FAQs of Profits Tax

Q: What is the year end of Hong Kong company?

A: In Hong Kong, any month can be used as the end of the fiscal year, and Hong Kong company has maximum 18 months for the first year's basis period of taxation.

  • It is generally 31 March to 31 December of each year for the basis period of taxation.
  • The year ended by the end of other month as permitted

Q: What is the profit tax rate Hong Kong company every year?

A: the profit tax rate is as follows:

  • For limited company, the first $2 million of the assessable profits is 8.25% and profits above that amount will continue to be subject to the tax rate of 16.5%;
  • For unincorporated corporations in sole proprietorship or partnership, the first $2 million of the assessable profits is 7.5% and profits above that amount will continue to be subject to the tax rate of 15%;
  • If the company is not profitable, there is no need to pay profits tax.

Q: Hong Kong company only opens bank account but no operation, then does this Hong Kong company need to process accounting, auditing and tax declaration?

A: According to Hong Kong Company Ordinance, whether all limited company has operation or suffer from profit or loss, it has the obligation to prepare for the accounting, auditing as well as declare its financial condition to Inland Revenue Department, whether its business takes place in Hong Kong or not.

Q: Can the profits of a Hong Kong company offset the losses of previous year?

A: Losses incurred in a taxable year can be carried forward and used to offset the profits of the company in subsequent years. There is no time limit for utilizing the tax losses.

Q: In which case will Hong Kong company be free from Profits Tax?

A: If the corporate profits do not arise from Hong Kong, and the company has not set up an office in Hong Kong nor hired Hong Kong employees, then its earned profits will be exempt from Profits Tax. it can apply to Inland Revenue Department for exemption from taxation.

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