TAX SERVICE

Tax Service

There is no capital gain tax, withholding tax on dividends, or GST, VAT in Hong Kong. The tax system in Hong Kong is the most simplest in the world. The current corporate tax rate is flat 16.5% on assessable profits.

Starting 2018/2019, the HKSAR government introduces a favorable two-tiered profit tax rate. Under the two-tiered profits tax rates regime, the profits tax rate for the first $2 million of assessable profits will be lowered to 8.25% (half of the standard rate) for corporations and 7.5% (half of the standard rate) for unincorporated businesses (mostly partnerships and sole proprietorships). Assessable profits above $2 million will continue to be subject to the rate of 16.5% for corporations and standard rate of 15% for unincorporated businesses.

When the company is commenced business outside Hong Kong, there will be no tax, despite the bank accounts are holding in Hong Kong. Income raised in or derived from outsides of Hong Kong is not subject to Hong Kong Corporate Tax. In other words, if you are operating a Hong Kong company and the bank facilities are held in Hong Kong, but you are residing in overseas and income is derived from your overseas clients, your Hong Kong company is not subject to Hong Kong corporate tax. Only income which raised in or derived from Hong Kong is subject to corporate tax in Hong Kong.

Tax evasion is an illegal method of obtaining a tax benefit. Tax planning is an attempt to obtain a tax benefit by legal means. Through efficient tax planning, a company/a taxpayer can enjoy maximum tax saving.

SOME TAX PLANNING TIPS:

  • Personal Expenses Paid by the Company - Personal expenses paid by the company are the most common way of minimizing tax liability adopted by small-medium companies. In order for such expenses to be qualified for deduction, company should prove that such expenses are not personal expenses defined by Inland Revenue Ordinances. In this sense, company should enter into an employment contract between the company and the director specifying clearly that the expenses should be borne by the company.

  • Quarter Rent Payment - Quarter rent payment of director/employee can be reimbursed by employer. The employee is only subject to tax on maximum 10% of his/her net assessable income in respect of the provision of quarters on his/her salaries tax. And the employer can deduct full amount as an expense towards calculating the net profit.

  • Deductible Expenses and Depreciation - All outgoings and expenses, other than expenses of a domestic, private or capital nature, wholly, exclusively and necessarily incurred in the production of assessable income, are allowed to be deducted from assessable income. Taxpayer can request deduction of such outgoings and expenses in the tax return, but proper records and receipt must be kept.

  • 60-Day Visit Rule - In general, if a person visits Hong Kong for not more than 60 days during the year of assessment, he will be exempt from salaries tax. In counting the number of days of visit, all days in HK are counted regardless of business related or not. Part of a day is counted as one whole day.

Profit Tax Return for Incorporated Companies

  • A newly incorporated company will receive the first Profit Tax Return 18 months after its date of incorporation.

  • The first Profit Tax Return has to be completed within 3 months after the issue date.

  • All other Profit Tax Return need to be completed within 1 month after the issue date.

Employer's Profit Tax Return

  • The Profit Tax Return for an employer is issued in the beginning of April every year which has to be completed within 1 month after the issue date.

Accounting and Auditing

  • According to the Companies Ordinance (Cap.622), all companies are required to prepare for the audited financial statements annually.

  • In order not to be imposed any penalty by the Government, we encourage our valued customers to take action beforehand.

  • Failure to comply will result in committing an offense. The director of the company will be liable to a fine of HK$300,000 and imprisonment for 12 months.

  • Prism Consultancy provides accounting service and auditing service, and helps/trains clients with using Xero Accounting.