Profit Tax in Hong Kong

Hong Kong’s profits tax regime is widely regarded as one of the most straightforward and business-friendly tax systems in the world. Built on a territorial basis with low and predictable tax rates, it offers clarity and certainty for companies operating locally or using Hong Kong as a regional hub. However, compliance still requires a clear understanding of who is subject to profits tax, how taxable profits are determined, applicable tax rates, filing obligations, and recent international developments such as BEPS 2.0. This guide provides a comprehensive overview of Hong Kong profits tax, helping businesses understand their obligations, manage risks, and remain compliant while operating efficiently. For businesses planning to establish operations in Hong Kong, understanding profits tax implications should form part of the broader Hong Kong company incorporation and ongoing compliance strategy.

What Is Profits Tax in Hong Kong?

Profits tax in Hong Kong is broadly equivalent to corporate income tax in other jurisdictions. It is governed by the Inland Revenue Ordinance and administered by the Inland Revenue Department (IRD). Any person or entity carrying on a trade, business, or profession in Hong Kong may be subject to profits tax if their profits are regarded as taxable under Hong Kong law.

Profits tax is charged on profits arising in or derived from the carrying on of a trade, business, or profession in Hong Kong. It applies not only to companies but also to other forms of business operations.

Entities commonly required to file profits tax returns include Hong Kong incorporated companies, branches of overseas companies operating in Hong Kong, sole proprietorships, partnerships, and property owners deriving rental income subject to assessment. Where applicable, profits tax returns must be filed together with audited financial statements.

Territorial Basis of Taxation in Hong Kong

Hong Kong adopts a territorial and flat-rate tax system. Under this principle, only profits that arise in or are derived from Hong Kong are subject to profits tax. Profits sourced outside Hong Kong are generally not taxable, regardless of whether they are remitted to Hong Kong.

The territorial principle applies equally to residents and non-residents. This means that tax liability depends on the source of profits rather than the place of incorporation or tax residence. Determining the source of profits is therefore a critical issue in Hong Kong profits tax compliance and often requires careful factual and legal analysis.

Profits Tax Filing Obligations and Deadlines

The IRD generally issues Profits Tax Returns as part of its annual bulk issue in early April. Taxpayers usually have one month from the date of issue to file, subject to applicable extensions. Extensions of time for lodgement may be requested under the IRD’s administrative arrangements. Failure to file on time without an approved extension may result in penalties being imposed. For newly incorporated companies, the first profits tax return is typically issued within 18 months from the commencement of business in Hong Kong.

Profits Tax Rates in Hong Kong (2025/26)

Hong Kong’s profits tax regime remains stable for the 2026/26 year of assessment. Profits tax is levied at flat rates, with a two-tier system available to reduce the tax burden for small and medium-sized enterprises. The applicable tax rate depends on the type of business entity and the level of assessable profits.

Standard and Two-Tier Profits Tax Rates

Hong Kong offers two approaches to profits tax rates: the standard single-tier rate and the two-tier profits tax rate regime. Most businesses opt for the two-tier regime, as it provides a lower tax rate on the first portion of assessable profits.

The profits tax rates applicable in 2026 are as follows:

Under the single-tier system, corporations are taxed at 16.5% on all assessable profits, while unincorporated businesses are taxed at 15%. The two-tier system applies the reduced rate only to the first HKD 2 million of assessable profits, with the balance taxed at the standard rate.

Eligibility for the Two-Tier Profits Tax Regime

The two-tier profits tax regime is designed to support SMEs by lowering their effective tax rate. However, where a business is part of a group of connected entities, only one entity within the group may elect to apply the two-tier rates for a particular year of assessment. The remaining connected entities will be taxed at the standard profits tax rates.

Careful consideration is required when making this election, as it directly affects the group’s overall tax position.

Territorial Basis and Scope of Taxation

Profits tax rates apply only to profits arising in or derived from Hong Kong. Under Hong Kong’s territorial tax system, profits sourced entirely outside Hong Kong are generally not subject to profits tax, regardless of where the company is incorporated.

