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Guide to Offshore Profit Tax Exemption for Hong Kong Companies
Hong Kong, as a globally recognized free port and international financial center, applies the territorial source principle of taxation. One advantage of this system is that profits wholly arising outside Hong Kong may be exempted from Hong Kong profits tax. The key conditions for a Hong Kong company’s offshore profits to qualify for tax exemption are genuine offshore operations, a complete chain of evidence, and compliant reporting.
Hong Kong 2026/27 Tax Relief Policies
On 25 February 2026, Mr. Paul Chan Mo-po, Financial Secretary of the Hong Kong Special Administrative Region, delivered the 2026–27 Budget at the Legislative Council, setting out the development direction for the vibrant city in the coming year. On tax and relief measures, the Budget introduced a number of concessions:Reduction in salaries tax and tax under personal assessment for the year of assessment 2025/26 by 100%, subject to a HK$3,000 ceiling.
Hong Kong Taxation - Hotel Accommodation Tax
On 28 February 2024, the Financial Secretary of Hong Kong, Mr. Paul Chan Mo-po, delivered 2024-25 Budget. He proposed to resume the collection of the hotel accommodation tax at a rate of 3% with effect from 1 January 2025. This proposal was passed by the Legislative Council of Hong Kong and published in the Gazette on 25 October 2024.
Hong kong Employer’s Return
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.
Introduction to Hong Kong Salaries Tax
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.
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.
Hong Kong Salaries Tax – Chargeable Income
According to Section 8(1) of the Hong Kong Inland Revenue Ordinance, salaries tax is imposed on all income arising in or derived from Hong Kong from an office, employment or any pension.In addition, regarding a non-Hong Kong employment, salaries tax is imposed by Section 8(1A) of the Hong Kong Inland Revenue Ordinance to assess income derived from services actually rendered in Hong Kong.
Hong Kong Taxation System (Major Taxes in Hong Kong)
Hong Kong Taxation System. Property tax is charged on the Hong Kong owners who have derived rental income from letting properties situated in Hong Kong and is computed at the standard rate on the net assessable value of the property.Salaries Tax is imposed on all income arising in or derived from Hong Kong from an office or employment or any pension. “Income arising in or derived from Hong Kong”
Hong Kong Salaries Tax – Notification of Chargeability to Salaries Tax
If you are liable to tax in Hong Kong, you have to inform the Inland Revenue Department (“IRD”). Section 51(2) of the Inland Revenue Ordinance (“IRO”) provides that a person chargeable to tax for any year of assessment shall inform Commissioner in writing that he/she is so chargeable not later than 4 months after the end of the basis period for that year of assessment unless he/she has already been required to furnish a tax return.
Hong Kong Profits Tax - Guideline Note on the Territorial Source Principle of Taxation
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. This guideline note gives a brief explanation of how the principle operates and provides simple examples for illustrative purposes of the tests applied to different types of businesses.