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 those which are 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 office and authority announced that the first US$ 50,000 of income of a company will be subject to a reduced corporate tax rate of 2%. Pursuant to the Inland Revenue (Amendment) (No.7) Bill 2017, a two-tiered profits tax regime will apply as follows:
Rates of Tax 2018-19 Companies First HK$ 2,000,000 8.25% On the Remainder 16.5% Unincorporated Businesses First HK$ 2,000,000 7.5% On the Remainder 15%
- If properly structured, non-resident Hong Kong companies are legally tax exempt if no business activity is conducted in Hong Kong. The Hong Kong’s tax system is territorially based. Under this system, foreign sourced income is outside the scope of Hong Kong profits tax;
- Generally, investment income and capital gains are not subject to tax in Hong Kong (SAR). However, income from property (land and buildings) located in Hong Kong (SAR) is subject to property 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;
- Assignments of residential immovable property are subject to a flat rate of stamp duty at 15% of the consideration or market value of the property (whichever is higher). The tax imposed on rental income of owners of land and buildings in Hong Kong is 15% on the assessable value of the rent and an allowance for repairs and outgoings equal to 20% of the rental income, after deducting rates paid by the owner;
- Hong Kong does not levy any import or export duties. Excise duty is levied on hydrocarbon oils, spirits, tobacco, cigarettes, and methyl alcohol;
- There is no Value Added Tax, GST or any other sales tax in Hong Kong;
- Hong Kong does not impose profits tax on the sale of capital assets;
- There are no inheritance and gift taxes in Hong Kong;
- 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:
Rates of Tax 2018-19 First $50,000 At 2% Next $50,000 At 6% Next $50,000 At 10% Next $50,000 At 14% On the remainder At 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;Profits Tax Return
Normal Issue Date For accounting year end between Normal filing date for unrepresented cases Due date for tax payment First working day in April of the following year of assessment
- 1 April to 30 November
- 1 December to 31 December
- 1 January to 31 March
- 2 May
- 2 May – 15 August
- 2 May – 15 November
As stipulated in the notice of assessment, generally between November of the year in which the returns are issued to April of the following year
- Annual filing Requirements for Hong Kong is submission of audited financial statements to the Inland Revenue Department. We, at Healy Consultants can assist our Clients to complete their annual accounting, tax obligations and annual compliance requirements for a fee of US$4,950.
- 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;
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 2018, 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 Employment (Amendment) (No.2) Ordinance 2018. These laws resemble the English system of labour laws, in terms of employer responsibility;
- With effect from 1 May 2017, the SMW rate is raised from $32.5 per hour to $34.5 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.