II. Profits Tax

With reference to section 14 of the Inland Revenue Ordinance, profits tax shall be charged for each year of assessment on persons carrying on a trade, profession or business in Hong Kong in respect of their assessable profits arising in or derived from Hong Kong for that year from such trade, profession or business (excluding profits arising from the sale of "capital assets").

“Persons” (in the context of Profits Tax) include corporations/limited companies, sole proprietorships, partnerships and trustees, etc. Self-employed persons are also included.

There is no distinction made between Hong Kong residents and non-residents. A resident may therefore derive profits from abroad without suffering tax in Hong Kong. Conversely, a non-resident may suffer tax on profits arising in Hong Kong . The question of whether a business is carried on in Hong Kong and whether profits are derived from Hong Kong is largely a question of fact. No tax is levied on profits arising abroad, even if they are remitted to Hong Kong.

Provisional Profits Tax

Profits Tax is chargeable on the actual profits of the year. As the profits for any particular year cannot be known until after the year end, a provisional tax charge is raised during the course of the year. In the following year, when the profits of the previous year are ascertained, an assessment is made and credit is given for the provisional tax paid.

Limited Company's taxation matters

Every corporation or limited company must appoint an auditor at the company's annual general meeting (section 131 of the Companies Ordinance), and such auditor can handle the taxation matters of such company (section 129C) . Therefore, please check with your auditor/accountant for any profit tax issues concerning with a limited company.

  1. General guidelines on how to compute Profits Tax
  2. Deductions relating to taxable profits
  3. Allowances relating to Profits Tax
  4. Scenarios involving partnership business
  5. Objection and Appeal
  6. Anti-avoidance measures concerning Profits Tax payment
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