Hong Kong does not impose capital gains tax, and there is generally no withholding tax on dividends or interest. These features, combined with the two-tier profits tax rate, contribute to Hong Kong’s reputation as a low-tax and business-friendly jurisdiction. 

While Hong Kong generally does not levy withholding tax on dividends and interest, payments to non-residents for the use of intellectual property in Hong Kong may trigger specific deeming/tax treatment under the Inland Revenue Ordinance.

Concessionary Profits Tax Rates

In addition to the standard profits tax rates, Hong Kong offers concessionary tax rates for certain qualifying activities and industries. In general, a concessionary rate equal to 50% of the normal profits tax rate may apply to qualifying profits from specific regimes, subject to meeting statutory conditions.

These concessionary regimes operate separately from the two-tier profits tax system and are intended to support targeted sectors rather than provide general tax relief.

Hong Kong Corporate Tax Calculator

Businesses may also estimate their tax exposure using our Hong Kong Corporate Tax Calculator.

Who Needs To Pay Profits Tax in Hong Kong?

Profits tax applies to any trade, profession, or business that earns profits arising in or derived from Hong Kong. The key determining factor is where the profits are sourced, not where the business is incorporated or where its owners are based. This source-based approach sits at the core of Hong Kong’s territorial tax system. Businesses that have recently completed Hong Kong company incorporation should be aware that tax filing obligations arise shortly after business commencement.

Hong Kong-Incorporated Companies

Companies incorporated in Hong Kong are required to file annual profits tax returns with the Inland Revenue Department. However, incorporation alone does not automatically create a tax liability. A Hong Kong company is subject to profits tax only if it earns profits sourced from activities carried on in Hong Kong.

If all profit-generating activities take place outside Hong Kong, the company may claim an offshore profits exemption, subject to IRD review and supporting evidence.

Overseas Companies Carrying on Business in Hong Kong

Overseas companies may also be liable to Hong Kong profits tax if they carry on business in Hong Kong and earn Hong Kong-sourced profits. This applies regardless of whether the company has a physical office in Hong Kong.

The IRD will examine the nature of the company’s operations, including where contracts are negotiated, services are performed, and management decisions are made, to determine whether the profits are taxable in Hong Kong.

Branch Offices of Foreign Companies

A branch office is not a separate legal entity from its foreign head office. If a foreign company operates a branch in Hong Kong and derives profits from Hong Kong business activities, those profits are generally subject to profits tax.

Only the profits attributable to the Hong Kong branch’s activities are taxable. Profits arising from overseas operations of the same company may fall outside the scope of Hong Kong profits tax, depending on the facts.

Sole Proprietorships and Partnerships

Unincorporated businesses, including sole proprietorships and partnerships, are also subject to profits tax if they carry on business in Hong Kong and earn Hong Kong-sourced profits. The same territorial principles apply, and tax is assessed based on the source of profits rather than the legal structure of the business.

Non-Resident Persons with Hong Kong-Sourced Profits

Non-resident persons may be subject to profits tax if they earn profits arising in or derived from Hong Kong. This commonly applies where services are performed in Hong Kong or where income is generated through Hong Kong-based business activities.

In certain situations, profits may be deemed to arise in Hong Kong under the Inland Revenue Ordinance, particularly for payments made to non-residents for services or intellectual property used in Hong Kong.

Importance of Profit Source over Place of Incorporation

Hong Kong’s profits tax system places greater importance on profit source than on the place of incorporation or tax residence. In broad terms:

To claim offshore treatment, a business must be able to demonstrate that its key profit-generating activities take place entirely outside Hong Kong. The IRD typically requires supporting documents such as contracts, invoices, correspondence, and operational records.

Treaty Protection for Non-Residents under DTAs

Hong Kong has entered into comprehensive double taxation agreements with multiple jurisdictions. These agreements may provide relief to non-resident businesses by limiting Hong Kong’s taxing rights, particularly where the non-resident does not have a permanent establishment in Hong Kong.

To access treaty benefits, non-residents generally need to substantiate their tax residence and satisfy the relevant treaty conditions. While DTAs can reduce exposure to double taxation, they do not override Hong Kong’s territorial principle and are applied on a case-by-case basis.

