Hong Kong company taxes

Profits tax: the two-tiered rate and the HK$2m band

Assessable profits of a corporation are taxed at 8.25% on the first HK$2,000,000 and 16.5% on the balance — so a company with, say, HK$3,000,000 of profit pays 8.25% on the first HK$2m and 16.5% on the remaining HK$1m, not 16.5% across the board. The one restriction to know: where a company has 'connected entities' (broadly, fellow group members under common control), only one of them, nominated each year, may enjoy the two-tiered rates — the others are taxed at the flat 16.5%. A standalone non-resident-owned company with no group simply gets the two-tiered benefit automatically.

No VAT, GST or sales tax at all

Hong Kong has no consumption tax of any kind — no VAT, no GST, no sales tax — so there is nothing to register for, no returns to file, and no threshold to watch as turnover grows. This removes an entire compliance workstream that a comparable UK Ltd, EU entity or Singapore company must run. The trade-off is purely that there is no input-tax credit to reclaim, which rarely matters for a lean service or trading business and is a clear net simplification for a remote founder.

Dividends and withholding for foreign owners

Hong Kong imposes no withholding tax on dividends or interest, so when your Hong Kong company distributes profit to you as a non-resident shareholder, nothing is deducted at the Hong Kong end. Dividends a Hong Kong company receives are also outside the charge to Profits Tax. The one outbound payment that is taxed is royalties to non-residents — generally a deemed-profit basis giving an effective 4.95% (rising to 16.5% where the IP was once held by a Hong Kong associate, and 4.5%/15% for individuals) — frequently cut further by a double-tax treaty. Your home country may still tax dividends you receive, so coordinate locally.

How a non-resident-owned company is taxed — the offshore claim

Because tax is territorial, the live question is not where the owner lives but where the profits are sourced. A Hong Kong company that earns its income entirely outside Hong Kong can lodge an 'offshore claim' to have those profits treated as non-taxable — but this is a substance test the IRD scrutinises hard: you must show, with contracts and evidence of where negotiation, performance and decision-making actually happened, that no profit-generating activity occurred in Hong Kong. An offshore claim is granted, not assumed; if you have a Hong Kong office, staff or local customers, expect the relevant profits to be onshore and taxed at the normal rates.

Offshore relief vs the FSIE regime, and losses

Do not confuse the territorial offshore claim with the Foreign-sourced Income Exemption (FSIE) regime introduced from 2023. FSIE applies only to members of multinational enterprise (MNE) groups and only to certain passive income (foreign dividends, interest, IP income and disposal gains) received in Hong Kong, requiring economic substance to stay exempt — it generally does not bite on a standalone, actively-trading non-resident-owned company. Separately, trading losses can be carried forward indefinitely to offset future Hong Kong profits (there is no carry-back), and Hong Kong offers no general R&D super-deduction beyond an enhanced deduction for qualifying local R&D expenditure.

Filing calendar and the audit gate

Every limited company must file a Profits Tax Return (BIR51) with audited financial statements — there is no small-company audit exemption, so even a low-turnover startup needs a Hong Kong CPA audit before the return can be completed. The IRD issues the first Profits Tax Return roughly 18 months after incorporation (covering the first ~18 months) and it is due within 3 months of issue; thereafter returns track your financial year-end, with block extensions commonly available through a tax representative. The annual return NAR1 to the Companies Registry (separate from tax) is due within 42 days of each incorporation anniversary.