Hong Kong is a distinguished place to start a business for entrepreneurs. If you are thinking of registering a company in Hong Kong as well, you should be familiar with the tax rates, rules, and guidelines of registering in the region. 3E Accounting Hong Kong, which is an accounting firm in Hong Kong, provides incorporating service and all the information you need to know to open a company such as taxation, accounting services, etc.
Tax In Hong Kong
Hong Kong has a territorial tax system. The taxes are charged only for the businesses, trades, professions, and other commercial activities that are operated within the boundaries of Hong Kong.
There are three payable taxes in Hong Kong. These are profits tax, salaries tax, and property tax.
- Profit taxes
The tax rate is 8.25% for the corporation that earns a profit of HK$2 million and the tax rate is 16.5% for a profit more than HK$2 million. Similarly, there are two-level tax rates for unincorporated companies. It is 7.5% for sole proprietorships and 15% for partnerships.
- Salary taxes
The tax rates levels range from 2%-17%. However, the standard tax rate is 15%. These salary taxes are imposed on the people who earn by working in an office, employment places, or pension holders. And, self-employed individuals are subjected to profit taxes.
The income is taxable only if the primary earning source is in Hong Kong.
- Property taxes
The standard tax rate is 15%.
The taxes levied by the Hong Kong government are comparatively low as compared to other parts of the world. This is also one of the reasons for Hong Kong being renowned among entrepreneurs to start a business.
Hong Kong does not impose taxes on withholding tax, sales tax, capital gains, VAT, estate tax, and tax on dividends. Also, the taxes levied are further decreased for the business due to different tax allowances and deductions.
HK secretarial services take hold of all your business-related matters including the tax issues, subjecting the compliance of your company with the jurisdiction of Hong Kong.
Filing Of Taxes
For filing the corporate tax, IRD (Inland Revenue Department) publishes PTR (Profit Tax Return) for business and the company usually has one month period to record and maintain the accounts after they reach the end of the financial year.
Likewise, for newly established companies, they receive Profits Tax Returns after 18 months of incorporation and they should submit the finalized PTR within 3 months of issuance. The Inland Revenue Department charges you late penalty fees if you fail to submit PTR on time.
For individuals charged on salary taxes, they should file an annual tax return every year to the Inland Revenue Department. IRD issues personal tax returns, and this should be finalized and submitted within one month of issuance of personal tax returns. This should be finalized to the IRD in either case; if you’re earning over the year or not.
Exemption Of Taxes In Hong Kong
You can apply for tax exemption if you are working outside Hong Kong. All your business trades, services, and products should be handled offshore. They should not be related to any of the customers and suppliers of Hong Kong.
You should provide the following documents to request for exemption on taxes in Hong Kong:
- Notes of consultation with clients and vendors
- Organization chart along with the address where foreign activities are operated
- Receipts for travels, expenses on foreign countries
- Copy of passport with dates showing offshore visit
- Sales and purchase orders
- Documents of shipping
- Emails, telephone bills, faxes, etc. as evidence of your contact with suppliers and customers.
