Frequency Asked Questions

Hong Kong companies are only required to pay profits tax annually. The profits tax rate for the first $2 million of the corporations’ profits is 8.25% and profits above that amount will continue to be subject to the tax rate of 16.5%; for unincorporated corporations in sole proprietorship or partnership, the two-tiered profits tax rate is 7.5% and 15%. If the company is not profitable, there is no need to pay profits tax.

It is generally 31 March to 31 December of each year for the basis period of taxation according to custom. Hong Kong company has maximum 18 months for the first year's basis period of taxation.

Generally imported/exported commodities need not be levied tariffs, except tobacco, liquor and petroleum. But import/export commodities must be declared at customs.

The base period of assessment shall be one of the following periods: - The year ended on 31 March or 31 December commonly - The year ended by the end of other month as permitted

Donation granted to recognizable charitable organisation is permitted to be deducted, but total donation as required shall not be less than $100 and not more than 35% of assessable profits.

Losses incurred in a taxable year can be carried forward and used to offset the profits of the company in subsequent years.

Profits Tax shall be levied according to the actual profits of the taxable year. Since the profits of one year shall be determined only after the end of year, Inland Revenue Department will levy provisional tax before the end of that year. After the profits of relevant year are assessed in the following year, the provisional tax already paid can be deducted from the Profits Tax payable of this year.

If the corporate profits do not arise from Hong Kong, and the company has not set up an office in Hong Kong nor hired Hong Kong employees, then its earned profits will be exempt from Profits Tax.

Yes. Because company incorporation is profit-oriented, even if the company in Hong Kong only performs the role of collecting and paying for others, it shall be deemed as agency service business, and its income shall be the commission for collection and payment for others.

No. According to Hong Kong laws, all Hong Kong company has the obligation to declare its financial condition to Inland Revenue Department, whether its business takes place in Hong Kong or not. If this company does not have its source of income in Hong Kong, it can apply to Inland Revenue Department for exemption from taxation.

One of the couple should apply for all child allowance. Generally speaking, it is more favourable for one of the couple who earns higher income to apply for child allowance. However, if one of the couple is assessed at standard tax rate, it is more favourable for the other to apply for child allowance.

If taxpayer, his/her separated or divorced spouse and other person are all entitled to apply for child allowance of one unmarried child, the Commissioner of Inland Revenue shall determine the basis for allocation of the child allowance according to each applicant's contribution to the nurture and education of that child.

If child meets the requirements of application for child allowance, his/her parent whether duly married or not, can apply for this child allowance.

If you raise one child over 18 but under 25 years old, this child should receive full-time education during relevant taxable year before you can obtain this child allowance. According to your case as referred to, your son has received full-time education from April to June of this year, so you are eligible to apply for this child allowance.

In determining whether the dependent parents are usually living in Hong Kong, Inland Revenue Department will consider their social and economic relations in Hong Kong, the objective factors referable of which include: - The number of days staying in Hong Kong - Whether they have a fixed residence in Hong Kong - Whether they have property to reside in foreign country - Whether they have job or business activities in Hong Kong or foreign country - Whether their relatives are living in Hong Kong or in foreign country - Generally speaking, if dependent parents are living in foreign country for a long time, the number of days staying in Hong Kong is limited or only of home-visiting nature, then they will not be deemed to be always living in Hong Kong by Inland Revenue Department, even if they hold Hong Kong permanent resident ID cards.

If your dependent parents do not want to continue living in Hong Kong, and only occasionally visit home located in Hong Kong, they will not be deemed to be always living in Hong Kong, which means you will not meet the requirements for application. However, if your parents only once in a while live in mainland, they will be deemed to be always living in Hong Kong, and you can apply for dependent parents allowance in respect of them.

You are married, so you are not entitled to "single parent allowance" even if you pay the living cost of children by yourself. According to Inland Revenue Ordinance, "single parent" refers to taxpayer being single, widowed or separated all the year round, and who raised children solely or mainly by his/herself in that year, and only this kind of parent can obtain "single parent allowance".

In reviewing the application, Inland Revenue Department may require the applicant to present proof showing that the dependent is qualified to apply for government's

Foreign national needs to pay Salaries Tax on its salary received during the employment in Hong Kong, but the following conditions can exempt the foreign national from Salaries Tax: - Consecutively or accumulatively staying in Hong Kong not more than 183 days during one tax period - This remuneration is not paid by Hong Kong employer or its representative - This remuneration is not borne by enterprise set up in Hong Kong by foreign employer

Application for "dependent parent allowance" is subject to your parents' residence, ages and dependence. If the dependent is always living in Hong Kong, aged 55 or above in this year, and given not less than $12,000 for a whole year, they are entitled to apply for "dependent parent allowance", but need not to inputting the living cost actually paid in the year.

