Hong Kong does not have capital gain tax and under usual circumstances, gains from disposal of property are not subject to tax.
Under Hong Kong tax law, “profits arising from the sale of capital assets” are outside the scope of charge for profits tax. Therefore, if the property sold is a capital asset, the profit arrived from the disposal will not be subject to tax. On the other hand, if the purchase and sale of property was in the nature of trade, the profits will be assessable to profits tax.
In determining whether an asset was acquired as a capital asset or trading stock, the Inland Revenue Department (“IRD”) will look at:
the taxpayer’s intention at the time of the acquisition;
consider whether the taxpayer had engaged an adventure in the nature of trade.
To ascertain the taxpayer’s intention, IRD will examine all the surrounding circumstances to see if the professed intention of the taxpayer is genuinely held. In considering whether there is an adventure in the nature of trade, IRD will see if badges of trade exist, such as frequently engaged in similar transactions; held the asset or commodity for a lengthy period; add re-sale value to the asset by additions or repair; and etc. This indicates an intention to trade or, perhaps, the carrying on a trade. For example, the source of finance should also be taken into account. If money was borrowed in short term, that could be a pointer towards an intention to buy the property with a view to resell in the short term. Then, it is a trade and the profit thereof is subject to tax. The burden of proof is on the taxpayer.
Source：Hong Kong Inland Revenue Department’s website
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.
Hong Kong, Macao and Taiwan residents who have lived in the inland (mainland) China for more than six months with a legitimate and stable job, a legitimate and stable residence or continuous school attendance are eligible to apply for a residence permit in accordance with the relevant regulations according to their wishes.
Normally, the Hong Kong Inland Revenue Department (“IRD”) will issue the Form BIR56A of the Employer’s Return (“ER”) to employers on the first working date of April each year. ER must be filed within one month from the date of its issuance unless otherwise stated. Before completing the ER, you must read carefully the Notes and Instructions for Form BIR56A and the Notes and Instruction for Form IR56B.
If the source of employment is located in Hong Kong, an employee’s any income derived from that employment falls within the basic charge to Salaries Tax, except in the basis period of a year of assessment render all his/her services outside Hong Kong, or services rendered during his/her visit to Hong Kong not exceeding a total of 60 days in the basis period of a year of assessment.
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.
