What taxes do Hong Kong companies need to pay?

Hong Kong companies mainly involve the following types of taxes:

1. Profit tax
-Definition and scope of taxation: Profits tax is one of the most important taxes in Hong Kong, equivalent to the corporate income tax in mainland China. It is a tax levied on the taxable profits generated in or derived from Hong Kong from any industry, profession or business conducted in Hong Kong (excluding profits from the sale of capital assets). For example, Hong Kong trading companies need to pay profits tax on profits obtained through local commodity trading activities in Hong Kong.
-Tax rate: Hong Kong implements a two-tier profit tax rate system. For corporations (generally referring to companies), the first HKD 2 million profit is subject to a profit tax rate of 8.25%; The portion exceeding HKD 2 million is subject to a tax rate of 16.5%. For illegal group businesses (such as sole proprietorship or partnership businesses), the profit tax rate for the first HKD 2 million is 7.5%; The portion exceeding HKD 2 million is subject to a tax rate of 15%.
-Exemption and Benefits: If a Hong Kong company’s profits come from overseas and can provide sufficient evidence to prove that its business operations and profit generation are unrelated to Hong Kong, it can apply for offshore exemption without paying profits tax. In addition, the Hong Kong government sometimes introduces profit tax reduction measures based on economic conditions and other factors, such as tax exemptions and other preferential policies.

2. Salary tax
-Definition and scope of taxation: Similar to personal income tax in mainland China, it is a tax levied on income generated in or derived from positions, employment, and retirement benefits in Hong Kong. If a Hong Kong company hires employees, including both local and non local residents, it is required to withhold and pay salaries tax on the wages, salaries, bonuses, allowances, and other income paid to the employees. For example, if a Hong Kong company hires a local employee with a monthly salary of HKD 30000, the company is responsible for withholding taxes in accordance with the regulations of salaries tax.
-Tax rate and calculation method: Salaries tax is calculated using progressive tax rates. The taxable income (i.e. the taxable portion of income) is the balance obtained by subtracting deductions and tax exemptions from the total income. The tax rate is divided into multiple levels, with the highest tax rate being 17%. However, the Hong Kong government sets certain tax exemption standards every year, such as basic tax exemption, married person tax exemption, child tax exemption, etc. These tax exemptions can reduce the taxable amount.
-Exemptions and concessions: If taxpayers meet certain conditions, such as supporting parents, grandparents, brothers and sisters, they can also apply for additional tax exemptions. At the same time, the Hong Kong government will also reduce or exempt salaries tax based on actual circumstances, such as introducing salary tax refund measures during certain special periods.

3. Property tax
-Definition and scope of collection: Property tax is a tax levied on the owners (including Hong Kong companies) of land and buildings in Hong Kong, calculated at the standard tax rate based on the net assessable value of the land or building. If a Hong Kong company owns properties for rental income, it is required to pay property tax. For example, Hong Kong company A owns a commercial property and rents it out to other companies, which requires the calculation and payment of property tax from the rental income.
-Tax rate and calculation method: The standard tax rate is 15%. When calculating the net taxable value, it is usually calculated by subtracting the rent income of the rented property from the differential pay paid by the owner (a type of land tax in Hong Kong), and then subtracting the 20% repair and maintenance tax exemption as the balance of the net taxable value. For example, if a company rents out a property with an annual rental income of HKD 1 million and a differential of HKD 50000, the net taxable value would be (100-5) x (1-20%)=HKD 760000, and the property tax for that year would be HKD 760000 x 15%=HKD 114000.
-Exemptions and discounts: If the property is for self occupation purposes, Hong Kong companies generally do not need to pay property tax. In some cases, such as when a property is partially vacant, there may also be corresponding tax adjustments.

In addition to the main tax categories mentioned above, Hong Kong companies may also be involved in other taxes such as stamp duty and gambling duty under specific circumstances, but these taxes are relatively less involved and have a more specific scope of application. For example, stamp duty is required when signing certain specific commercial documents (such as real estate transfer documents).

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