Can Hong Kong Companies Enjoy Zero Tax? – Offshore Services in Hong Kong

A) Hong Kong taxation is territorial based. It means the profits will be  taxed only if the profits are earned in Hong Kong.

For example:

i) If you run a restaurant in Hong Kong and made a profit, you are required to pay tax in Hong Kong. 

ii) If you are employed by a Hong Kong company and were paid salaries, you are also required to pay tax in Hong Kong. 

iii) If you own a property in Hong Kong and let out to someone at a rental income, you are also required to pay tax in Hong Kong. 

B) Hong Kong only has three kinds of tax, namely: 

i) profits tax – making profits is subject to profits tax; 

ii) salaries tax – taking salaries is subject to salaries tax; 

iii) property tax – renting out properties is subject to property tax. 

C) To illustrate further with more complicated examples: 

i) if you run a restaurant outside Hong Kong making profits; or if you run two restaurants – one in China and one in Hong Kong using only one Hong Kong company to run two restaurants – assuming that both restaurants are profitable – the restaurant in Hong Kong is certainly subject to Hong Kong profits tax; but the restaurant in China is not subject to Hong Kong profits tax. 

ii) if you are employed by USA company and your work location is in Hong Kong – the USA company is paying you salaries; or if you are employed in Hong Kong, and your work location is in USA, In the first scenario of employment case, the employee is required to pay Hong Kong salaries tax, but in the second scenario, it is not required to pay Hong Kong salaries tax. 

iii) if you use Hong Kong company to buy a property in USA, and let out to your Hong Kong friend who is Hong Kong resident because their old parents live in USA, but they live in Hong Kong. They pay you rental in Hong Kong which is not subject to Hong Kong property tax.

 

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