Provisional Profits Tax

Provisional profits tax is an integral part of Hong Kong’s profits tax system. It is designed to ensure timely tax collection during the year of assessment, rather than waiting until final profits are confirmed. Businesses operating in Hong Kong should understand how provisional profits tax works to manage cash flow and avoid unexpected tax liabilities.

What Is Provisional Profits Tax?

Provisional profits tax is an advance payment of profits tax required by the Inland Revenue Department (IRD). It is generally based on the assessable profits of the preceding year of assessment and serves as a prepayment toward the current year’s profits tax liability.

The IRD issues provisional profits tax demands together with the annual profits tax assessment. This approach helps maintain a steady flow of tax revenue and reduces the risk of large lump-sum payments after the year-end.

How Provisional Profits Tax Is Paid

Companies are typically required to pay provisional profits tax in two instalments during the current tax year. The IRD specifies the due dates in the tax demand note, and late payment may result in surcharges.

The provisional tax payable is calculated using the prior year’s assessable profits and the applicable profits tax rate. This amount is not a final tax but an advance payment subject to later adjustment.

Adjustment Against Final Profits Tax

After a company files its annual profits tax return, the IRD assesses the actual profits tax payable based on the audited financial statements for that year.

Any provisional profits tax already paid will be applied as a credit against the final tax liability:

• If the provisional tax paid is higher than the final assessed amount, the excess will be refunded or offset against future tax liabilities
  
• If the provisional tax paid is insufficient, the company will be required to pay the balance

This mechanism ensures that businesses ultimately pay tax based on actual profits rather than estimates.

Reduction or Holdover of Provisional Profits Tax

In certain situations, a business may apply for a reduction or holdover of provisional profits tax. Common grounds include a significant drop in expected profits, the cessation of business, or the availability of losses to offset taxable income.

Applications must be submitted within the statutory time limits and supported by reasonable estimates or relevant documentation. Approval is subject to the IRD’s review and discretion.

Tax Incentives and Deductions in Hong Kong

Hong Kong offers a wide range of profits tax incentives and deductions to support business growth while maintaining a simple and transparent tax system. These measures are sector-specific and activity-based, allowing eligible businesses to lawfully reduce their profits tax exposure while remaining compliant with the Inland Revenue Ordinance.

Industry-Specific Tax Incentives

Hong Kong provides concessionary profits tax rates for certain qualifying industries and activities. Where statutory conditions are met, qualifying profits may be taxed at 50 percent of the normal profits tax rate.

Common concessionary regimes include qualifying corporate treasury centres, aircraft leasing and aircraft leasing management activities, shipping-related activities, and professional reinsurance. Income derived from qualifying debt instruments issued before 1 April 2018 may also be subject to concessionary tax rates depending on maturity, while qualifying debt instruments issued on or after 1 April 2018 are generally exempt from profits tax.

These regimes operate independently of the two-tier profits tax system and are designed to promote strategic industries in Hong Kong.

Research and Development (R&D) Tax Deductions

Hong Kong offers enhanced tax deductions for qualifying research and development expenditures under the Inland Revenue (Amendment) (No.7) Ordinance 2018. R&D expenses are classified into two categories.

Type A expenditures generally include payments made to designated research institutions and universities for qualifying R&D activities. Type B expenditures typically cover in-house R&D costs, such as staff costs and consumables directly attributable to qualifying R&D activities conducted in Hong Kong.

Only scientific or technological R&D activities conducted in Hong Kong qualify. Activities relating purely to market research, management studies, or non-technical improvements are excluded.

Profits Tax Exemptions

Certain income items are specifically exempt from Hong Kong profits tax. These exemptions help prevent double taxation and support capital market development.

Common exempt income includes dividends received from companies subject to Hong Kong profits tax, interest on Tax Reserve Certificates, interest and profits from specified government and Exchange Fund debt instruments, and qualifying income from authorised or bona fide widely held investment schemes. Interest income from Hong Kong bank deposits, other than that received by financial institutions, is also generally exempt.

