Profits Tax Filing

Any individual, corporation, partnerships, trustee or organisation carrying on a trade, profession or business in Hong Kong in respect of its profits arising in or derived from Hong Kong (excluding profits arising from the sale of capital assets).

Section 14 of the Inland Revenue Ordinance stipulates three conditions for the payment of profits tax: (i) the company must carry on a trade, profession or other business in Hong Kong; (ii) the trade, profession or other business generates profits; and (iii) ) The profits must be profits arising in or originating from Hong Kong.

Hong Kong adopts a territorial source principle of taxation. Only profits which have a source in Hong Kong are taxable here. Profits sourced elsewhere are not subject to Hong Kong Profits Tax. The principle itself is very clear but its application in particular cases can be, at times, contentious.

The Inland Revenue Department (“IRD”) will issue tax return to individuals, sole proprietors, partnerships, property owners and limited companies. Such persons and corporations should complete and file the tax return together with the required documents to IRD. First set of profits tax return will be issued by 18 months from incorporation date. Should the person haven’t received the profits tax return from IRD, he/she should notify IRD its chargeability of Hong Kong Profits Tax.

The tax return of the limited company or partnership is generally posted in April of each year and the salaries tax return is usually posted in May of each year from the Inland Revenue Department. The deadline for submission of tax returns is 1 month.

There is no sales tax, value added tax (“VAT”), dividend tax, capital gain tax in Hong Kong