits Tax Return and other supporting documentation before the annual corporate tax filing due date. 

The profits tax return can be submitted via post or online through the government’s eTax platform. 

Summary

Once you’ve submitted the profits tax return, the IRD will follow up on a later date with an invoice on how much tax you owe. If you need help with performing an audit or are looking to prepare your books for one, drop us a message and we’ll help you out.