Offshore Profits and Territorial Tax System

Hong Kong operates under a territorial source principle of taxation. Profits tax is only charged if profits arise in or are derived from Hong Kong and are generated from business activities carried out in Hong Kong. Companies seeking exemption for offshore income should understand the documentary requirements involved in making an offshore profits claim with the Inland Revenue Department.

Where profits are derived entirely offshore, a business may claim offshore tax exemption. Such claims are reviewed by the Inland Revenue Department on a case-by-case basis and must be supported by substantive evidence demonstrating that profit-generating activities took place outside Hong Kong.

Hong Kong has also implemented the Foreign-Sourced Income Exemption (FSIE) regime to address international tax standards. Under this regime, certain foreign-sourced passive income received by multinational enterprise entities may be subject to profits tax unless specific economic substance, nexus, or participation requirements are met.

Deductible Business Expenses

Hong Kong allows deductions for expenses incurred wholly, exclusively, and necessarily in the production of chargeable profits. This enables businesses to reduce their assessable profits through legitimate operating costs.

Common deductible expenses include rent, staff salaries, utilities, professional fees, and business-related expenses. Certain items, such as private expenses, capital losses, and Inland Revenue Ordinance taxes, are not deductible.

Some capital expenditures qualify for deductions over time or in full, depending on their nature.

Depreciation Allowances

Businesses may claim depreciation allowances on qualifying assets to reflect wear and tear.

Balancing allowances or charges may arise on disposal, depending on the tax written-down value of the assets.

Charitable Donations

Approved charitable donations are deductible if they are made to recognised charitable institutions or the Hong Kong government. The total deductible amount must be at least HKD 100 and must not exceed 35 percent of adjusted assessable profits before donation deductions.

Treatment of Tax Losses

Business losses may be carried forward indefinitely to offset future profits from the same trade. Losses cannot be transferred between different companies or different trades within the same entity.

Sole proprietors and partners may elect for personal assessment, allowing trading losses to be offset against other income sources, subject to statutory rules.

Filing Profits Tax in Hong Kong

Filing profits tax in Hong Kong is a statutory obligation for businesses carrying on a trade, profession, or business in the city. Profits tax returns are filed annually with the Inland Revenue Department (IRD), based on the company’s financial results for the relevant year of assessment.

What Is a Profits Tax Return?

A profits tax return reports a business’s assessable profits for a year of assessment, together with supporting financial information. The return is prepared using the company’s accounting records, including details of assets, liabilities, income, and expenses.

Corporations with assessable profits are generally required to submit audited financial statements together with their profits tax return. Accurate bookkeeping throughout the year is therefore essential, as all expenses incurred on behalf of the business must be properly recorded and supported.

Who Must File Profits Tax Returns?

Any entity that carries on a trade, profession, or business in Hong Kong may be required to file a profits tax return. This includes corporations, partnerships, sole proprietorships, and non-resident persons with Hong Kong–sourced profits.

Newly incorporated or newly registered businesses typically receive their first profits tax return about 18 months after the commencement of business. For continuing businesses, the IRD issues profits tax returns annually as part of its bulk issuance exercise each April.

Even where a business has no assessable profits or has ceased operations, it must still file the return if one is issued by the IRD.

Profits Tax Return Forms

The form required depends on the nature of the business entity.

Profits from a sole proprietorship are ultimately reported under the individual’s tax return, but the business must still complete the relevant profits tax form when required.

Filing Deadlines and Extensions

Profits tax returns are usually issued in early April and cover the year of assessment from 1 April to 31 March. The standard filing deadline is one month from the date of issue, as stated on page one of the profits tax return.

The IRD may grant filing extensions under the Block Extension Scheme, depending on the company’s accounting year-end. Businesses that file electronically through the IRD’s eTAX system may also receive an additional one-month extension, subject to eligibility conditions.

Any request for further extensions beyond these arrangements is granted only in exceptional circumstances and must be supported by written justification.

Profits Tax Filing Timeline (Typical)

Understanding the typical filing cycle helps businesses plan ahead and avoid unnecessary penalties. While exact dates may vary each year, the general timeline for Hong Kong profits tax is as follows:

1. April – The Inland Revenue Department (IRD) issues the annual Profits Tax Return as part of its bulk issuance exercise.
   
