Company Tax Rate

Company Tax Rate | Bestar

Hong Kong Company Tax Rates

Hong Kong operates on a territorial basis of taxation, meaning that companies are only taxed on profits arising in or derived from a trade, profession, or business carried on in Hong Kong. Profits sourced outside of Hong Kong are generally not taxed, even if remitted back to Hong Kong.

Hong Kong has a two-tiered profits tax rate system:

• For corporations:

  
  

  • The first HK$2 million of assessable profits is taxed at 8.25%.

  • Profits above HK$2 million are taxed at 16.5%.

    
    

• For unincorporated businesses (sole proprietorships and partnerships):

  
  

  • The first HK$2 million of assessable profits is taxed at 7.5%.

  • Profits above HK$2 million are taxed at 15%.

It's important to note that only one entity within a group of connected entities is eligible for the two-tier tax rates. All other connected entities would be taxed at the standard rates of 16.5% for corporations and 15% for unincorporated businesses.

Additionally, Hong Kong offers various tax incentives and concessionary rates for specific activities and industries, such as certain qualifying corporate treasury centers, aircraft leasing activities, and professional reinsurers.

How Bestar can Help

Company Tax Rate

Bestar plays a crucial role in helping individuals and businesses navigate the complex tax landscape of Hong Kong. Here's how we can assist:

1. Ensuring Compliance and Avoiding Penalties:

• Understanding constantly evolving laws: Tax laws and regulations are complex and can change frequently. Bestar stays updated on the latest amendments, including international developments like BEPS 2.0 and FSIE regimes, ensuring your business remains compliant.

  
  

• Accurate tax filing: We help prepare and file all necessary tax returns (profits tax, salaries tax, property tax, employer's returns, etc.) accurately and on time, minimizing the risk of errors, late filing penalties, and audits.

  
  

• Responding to IRD inquiries: We can communicate with the Inland Revenue Department (IRD) on your behalf, handle correspondence, and respond to inquiries or requests for supporting documents.

  
  

• Assisting with tax investigations and audits: If your business is selected for a tax investigation or field audit, Bestar can represent you, help gather necessary information, and negotiate with the IRD to reach a reasonable resolution.

2. Optimizing Tax Efficiency and Minimizing Liabilities:

• Strategic tax planning: This is a core service. Bestar analyzes your financial situation and business operations to identify legal ways to reduce your tax burden. This includes:

  
  

  • Maximizing deductions and allowances: Identifying all eligible expenses, deductions, and allowances that can reduce your taxable income.

  • Utilizing offshore income exemptions: Hong Kong's territorial tax system can be complex. Bestar can advise on structuring your operations to legitimately classify certain income as offshore and thus exempt from Hong Kong tax.

  • Structuring for the two-tiered tax system: Ensuring your business effectively benefits from the lower 8.25% tax rate on the first HK$2 million of profits.

  • Income splitting: Advising on strategies to distribute income among multiple shareholders or entities to take advantage of lower tax brackets.

  • Timing of income recognition: Strategically planning when to recognize income and expenses to optimize taxable income across different tax periods.

    
    

• Leveraging tax incentives and concessions: Hong Kong offers various tax incentives. Bestar can identify if your business qualifies for any special rates or exemptions, such as those related to specific industries, research and development, or corporate treasury centers.

  
  

• Double Taxation Agreements (DTAs): Hong Kong has a growing network of DTAs. Tax professionals can advise on how to leverage these agreements to avoid or reduce double taxation on cross-border income. We can also assist with obtaining a Certificate of Resident Status (COR) which is often required to claim DTA benefits.

  
  

• Profit repatriation and fund extraction: Advising on tax-efficient ways to repatriate profits or extract funds from your business.

3. Providing Advisory and Support for Business Decisions:

• Business structuring: Advising on the most tax-efficient corporate holding and operating structures for new and existing businesses, including human resource arrangements.

  
  

• Mergers and Acquisitions (M&A): Conducting tax due diligence for M&A transactions and advising on tax-efficient structuring for such deals.

  
  

• International tax planning: For businesses with global operations, professionals can provide guidance on cross-border tax issues and ensure compliance in multiple jurisdictions.

  
  

• Advance tax rulings: For complex or controversial tax issues, we can help apply for an advance ruling from the IRD to gain certainty on the tax treatment.

  
  

• Personal tax advisory: Bestar also offers services for individuals, including salaries tax planning, property tax advice, and assistance with claiming allowances and deductions.

  
  

• Bookkeeping and accounting integration: Bestar works closely with accounting services to ensure accurate record-keeping, which is fundamental for effective tax planning and compliance.

Key Benefits of Hiring a Tax Professional in Hong Kong:

• Save money: By maximizing deductions, utilizing exemptions, and optimizing your tax structure.

  
  

• Save time: Freeing up your valuable time to focus on your core business activities.

  
  

• Peace of mind: Knowing your tax affairs are handled correctly and you're compliant with regulations.

  
  

• Access to expertise: Benefiting from in-depth knowledge of Hong Kong tax laws and best practices.

  
  

• Reduced risk: Minimizing the chances of penalties, audits, and legal issues.

In essence, Bestar acts as a strategic partner, helping businesses not only meet their tax obligations but also leverage the tax system to enhance profitability and support long-term growth.

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