As a property owner, we need to: - keep sufficient records of rent received, such as lease agreements and duplicates of rental receipts, receipts for payment of rates, correspondence relating to modification of lease terms and recovery of rent in arrears, for at least 7 years; - complete and submit a tax return for reporting rental income; - notify liability to tax unless you have already received the tax return from the Inland Revenue Department; - notify cessation of ownership within 1 month of such cessation; - notify change of address within 1 month of change; and - pay the tax

Rental income includes the following: - gross rent received or receivable; - payment for the right of use of premises under licence; - service charges or management fees paid to the owner; - owner's expenditure borne by the tenant, e.g. repairs and property tax paid by the tenant; - sums previously deducted as irrecoverable rent and now recovered; and - lump sum premium.

If the income from property chargeable to Property Tax is included in your profits for Profits Tax purposes, or if the property you owned is occupied by you for business purposes, the amount of Property Tax paid may be deducted from the amount of Profits Tax assessed. Corporations carrying on a trade, profession or business in Hong Kong may make application in writing for exemption from paying the Property Tax, which would otherwise be set off against their Profits Tax.

Normally, the common areas of a building such as side shop, carpark, external wall, roof top etc are collectively owned by the individual owners of the building. If any part of the common areas is let out, the rental income derived is chargeable to Property Tax. The owners are responsible for reporting the rental income and paying the tax. If the owners have not received a tax return relating to the common areas let, they are required to notify us in writing. However, when an owners' corporation is formed, section 16 of the Building Management Ordinance provides that the rights and duties of the owners relating to the common parts of the building shall be exercised and performed by the incorporated owners of the building. Therefore, the owners' corporation is required, on behalf of all the owners of the building, to report the income and pay the tax. With effect from 12 February 2010, when an owners' incorporation or a person receives any rental income on common parts of a building, either on own behalf or on behalf of another person, the owners' incorporation or the person receiving the rent will be regarded as owner of the common parts and is thus required to report the rental income and pay the property tax.

No. A Limited Company incorporated in Hong Kong shall have its name with the words "Limited Company" or "Limited" in order to indicate that shareholders shall bear limited liability for future obligation.

Yes. However, a English name is required when clients are planning to open bank accounts.

Chinese or English can be used while Arabic numbers can be included. No bilingual name is allowed.

Yes.

The registered capital, no matter how much it is, does not need verification.

The Registered capital represents: - The company's maximum financing capacity: The company is financed through issuing new shares to its existing shareholders or new investors. The greater the registered capital amount, the more the company is financed. - Shareholders' maximum liability: If the company liquidates, shareholders shall bear the liability limited to the issued but not fully paid capital, instead of registered capital.

No government fee shall be paid when an enterprise increasing its registered capital.

Shareholders and directors are different in comparison in the following rights and obligations: Shareholders' rights and obligations are as follows: - To take part in meetings of shareholders, and entitled to voting power in proportion of shareholding - To understand the operating and financial conditions of the company - To elect and to be elected as members of Board of Directors - To obtain dividends - To pre-empt shares transferred by other shareholders - To subscribe in priority the shares newly issued by the company - To have distribution from the remaining property after liquidation of the company - To consider and pass the annual auditors' report in meetings of shareholders - To employ or dismiss directors in meetings of shareholders and determine directors' remuneration Directors' rights and obligations are as follows: - To take charge of ordinary operations and decisions of the company - To keep accounting book and business record - To take charge of bank account management - To secure the loan borrowed with the company's property - To propose profits distribution scheme - To propose registered capital increase scheme - To convene meetings of shareholders - To execute resolutions passed at meetings of shareholders

Yes. The shareholder and director of the company can be the same person.

Chinese residents or overseas persons who are 18 years old or above and holding passports or ID cards can become shareholders or directors of Hong Kong limited company.

Yes. All information of a limited company registered in Hong Kong, including names, addresses and shareholding percentage of shareholders; and names, ID card numbers or passport numbers and addresses of directors, shall be accessible by the public.

Company to be registered in Hong Kong needs a Hong Kong registered address but no requirement of having its own office. We can provide company registered address service, so clients will not pay additional expenditure for office rental.

Bank account may not be opened when that is not necessary, but we suggest that all business contacts shall be operated through the bank account of the company.

All shareholders and directors must be present for the account opening. However, requirement of the attendance of shareholders varies from one bank to the others. Company shall prepare company registration documents and present to the bank for the procedure of account opening. It may choose to open an account in foreign banks located in Hong Kong or overseas.

Bank will generally ask for the following documents: - The original minutes of meetings approving opening of account - Certificate of Incorporation (copy certified by accountant) - Business Registration Certificate (copy certified by accountant) - Notice of appointment of director and secretary (copy certified by accountant) - Articles of Association (copy certified by accountant) - ID card/passport of each director - Proof of personal address of each director

Capital is free to come in and go out of Hong Kong, without any restrictions.