2. Within One Month of Issue Date – Standard filing deadline for submitting the completed Profits Tax Return, tax computation, and required supporting documents.
   
3. Extended Deadlines Under Block Extension Scheme – Depending on the company’s accounting year-end, extended filing deadlines may apply:
   
   • December year-end companies – typically extended to mid-September
     
   • March year-end companies – typically extended to mid-November
     
4. Upon Assessment Issuance – The IRD issues a Notice of Assessment, including any provisional profits tax payable for the following year of assessment.
   
5. Tax Instalment Due Dates – Profits tax and provisional profits tax are generally payable in instalments according to the dates stated on the demand note.
   

Businesses should monitor all notices issued by the IRD carefully, as late filing or late payment may result in surcharges, estimated assessments, or penalties under the Inland Revenue Ordinance.

Understanding N Code, D Code and M Code (IRD Block Extension Scheme)

The Inland Revenue Department (IRD) uses Accounting Date Codes on Profits Tax Returns to determine whether a taxpayer can file under the Block Extension Scheme (i.e., extended filing deadlines arranged through tax representatives). These codes are practical signals of your effective filing deadline, especially for companies with audited accounts.

What Each Code Means

How to Submit a Profits Tax Return

Profits tax returns can be filed either electronically or in paper form. The IRD strongly encourages electronic filing due to its efficiency and automatic extension benefits.

When submitting a profits tax return, businesses are generally required to include a completed tax computation, audited financial statements where applicable, and any required supplementary forms. Supporting documents should be retained, as the IRD may request them during a review or tax enquiry.

Supplementary Forms and Additional Reporting

Supplementary forms are required when a business claims preferential tax regimes, tax incentives, or reports specified income. Forms such as IR1478 and IR1479 must be completed electronically and submitted through the IRD’s electronic filing platform, even if the main return is filed on paper.

Failure to submit required supplementary forms may delay processing or trigger follow-up queries from the IRD.

Importance of Proper Profits Tax Filing

Timely and accurate filing of profits tax returns helps businesses avoid penalties, surcharges, and unnecessary audits. Engaging a professional accountant familiar with Hong Kong profits tax requirements can help ensure compliance, proper documentation, and correct application of tax rules.

How to Pay Corporate Tax in Hong Kong

Paying corporate tax in Hong Kong is a structured annual process overseen by the Inland Revenue Department (IRD). Companies must comply with filing requirements, meet statutory deadlines, and settle tax liabilities in Hong Kong Dollars to remain compliant.

Step 1: Receive and File the Profits Tax Return

Corporate tax is assessed through the annual Profits Tax Return issued by the IRD, usually in April each year. The return covers the year of assessment from 1 April to 31 March.

The applicable tax form depends on your business structure:

Most companies must file the return within one month from the issue date stated on the notice. Businesses that file electronically via the IRD’s eTAX system receive an automatic one-month extension.

For newly incorporated companies, the first profits tax return is typically issued around 18 months after incorporation, once a full set of accounts has been prepared.

Step 2: Prepare Tax Computation and Supporting Documents

Before payment, companies must prepare a profits tax computation based on their financial statements. This calculation determines the assessable profits subject to Hong Kong profits tax.

Corporations with assessable profits are generally required to submit audited financial statements together with the tax return. Proper record-keeping is essential, as the IRD may review supporting documents during assessment or audit.

Step 3: Pay Provisional Profits Tax

Provisional Profits Tax is generally demanded based on the prior year’s assessable profits. Payment is typically required by instalments in accordance with the IRD’s demand note. Any provisional tax paid is credited against the final assessment.

Example: Corporate Tax Calculation

Assume a company has an annual turnover of HKD 1.5 million and a 10% profit margin.

• Taxable profits: HKD 150,000
  
• Applicable rate under the two-tiered profits tax system: 8.25%
  

Tax payable:
HKD 150,000 × 8.25% = HKD 12,375

This example illustrates how smaller profits benefit from Hong Kong’s reduced profits tax rate on the first HKD 2 million of assessable profits.

