Corporate Tax FAQ for Hong Kong SAR
General Corporate Taxation
Hong Kong follows a territorial basis of taxation, meaning only profits arising in or derived from Hong Kong are taxable. Offshore profits are generally not taxed.
Yes, companies must notify the tax authority even if no tax return has been issued.
Assessable profits are computed by adjusting accounting profits according to tax laws for the financial year ending within the relevant year of assessment.
- Corporations: The current corporate profit tax rate in Hong Kong is 16.5% on assessable profits.
- Sole Proprietorships & Partnerships: Individuals operating as sole proprietors or in partnerships are taxed at a 15% rate on assessable profits.
- Two-Tier Tax System: A lower tax rate of 8.25% applies to the first HKD 2 million of profits for corporations and 7.5% for unincorporated businesses.
Yes, offshore profits are generally exempt, but they may be deemed taxable under the Foreign-Sourced Income Exemption (FSIE) regime if specific conditions are not met.
No, Hong Kong does not tax worldwide income. Only income sourced in Hong Kong is taxable.
Filing and Compliance
The year of assessment runs from 1 April to 31 March.
Filing deadlines depend on the financial year-end:
- 1 January to 31 March: 15 November (same year).
- 1 April to 30 November: 2 May (next year).
- 1 December to 31 December: 15 August (next year).
- Tax return form.
- Financial statements.
- Tax computation showing adjustments to accounting profits.
Yes, overseas companies must file tax returns for their Hong Kong branch operations.
Penalties and interest may be imposed for late filing or non-compliance.
Yes, provisional tax is payable based on the prior year’s liabilities and is credited against the final tax.
Specific Tax Treatments
Generally, capital gains are not taxable, but offshore disposal gains may be deemed taxable under the FSIE regime.
- Dividends from local companies are exempt.
- Dividends from overseas companies are typically not taxable unless deemed taxable under the FSIE regime.
- Hong Kong-sourced interest income is taxable unless derived from a deposit with a financial institution.
- Offshore interest income may be deemed taxable under the FSIE regime.
- Royalties paid for using IP in Hong Kong are taxable.
- Offshore royalties may also be taxable under the FSIE regime.
The FSIE regime deems certain offshore income (interest, dividends, disposal gains, and IP income) taxable if received in Hong Kong and specific conditions are not met.
- Gains/losses from revenue transactions are taxable/deductible.
- Gains/losses from capital transactions are not taxable/deductible.
Special Tax Provisions
Yes, inventory must be valued at the lower of cost or market value, and LIFO is not allowed.
Yes, certain activities like reinsurance, ship leasing, and corporate treasury operations qualify for concessionary tax rates (8.25%) or exemptions.
Yes, income from QDIs issued on or after 1 April 2018 is tax-exempt if specific conditions are met.
Upon cessation, inventory is valued at market value unless sold to another Hong Kong business.
Partnerships are taxed as a single entity, and profits are shared among partners for personal tax purposes. Salaries paid to partners or their spouses are not deductible.
Yes, under the FSIE regime, intra-group transfer relief allows tax deferral for asset transfers within associated entities.
Double Taxation and International Aspects
Yes, Hong Kong has DTAs with over 40 jurisdictions, including China, the UK, and Malaysia.
Relief is provided through tax credits for foreign income that is also subject to Hong Kong profits tax under a DTA.
No, Hong Kong does not have CFC legislation.
Reduced tax rates may apply for royalties under DTAs with certain jurisdictions.
Yes, non-residents selling goods through Hong Kong consignment agents are taxed at 0.5% of gross sales proceeds.
Interest arising from business operations in Hong Kong is deemed taxable.
Personal Tax FAQ for Business Owners, Directors, and Employees
General Personal Taxation
Personal tax, known as salaries tax, is imposed on income derived from employment, offices, or pensions in Hong Kong.
Yes, directors are subject to salaries tax on fees and income derived from their directorship roles in Hong Kong.
Salaries tax is the lower of:
Standard rate: 15% on net assessable income after deductions and allowances.
Progressive rates:
| Net Chargeable Hong Kong Salary Tax (in HKD currency) | Tax Rate (%) |
| 0 – 50,000 | 2 |
| 50,001 – 100,000 | 6 |
| 100,001 – 150,000 | 10 |
| 150,001 – 200,000 | 14 |
| Above 200,000 | 17 |
- Employment income (e.g., wages, salaries, bonuses, allowances).
- Fees earned by directors.
- Benefits in kind (e.g., housing, car benefits).
Income is taxable only if the employment is exercised in Hong Kong. Income derived from services outside Hong Kong is generally exempt, subject to apportionment rules.
Yes, allowances and deductions include:
- Personal allowance.
- Dependent spouse/child allowance.
- Deductions for education, charitable donations, and home loan interest.
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Talk To ExpertPersonal Tax Obligations for Business Owners and Directors
Director’s fees are subject to salaries tax in Hong Kong, regardless of the director’s residential status.
Yes, business owners can pay themselves a director’s fee, which will be taxed under salaries tax.
Yes, non-monetary benefits (e.g., housing, cars, club memberships) are taxable as part of the director’s income.
No, profits from partnerships are taxed under profits tax, not salaries tax. However, any salary or remuneration paid to partners or their spouses is not deductible for profits tax purposes.
Dividends are not subject to salaries tax or profits tax in Hong Kong.
No, personal or private expenses are not deductible. Only business-related expenses are deductible under profits tax for the company.
Taxation of Employees
Yes, employee salaries are taxable under the salaries tax system.
Bonuses, commissions, and allowances are fully taxable if related to employment in Hong Kong.
Yes, but employees may benefit from preferential tax treatment if housing is provided by the employer under specific arrangements.
Yes, employers must file an Employer’s Return of Remuneration and Pensions annually to report all payments and benefits provided to employees.
Yes, expatriates are subject to salaries tax on income derived from employment in Hong Kong unless specific exemptions apply.
Employer contributions to the Mandatory Provident Fund (MPF) are not taxable to the employee, but voluntary contributions by the employer may be taxed.
Tax Filing and Deadlines
Individuals typically need to file their Salaries Tax Return (Form BIR60) by early June following the end of the tax year (31 March).
Personal tax is paid in two installments:
- Provisional tax: Based on the previous year’s income.
- Final tax: Reconciled after the year-end tax return is filed.
Penalties and fines may apply for late filing or non-compliance.
Yes, the Inland Revenue Department (IRD) encourages e-filing and provides an extension for returns filed electronically.
No, personal tax liabilities must be settled by the due date specified in the assessment notice.
Taxpayers can lodge an objection with the IRD within 1 month of the assessment date.
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