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2024-05-31Hong Kong Offshore Income Concept (Corporation and Individual)
Profits Tax
Generally, a Hong Kong company is liable to only one kind of tax, i.e. Profits Tax. There is no Value Added Tax and no tax on dividend or interest income in Hong Kong.
Basically, a Hong Kong company is not subject to Hong Kong taxes if its operations are not carried out in Hong Kong. In determining whether a Hong Kong company’s operations are carried out in Hong Kong, all the company’s operations (starting from sourcing customers and suppliers until the contract for sale, purchase and/or services has been executed) will be considered to find out which processes are carried out in and outside Hong Kong. The location of bank accounts is insignificant for this matter. For instance, a Hong Kong trading company with a bank account in Hong Kong will not be subject to Hong Kong taxes if:
Whether profits are subject to Hong Kong taxes is a matter of fact and not a matter of law, so it depends on the evidence the company can provide. Further, the profits tax exemption is not an automatic process. The Company subsequently would require to pass the tax surveillance as could be raised by the Inland Revenue Department (“IRD”). Sufficient information and documents have to be provided to the IRD to show that the whole operation and all the business activities of the HK company have been carried out by the directors/employees outside Hong Kong. In order to prepare for the offshore profits tax exemption claim, all available accounting books, invoices of sales and purchases, orders, emails, bank statements, payment and receipt vouchers, bank outward and inward remittance documents, copy of contracts with any business parties, etc. should be kept by the Company and provide them to IRD as evidence of the offshore business operation model. A company can submit a claim for offshore profits tax exemption through the Profits Tax Return, which needs to be submitted with the audited financial statements and the proposed tax computation.
Salaries Tax
An individual receiving salary from a Hong Kong source will be wholly subject to Hong Kong salaries tax, unless all services under the employment were rendered outside Hong Kong. Income from services rendered in Hong Kong during visits not exceeding a total of 60 days in the year is also excluded from Hong Kong salaries tax. These are not applicable for civil servants, seafarers nor aircrews.
An individual can submit a claim for offshore salaries tax exemption through his/her Individual Tax Return.
Disclaimer: The above information are presented in summary form for reference only. Readers are advised to seek further professional advice to obtain further information for offshore income tax exemption in Hong Kong.
Source：Hong Kong Inland Revenue Department’s website
Generally, a Hong Kong company is liable to only one kind of tax, i.e. Profits Tax. There is no Value Added Tax and no tax on dividend or interest income in Hong Kong.
Basically, a Hong Kong company is not subject to Hong Kong taxes if its operations are not carried out in Hong Kong. In determining whether a Hong Kong company’s operations are carried out in Hong Kong, all the company’s operations (starting from sourcing customers and suppliers until the contract for sale, purchase and/or services has been executed) will be considered to find out which processes are carried out in and outside Hong Kong. The location of bank accounts is insignificant for this matter. For instance, a Hong Kong trading company with a bank account in Hong Kong will not be subject to Hong Kong taxes if:
- it has no real office or any business establishment in Hong Kong (excluding registered office);
- it has no staff in Hong Kong and did not engage any agent to carry out any business activities or conduct business in Hong Kong;
- the central management and control, including the board of directors, are based outside Hong Kong;
- the business negotiations and contracts with customers and suppliers were executed and effected outside Hong Kong outside Hong Kong;
- it did not operate a warehouse in Hong Kong to store the company’s products.
Whether profits are subject to Hong Kong taxes is a matter of fact and not a matter of law, so it depends on the evidence the company can provide. Further, the profits tax exemption is not an automatic process. The Company subsequently would require to pass the tax surveillance as could be raised by the Inland Revenue Department (“IRD”). Sufficient information and documents have to be provided to the IRD to show that the whole operation and all the business activities of the HK company have been carried out by the directors/employees outside Hong Kong. In order to prepare for the offshore profits tax exemption claim, all available accounting books, invoices of sales and purchases, orders, emails, bank statements, payment and receipt vouchers, bank outward and inward remittance documents, copy of contracts with any business parties, etc. should be kept by the Company and provide them to IRD as evidence of the offshore business operation model. A company can submit a claim for offshore profits tax exemption through the Profits Tax Return, which needs to be submitted with the audited financial statements and the proposed tax computation.
Salaries Tax
An individual receiving salary from a Hong Kong source will be wholly subject to Hong Kong salaries tax, unless all services under the employment were rendered outside Hong Kong. Income from services rendered in Hong Kong during visits not exceeding a total of 60 days in the year is also excluded from Hong Kong salaries tax. These are not applicable for civil servants, seafarers nor aircrews.
An individual can submit a claim for offshore salaries tax exemption through his/her Individual Tax Return.
Disclaimer: The above information are presented in summary form for reference only. Readers are advised to seek further professional advice to obtain further information for offshore income tax exemption in Hong Kong.
Source：Hong Kong Inland Revenue Department’s website
- https://www.ird.gov.hk/eng/paf/bus_pft_tsp.htm
- https://www.ird.gov.hk/eng/pdf/dipn21.pdf
- https://www.gov.hk/en/residents/taxes/salaries/salariestax/exemption/employee.htm#exempt
- https://www.ird.gov.hk/eng/pdf/pam42e.pdf
Disclaimer
All information in this article is only for the purpose of information sharing, instead of professional suggestion. Kaizen will not assume any responsibility for loss or damage.
WhatsApp/Line/Wechat: +852 5616 4140
All information in this article is only for the purpose of information sharing, instead of professional suggestion. Kaizen will not assume any responsibility for loss or damage.
WhatsApp/Line/Wechat: +852 5616 4140
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Hong Kong Offshore Income Concept (Corporation and Individual)
a Hong Kong company is not subject to Hong Kong taxes if its operations are not carried out in Hong Kong. In determining whether a Hong Kong company’s operations are carried out in Hong Kong, all the company’s operations (starting from sourcing customers and suppliers until the contract for sale, purchase and/or services has been executed) will be considered to find out which processes are carried out in and outside Hong Kong.