Last week, Hong Kong chief executive Carrie Lam put forward profits tax reform.It will be implemented after passing relevant laws by Legislative Council of Hong Kong.

According to the reform, the first 2 million HKD annual profits are expected to subject to 10% tax rate. The amount exceeds 2 million HKD will be subject to 16.5% tax rate.

How Much Can Save?

Currently, profits tax rate in Hong Kong is 16.5%, 2 million annual profits will be charged 0.33 million for tax.

After the new tax reform, for a Hong Kong company, as long as its annual profits are not less than 2 million HKD, it helps save 0.13 million paying tax.

What Is Profits Tax?

According to the definition from Inland Revenue Department of Hong Kong, persons, including corporations, partnerships, trustees, and bodies of persons carrying on any trade, profession or business in Hong Kong are chargeable to tax on all profits arising in or derived from Hong Kong from such trade, profession or business.

Therefore, no distinction made between residents and non-residents. A resident may derive profits from abroad without suffering tax; conversely, a non-resident may suffer tax on profits arising in Hong Kong

Simple and Low Tax Rate System in HK

So far, there only three types of income tax in Hong Kong, including profits tax, salaries tax, and property tax.

Compared with the personal income tax in China mainland which could be up to 45%, the maximum salaries tax in Hong Kong is only 17%.

For most of the offshore companies, the staff is not even needed to pay salaries tax as long as they don't hire Hong Kong residents.

Check Tax Payment before Accounting Period

Though companies can freely choose their accounting period, the accounting period of Hong Kong government is from April 1st to March 31st the next year.

Tax accounting period affects deadlines for paying company tax and sending (‘filing’) a company tax return. So, you should check the tax payment of your company, or the bad company financial report may affect Hong Kong bank accounts.

As we all know it becomes much harder to open a Hong Kong bank account, especially after the launch of CRS. In order to enjoy freely foreign exchangefor your business, we suggest you always be aware of tax payment of Hong Kong company.

If you need more information about Hong Kong company, Hong Kong bank account or auditing, please feel free to contact us.

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