Step 4: Settle Tax Payment with the IRD

Corporate tax payments must be made in Hong Kong Dollars directly to the IRD by the due date stated on the assessment notice. Late payment can trigger estimated assessments, surcharges, and enforcement action.

Penalties may include:

• A 10% surcharge on overdue tax
  
• Increased penalties of up to 50% for repeated non-compliance
  
• Legal recovery action in serious cases

Maintaining accurate accounts and meeting filing and payment deadlines is critical to managing Hong Kong tax compliance effectively.

Managing Payments Efficiently

For businesses operating internationally, having reliable financial tools can simplify tax payments. Multi-currency business accounts can help companies manage incorporation costs, government fees, and tax payments in Hong Kong Dollars while reducing foreign exchange inefficiencies.

Hong Kong Tax Compliance Laws and Penalties

Hong Kong maintains a relatively simple and transparent tax system, but strict compliance with tax laws is still required. Businesses must understand their tax obligations, the types of taxes involved, and the consequences of late filing or non-payment to avoid unnecessary penalties and enforcement actions by the Inland Revenue Department (IRD).

Types of Taxes in Hong Kong

Hong Kong taxes can broadly be divided into direct taxes and indirect taxes. Each category serves a different purpose and applies under different circumstances.

Direct taxes are imposed on income or profits earned by individuals and businesses. In the business context, the most relevant direct tax is profits tax. Other forms of direct taxation include salaries tax and property tax, depending on the nature of income derived.

Indirect taxes are transaction-based and are generally paid as part of the cost of goods or services. These taxes do not depend on income level but on specific activities or transactions.

Hong Kong does not impose value-added tax or general sales tax, which helps keep the overall tax burden low compared to many other jurisdictions.

Importance of Ongoing Tax Compliance

Tax compliance in Hong Kong involves more than filing annual tax returns. Businesses must maintain proper accounting records, track income and expenses accurately, and meet statutory filing and payment deadlines.

Failure to comply may result in estimated assessments, additional tax liabilities, penalties, and interest charges. Engaging a professional accountant can help ensure returns are prepared correctly and submitted on time, reducing compliance risks and administrative burden.

Penalties for Late Filing or Late Payment

Businesses that fail to file profits tax returns or pay taxes by the due date may face penalties under Section 82A of the Inland Revenue Ordinance. The IRD may first issue an estimated assessment if no return is filed, often resulting in a higher tax liability than expected.

Penalties are generally calculated as a percentage of the tax undercharged and may increase significantly for repeat offences within a five-year period.

In serious cases, additional fines or prosecution may apply, depending on the nature and severity of the non-compliance.

Managing Compliance Risks

Understanding Hong Kong tax compliance laws helps businesses avoid penalties and disputes with the IRD. Timely filing, accurate reporting, and proper documentation are key to maintaining good compliance standing.

For many businesses, working with an experienced Hong Kong tax professional provides assurance that tax obligations are met correctly and efficiently, allowing management to focus on core business operations.

Audit, Tax Compliance, and Filing Support in Hong Kong

Understanding how audits work, what constitutes acceptable tax planning, and when professional support is needed is an important part of Hong Kong tax compliance. While Hong Kong is known for its simple tax system, the Inland Revenue Department (IRD) actively reviews filings to ensure accuracy and compliance with the law.

Is There an Audit Process in Hong Kong?

Yes. The IRD conducts audits and field reviews to verify that tax returns accurately reflect a business’s financial position. Audits may be selected at random or triggered by specific risk indicators, such as inconsistent figures, persistent losses, or incomplete documentation. Most corporations with assessable profits are required to prepare audited financial statements in accordance with Hong Kong statutory audit requirements before submitting their profits tax return.

During an audit, the IRD may review accounting records, tax computations, and supporting documents to compare reported figures against underlying business transactions. Most audits are relatively focused in scope and may take from under an hour to several hours, depending on the complexity of the case.

If an audit results in adjustments, the IRD will issue a written notice outlining its findings. Taxpayers generally have 60 days to respond. Where there is disagreement, an objection or appeal may be lodged in accordance with statutory procedures.

