Profits Tax
A CPA makes sure that you get the relevant tax rebates and deductions you are entitled to, and helps you to avoid double taxation on any overseas business.
FAQs
Persons (including corporations, partnerships, trustees and bodies of persons) carrying on any trade, profession or business in Hong Kong are chargeable to tax on all profits (excluding profits arising from the sale of capital assets) arising in or derived from Hong Kong from such trade, profession or business. There is therefore no distinction made between residents and non-residents.
If a person sells his flat or any property as part of a scheme of profit-making, it will be regarded as a business and he is required to pay tax on any profit he may make.
A two-tiered rates is applicable from the year of assessment 2018/19 onwards, being –
for corporations, 8.25% on assessable profits up to $2,000,000; and 16.5% on any part of assessable profits over $2,000,000; and
for unincorporated businesses, 7.5% on assessable profits up to $2,000,000; and 15% on any part of assessable profits over $2,000,000
Special concessionary rates (0%, 5% or 50% of the normal profits tax rate) are applicable to qualifying profits derived from qualifying debt instruments, or by a qualifying person (e.g. corporate treasury centre, aircraft/ship lessor or leasing manager, and specified insurer/reinsurer/licensed insurance broker company), and from qualifying transactions (e.g. eligible intellectual property income).
Deductible Expenses
Generally, all outgoings and expenses, to the extent to which they have been incurred by the taxpayer in the production of chargeable profits, are allowed as deductions. Reference can be made to section 16 of the Inland Revenue Ordinance.
Non-deductible Items
In computing the assessable profits deduction is specifically prohibited in respect of the following:-
– domestic or private expenses and any sums not expended for the purpose of producing the profits;
– any loss or withdrawal of capital, the cost of improvements and any expenditure of a capital nature;
– any sum recoverable under insurance or contract of indemnity;
– rent of or expenses relating to premises not occupied or used for the purpose of producing the profits;
– taxes payable under the I.R.O., except Salaries Tax paid in respect of employees’ remuneration;
– any remuneration or interest on capital or loans payable to or, subject to section 16AA, contribution made to a mandatory provident fund scheme in respect of the proprietor or the proprietor’s spouse or, in case of a partnership, to its partners or their spouses; and
– charitable donations amounting in aggregate not less than $100 but not exceeding 35% of the adjusted assessable profits before deduction of donations, are allowable for deduction in computing the assessable profits.
You may apply in writing for holding over of the whole or part of the provisional tax on Form IR1121, on the following grounds –
– If your assessable profits for the year of assessment (or the estimated sum you are liable to pay provisional profits tax) are likely to be less than 90% of the assessable profits for the preceding year.
– The amount of any loss brought forward for set off to that year of assessment has been omitted or is incorrect.
– You have ceased, or will before the end of the year of assessment cease, to carry on your trade, profession or business and that the assessable profits for that year of assessment are, or are likely to be, less than the assessable profits for the preceding year.
– You have elected to be personally assessed for the year of assessment for which provisional tax was charged, and the election is likely to reduce your liability to tax.
– You have objected to your assessment for profits tax for the year preceding the year of assessment for which provisional tax was charged.-
Time Limit – application should be lodged not later than 28 days before the due date for payment, or 14 days after the date of issue of the notice for payment, whichever is later.