The rates
| Assessable profits | Corporations | Unincorporated businesses |
|---|---|---|
| First HKD 2,000,000 | 8.25% | 7.5% |
| Remainder | 16.5% | 15% |
Only one company in a group of connected entities can claim the lower first-tier rate.
The territorial principle
Hong Kong taxes profits arising in or derived from Hong Kong. Where the profit-producing activities happen decides the source. A company whose trading operations genuinely take place outside Hong Kong can file an offshore claim, which the Inland Revenue Department reviews closely and which requires good documentation.
Foreign-sourced income exemption (FSIE)
Since 2023, certain foreign-sourced passive income received in Hong Kong by companies in multinational groups, such as dividends, interest, IP income and disposal gains, is only exempt if conditions such as economic substance in Hong Kong are met.
What Hong Kong doesn’t tax
- No VAT or GST
- No tax on dividends paid
- No capital gains tax (subject to FSIE for some groups)
Compliance
Companies file an annual profits tax return with audited financial statements. Our Hong Kong company formation service can include accounting and tax filing, and our holding structure advice covers dividends from a mainland WFOE.