This comprehensive guide to Hong Kong corporate taxes will provide a clear picture of Hong Kong’s corporate taxes, also known as, Hong Kong Profits Tax, to anyone thinking of starting a business in Hong Kong or is already doing business in Hong Kong. This guide will also explain:
- Corporate tax rates for Hong Kong companies
- The 2-tier corporate tax rate for Hong Kong companies
- When do companies need to file taxes?
- What do companies need to submit when filing taxes?
- How do offshore Hong Kong companies file taxes?
Corporate Tax Rates for Hong Kong Companies
Hong Kong Limited Companies:
| Net Assessable Profits | Companies that qualify for 2-tiered tax rates | Companies that do not qualify for 2-tiered tax rates |
| HK$0 to HK$2,000,000 | 8.25% | 16.5% |
| Over HK$2,000,000 | 16.5% | 16.5% |
Sole Proprietorships and Partnerships:
| Net Assessable Profits | Companies that qualify for 2-tiered tax rates | Companies that do not qualify for 2-tiered tax rates |
| HK$0 to HK$2,000,000 | 7. 5% | 15% |
| Over HK$2,000,000 | 15% | 15% |
The 2-Tiered Corporate Tax Rate
In 2018, the Hong Kong IRD introduced a 2-tiered corporate tax rate that charges the first HK$2,000,000 of profits at half the normal tax rate. This means that limited companies will be taxed at 8.25% for the first HK$2,000,000 of profits, and 16.5% for any profits over HK$2,000,000. While sole proprietorships and partnerships are taxed at 7.5% for the first HK$2,000,000 of profits, and 15% for any profits over HK$2,000,000.
Who Qualifies for the 2-Tiered Corporate Tax?
All companies required to pay Hong Kong Profits Tax are eligible for the 2-tiered corporate tax rates. However, if one person or holding company controls multiple companies, only one of the companies can opt to take advantage of the 2-tiered corporate tax rates. The Hong Kong IRD refers to these companies as “connected entities”. Two companies as considered connected entities if:
- One of the companies controls the other company, or
- Both companies are controlled by the same person or company
An illustration explaining 2-tiered corporate tax rate eligibility and connected entities
When do Hong Kong companies file taxes?
The Hong Kong tax year begins on April 1st and ends on March 31st each year. However, the tax filing date of each company will depend on the financial year end date the company chooses. The below table shows the annual Hong Kong corporate tax filing due dates for each financial year end.
| Financial Year End of the Company | Annual Corporate Tax Filing Due Date |
| Year end falling between April 1 to November 30 | April 30 |
| Year end falling between December 1 to December 31 | August 15 |
| Year end falling between January 1 to March 31, and the company has made a profit for the year | November 15 |
| Year end falling between January 1 to March 31, and the company has made a loss for the year | January 31 |
The Hong Kong Corporate Tax Filing Process
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. The main steps of tax filing process is explained below.
Steps in the Hong Kong Corporate Tax Filing Process
- Hong Kong IRD Issues a Profits Tax Return (BIR51) around April each year
- Notify your Tax Representative that a Profits Tax Return was received
- Tax Representative files for Block Extension
- Prepare and provide documents for a Practicing CPA to prepare and Auditor’s Report. This is a guide to how much audits of Hong Kong companies cost.
- Submission of Profits Tax Return and supporting documentation before the annual corporate tax filing due date
An illustration explaining the steps to file Hong Kong Corprorate Taxes
What Documents should be Submitted when Hong Kong Companies File Corporate Taxes?
When a Hong Kong company files its corporate taxes, it must submit the following to the Hong Kong IRD:
- Filled out Profits Tax Return (Form BIR51)
- Supplementary Form if necessary. The supplementary forms can be found here.
- Auditor’s Report and Financial Statements
- Tax Computation including supporting breakdowns
Can Hong Kong Companies file Corporate Taxes Online?
The Hong Kong IRD has introduced the eTax service which allows companies to file their corporate taxes online. Companies and their tax representatives can fill out the Profits Tax Return online and upload supporting documents through the eTax Portal. However, to sign the Profits Tax Return electronically, the signer must have one of the following:
- Recognized personal digital certificate
- An iAM Smart account
- Be a service provider with a recognized organizational digital certificate
Do Dormant Hong Kong Companies need to File Corporate Taxes?
If a dormant Hong Kong company has received a Profits Tax Return from the Hong Kong IRD, the company is still required to file the Profits Tax Return before the due date, but the IRD will allow the submission without the need to also submit audited financial statements.
For a Hong Kong company to be considered dormant, the company must fulfil two conditions:
- The company does not have any accounting transactions. This means that the only transaction the company is allowed to have is the settlement of their annual business registration fee.
- The company must pass a special resolution declaring that the company will become dormant, and submit the resolution to the Hong Kong Companies Registry.
A decision tree that determines whether a Hong Kong company is considered dormant
To cease the dormant status, the company can pass a special resolution and submit this to the Hong Kong Companies Registry. Likewise, if any accounting transaction takes place, the dormant status of the company will cease.
Sample templates of these resolutions can be downloaded here:
Do Hong Kong Offshore Companies Need to File Corporate Taxes?
A Hong Kong offshore company is a Hong Kong company that sources its profits outside of Hong Kong. These companies usually do not employ any staff within Hong Kong and carries out its business activities outside of Hong Kong. It is important to note that an offshore Hong Kong company still needs to file its corporate taxes each year.
Companies of different industries have industry specific conditions that determine whether the profits of the company can be considered offshore. This table lists the factors that determine the source of profits for each industry.
Should you hire a Tax Representative?
Unless you are an experienced CPA, filing your company’s taxes should be left to the professionals. The Yau and Wong team has over 30 years of experience filing taxes for Hong Kong businesses and offshore Hong Kong companies. Get in touch with us today!