Tax Planning vs. Tax Avoidance

Businesses in Hong Kong are permitted to engage in legitimate tax planning, which involves arranging business affairs in a tax-efficient manner while fully complying with the Inland Revenue Ordinance.

However, aggressive tax avoidance practices that lack commercial substance may be challenged by the IRD. Examples include artificial arrangements designed solely to reduce taxable profits or shifting income without genuine business reasons.

Acceptable tax planning typically includes:

• Claiming allowable deductions and depreciation in accordance with tax rules
  
• Applying available tax incentives or concessionary regimes where statutory conditions are met
  
• Ensuring accurate allocation of income and expenses based on actual business activities
  

The IRD has broad powers to disregard arrangements that are considered artificial or designed primarily to avoid tax. Businesses should therefore focus on compliance-based planning rather than relying on perceived loopholes.

Filing Personal Income Tax Returns in Hong Kong

Individuals subject to salaries tax or personal assessment must file annual tax returns with the IRD. The most convenient method is online filing through the IRD’s eTAX platform, which is free of charge and widely used.

Alternatively, individuals may submit paper returns by completing the relevant form and mailing it to the IRD. Blank forms are available online and at post offices.

Online filing allows faster processing and easier access to prior-year records. Charges may apply only if subsequent amendments to filed returns are required.

Do You Need an Accountant?

While it is possible to prepare and file tax returns independently, many individuals and businesses choose to engage a professional accountant. An experienced Hong Kong tax professional can help ensure returns are prepared accurately, deductions are properly claimed, and compliance risks are managed effectively.

Accountants also provide support in responding to IRD enquiries, handling audits, and explaining tax obligations in practical terms. For businesses with ongoing operations or complex transactions, professional support can significantly reduce administrative burden and the risk of errors.

BEPS 2.0 and the Global Minimum Tax

Hong Kong has moved to implement the OECD Pillar Two Global Minimum Tax for in-scope multinational enterprise (MNE) groups (generally those with consolidated revenue at or above EUR 750 million). The legislation introduces a 15% minimum effective tax framework, including an Income Inclusion Rule (IIR) and a Hong Kong Minimum Top-up Tax (HKMTT) as domestic measures. The IIR and HKMTT apply for fiscal years beginning on or after 1 January 2025, while the Undertaxed Profits Rule (UTPR) will take effect from a later date to be specified by the Government.

Conclusion

Hong Kong’s profits tax system combines simplicity with strict compliance expectations. While the territorial principle, two-tier tax rates, and wide range of deductions and incentives can significantly reduce a company’s effective tax burden, these benefits depend on accurate reporting, proper documentation, and timely filing. From determining profit source and managing provisional tax to navigating audits, penalties, and evolving global tax standards, businesses must take a structured approach to tax compliance. Engaging experienced Hong Kong tax professionals can help ensure obligations are met correctly, risks are managed proactively, and businesses remain well-positioned in an increasingly transparent and regulated international tax environment.

Navigating Hong Kong profits tax can be complex, especially when dealing with filing deadlines, provisional tax, audits, and evolving compliance requirements. FastLane Group supports businesses with accurate profits tax filing, audit coordination, bookkeeping, and ongoing compliance support, helping you stay compliant with the Inland Revenue Department while avoiding unnecessary risks and penalties. Contact us today if you need professional assistance with Hong Kong profits tax filing.

Frequently Asked Questions About Hong Kong Profits Tax

What is the profits tax rate in Hong Kong?

Corporations are taxed at 8.25% on the first HKD 2 million of assessable profits and 16.5% on the remainder under the two-tier regime.

Is foreign income taxable in Hong Kong?

Generally, only profits sourced in Hong Kong are taxable under the territorial tax system. Foreign-sourced income may be exempt, subject to specific rules such as the FSIE regime.

When is profits tax due in Hong Kong?

Profits Tax Returns are typically issued in April. Filing deadlines depend on the company’s accounting year-end and IRD extension arrangements.

What is provisional profits tax?

Provisional profits tax is an advance payment based on the prior year’s assessable profits and is credited against the final tax assessment.