Accounting and tax
Hong Kong is a law-tax jurisdiction with liberal laws. Many of our Clients appoint Healy Consultants their accounting and tax representative in Hong Kong to assist with i) communicating with the Inland Revenue Department (HKIRD) ii) completing financial statements and corporate tax returns and iii) supervising independent auditors. Find below specific information about Hong Kong accounting and tax.
- For resident Hong Kong companies, the corporate income tax in the city is 16.5%. Resident companies are the ones incorporated or managed from Hong Kong, and they are only taxed on net profits arising from sales within the city;
- In 2018, the Hong Kong tax authority announced the first HKD2 million (US$250,000) of income of a company will be subject to a reduced corporate tax rate of 8.5%. This effectively reduces the effective tax rate to 12.5% on an annual income of US$500,000;
- If properly structured, non-resident Hong Kong companies are legally tax exempt if no business activity is conducted in Hong Kong. They are not taxed on income earned offshore, even if it is remitted back into the city;
- There are no capital gains taxes, withholding taxes, value added tax, sales tax or accumulated earnings tax;
- Stamp duty on the transfer of shares in Hong Kong is 0.2% of their value, which is shared equally between the two parties involved. Property tax is levied at a fixed rate of 15% on the value of the property;
- Personal income tax is also only applicable for income arising in or derived from Hong Kong. There are 4 different brackets for tax rates, as show in the table below:
Income bracket (HK$) Tax rate Under 40,000 2% 40,001 – 80,000 7% 80,001 – 120,000 12% Above 120,000 17%
- Annual corporate income tax returns must be filed with Inland Revenue Department on the 1st April every year. Penalties might be imposed in case of delays;
- Additionally, audited financial statements must be submitted annually to the Inland Revenue Department. Healy Consultants can assist our Clients to complete their annual accounting and tax obligations for a fee of US$4,950.
Miscellaneous Tax information
- Unlike many jurisdictions, business losses can be carried forward indefinitely in Hong Kong;
- A Hong Kong business benefits from the city’s 37 DTAs, which provide double taxation relief when dealing with countries like Germany, Singapore, UK, USA, etc.;
- Healy Consultants can assist our Clients to clarify their annual reporting obligations so that they can comply with all of their personal and corporate tax obligations of their country of residence and domicile.
Legal and compliance considerations
- As of 2014, a Hong Kong business is required to have at least one director who is a natural person. A corporate director can no longer be the sole director of a company. If required, Healy Consultants will be please to provide your firm with a professional nominee director. Our fee amounts to US$2,500 per annum;
- All Hong Kong companies are required to have a local registered office and a resident company secretary. Most of our Clients request Healy Consultants to provide these services for their Hong Kong companies;
- After company incorporation, company information, such as capital structure and director/shareholder details are publicly available through the Companies Registry. This means less privacy for shareholders, but increases transparency of doing business in the city.
- Recruitment of foreign labour requires the employer to justify that the locals have not been denied the work opportunity. Furthermore, the foreign employee is expected to prove that he/she possesses the credentials relevant to the position;
- Residents of mainland China, Taiwan and Macau will require additional documents when applying for an employment visa, such as copies of identity cards and copies of the applicant’s household registration;
- When employing local or foreign workers, employers must comply with the 2010 Employment Ordinance. These laws resemble the English system of labour laws, in terms of employer responsibility;
- From 1st May 2015, the hourly minimum wage in Hong Kong is US$4 per hour;
- All employees must contribute to their employee’s social security fund. The contributions are divided equally among employees earning above US$916 (5%) and employers (5%).
Licensing in Hong Kong
- All Hong Kong companies must apply for the respective business license during the month following incorporation;
- All the necessary licenses, as well as the application steps, are listed at the Trade and Industry Department’s website.
- Every year, our Client will face the following recurring costs for their active companies: i) business registration renewal ii) annual return filing and iii) audited financial statements;
- Healy Consultants provides our Clients with company de-registration service in Hong Kong. Please note that our fee for this service is US$2,450 and the process takes a minimum of 6 months.