FAQ on Accounting & Tax

A Hong Kong company only needs to pay Profits Tax every year, which is calculated at 8.25% on assessable profits up to HK$2,000,000; and 16.5% on any part of assessable profits over HK$2,000,000. Note that 100% of the 2021/2022 profits tax is waived subject to a ceiling of HK$10,000 per case.

A Hong Kong company which do not generate any profit therefore does not need to pay any Profits Tax.

In Hong Kong, the most common FYE are 31 December and 31 March. The former is the calendar year-end and the latter is the financial year-end of Hong Kong government.

For a newly incorporated Hong Kong company, its first financial year commences on the date of incorporation and ends on a date determined by the its Board of Directors. The Board should specify a date as the FYE of the company before the first anniversary of incorporation; otherwise, the last day of the month of the company’s first anniversary of incorporation would be treated as the first FYE of the company. In addition, the first FYE must fall within 18 months. Hence, the first financial period of the company should not be more than 18 months.

Generally imported/exported commodities are not levied tariffs; except tobacco, liquor and petroleum. Nonetheless, import/export commodities must be declared at customs.

Yes. Clients only need to provide us with the relevant information; we can then process the accounting, auditing, tariff declaration and other relevant service on your behalf. Fees for such services will be determined based on the actual workload.

There are three kinds of taxes in Hong Kong: Profits Tax, Salaries Tax and Property Tax.

Profits Tax shall be 8.25% on assessable profits up to HK$2,000,000; and 16.5% on any part of assessable profits over HK$2,000,000, while Salaries Tax shall be calculated depending on the salary income at a progressive tax rate which may be up to15% of the net assessable income after any allowable deductions except for personal allowances. On the other hand, a standard rate of 15% Property Tax is being collected based on the net assessable value of the property for the relevant year of assessment.

The basis period for any year of assessment is the period on the income/profits of which tax for that year will be computed. For Salaries Tax and Property Tax, the basis period is from 1 April each year to 31 March of the following year.

For Profits Tax, the basis period is either the year ended 31 March during the relevant year, or where the annual accounts are made up to any day other than 31 March, the year ended on that day in the relevant year, or where the accounts are made up for each lunar year, the lunar year ended in the relevant year.

Donations eligible for tax deduction shall not be less than $100. The maximum amount deductible is 35% of the income after allowable expenses and depreciation allowances.

Yes, losses incurred in a taxable year can be carried forward and be used to offset the profits of the company in subsequent years.

Profits Tax shall be levied according to the actual profits of the taxable year. Since the profits of one year shall be determined only after the end of year, the Inland Revenue Department will levy provisional tax before the end of that year. After the profits of the relevant year are assessed in the following year, the provisional tax already paid can be deducted from the Profits Tax payable of that year.

If the corporate profits do not arise from Hong Kong, and the company has not set up an office in Hong Kong nor hired Hong Kong employees, then its earned profits will be exempt from Profits Tax.

Yes. Because company incorporation is profit-oriented; hence, even if the company in Hong Kong only performs the role of collecting and paying for others, it shall be deemed as an agency service business, and its commission from undertaking the collection and payment for others shall be treated as its income.

No. According to Hong Kong laws, all Hong Kong companies have the obligation to declare their financial condition to Inland Revenue Department, whether or not its business takes place in Hong Kong. If your company however does not source any of its income from Hong Kong, you can apply for tax exemption from the Inland Revenue Department.