Tax authority

​The tax authority for businesses in Hong Kong is the Inland Revenue Authority (IRD), which is where the companies must file their tax returns. All companies in Hong Kong must pay tax, which is commonly known as Profit Tax​.

Territorial corporate tax system

​Hong Kong follows the territorial tax system, which is where tax is levied for profits made within Hong Kong. If your source of profits is outside Hong Kong, then the profits are not taxable. The territorial corporate tax system applies to both foreign and local individuals and companies. Essentially, a person is liable for taxation if:

• The person carries a business, trade, or profession in Hong Kong,
• The business, trade, or profession derives profits, and
• The profits are derived in or from Hong Kong.
  
  

Filing tax returns

Companies in Hong Kong are required to file tax returns annually. The IRD sends notifications to companies, and each company is required to file the returns within a month from the time they receive the notification, which is usually sent on the 1st of April annually. If the company is newly incorporated, a notification is sent 18 months after the company’s incorporation. Should a company or individual fail to file returns within the specified period, they are liable to be fined or prosecuted. Nevertheless, a company can ask for an extension.

Complementary documents

When submitting your tax returns, each company is required to send supporting documents, including:

• A tax computation to show how the company arrived at its profits or losses.
• An auditors report
• The company’s balance sheet
• A Profit and Loss account

However, these documents are not required for a sole proprietorship with gross revenue under HKD2m for the period. Small corporations have an exemption from providing the auditors report (but not having one) if certain other conditions are kept. .

Profit tax exemptions

Despite the requirements to file tax returns annually, companies that meet either of the following are exempt:

• Dormant companies per the definition in the Companies Ordinance, since they don’t have any transactions in a financial year.
• If a foreign company has a branch in Hong Kong it may be exempted if it provides relevant information to prove so.
• Companies that are incorporated within a jurisdiction that doesn’t require tax audits.