Hong Kong taxes only profit sourced in Hong Kong, at two low rates, with no VAT and no tax on dividends or capital gains.
Profits tax is 8.25% on the first HK$2 million and 16.5% above. There is no VAT, GST, capital gains tax or dividend withholding. Only Hong Kong-sourced profit is taxable, but offshore claims need strong evidence.
Corporations only; unincorporated businesses use 7.5% and 15%.
| Tax | Rate | Applies to |
|---|---|---|
| Profits tax, first tier | 8.25% | First HK$2 million of assessable profit |
| Profits tax, second tier | 16.5% | Assessable profit above HK$2 million |
| Two-tier limit | One entity per group | Only one connected company can claim the lower tier |
| Sales tax / VAT | None | No consumption tax on goods or services |
| Dividends and capital gains | 0% | Not taxed, subject to FSIE rules for some groups |
A company with HK$3 million of assessable profit pays 8.25% on the first HK$2 million (HK$165,000) and 16.5% on the next HK$1 million (HK$165,000). Total profits tax is HK$330,000, an effective rate of 11%.
Only one company in a group of connected entities can use the 8.25% band. Founders with several companies must nominate which one.
Keep contracts, travel records, emails and invoices showing where deals were negotiated and services performed. The IRD often asks follow-up questions over years.
Tax losses carry forward indefinitely against future profit of the same company, but cannot be carried back.
The rates are low, but the offshore claim is where founders go wrong. Treat it as a claim you must prove, not an exemption you get automatically, and keep records of where work and decisions happen.
Yes, but you must file a claim with evidence that the profit-producing operations happened outside Hong Kong; the IRD often asks questions.
Yes. Salaries tax runs at progressive rates up to 17%, or a standard rate on high earners.
Yes. Every company issued a return must file one, with audited accounts.
