Hong Kong Accounting Questions Answered

What is the profits tax rate in Hong Kong?

Hong Kong Profits Tax operates on a two-tier basis: 8.25% on the first HKD 2 million of assessable profits and 16.5% on any amount above that. Only one company in a related group can benefit from the 8.25% rate.

Does Hong Kong have VAT or GST?

No. Hong Kong has no VAT, GST, or sales tax. There are only three direct taxes: Profits Tax on business profits, Salaries Tax on employment income, and Property Tax on rental income. The absence of consumption tax is one of Hong Kong's strongest competitive advantages.

What is the offshore tax exemption in Hong Kong?

Hong Kong taxes only profits that arise in or are derived from Hong Kong (territorial basis). Offshore profits are exempt from Profits Tax. The source of profits is determined by where the key profit-generating activities (negotiation and conclusion of contracts) took place. Since 2023, FSIE rules apply to passive income of multinational groups.

How does MPF work in Hong Kong?

MPF (Mandatory Provident Fund) requires both employer and employee to each contribute 5% of the employee's relevant income monthly, capped at HKD 1,500 each (based on a HKD 30,000 relevant income cap). Employees aged 18-64 must be enrolled within 60 days of starting employment.

What is the salaries tax rate in Hong Kong?

Hong Kong Salaries Tax is progressive from 2% to 17% on net chargeable income, automatically capped at 15% of net total income (the standard rate) if that produces a lower liability. There is no National Insurance or social security equivalent. Major allowances: basic HKD 132,000, married HKD 264,000.

How do I pay myself as a Hong Kong company director?

Hong Kong company directors can pay themselves through salary (subject to Salaries Tax at progressive rates up to 17% and MPF up to HKD 1,500/month) or dividends (no HK dividend tax, no withholding tax). Most directors use a combination. Non-resident directors should consider an all-dividend approach since HK has no dividend withholding tax.

How do I set up a company in Hong Kong?

Incorporate online via the Companies Registry e-Registry portal. You need 1 director (any nationality), 1 shareholder (any nationality), a HK-resident company secretary or licensed firm, and a HK registered address. The filing fee is HKD 1,720. Most online incorporations complete in 1 working day.

Can I run a Hong Kong company as a non-resident?

Yes. Hong Kong has no residency requirement for company directors or shareholders. A non-resident of any nationality can own, direct, and manage a Hong Kong private limited company entirely from abroad. You need a HK-resident company secretary and a HK registered address.

Do I need an audit for my Hong Kong company?

Yes. ALL Hong Kong private limited companies must have their accounts audited annually by a Hong Kong-registered CPA (member of HKICPA), regardless of size, revenue, or whether the company is dormant. There is no small company audit exemption in Hong Kong.

When is profits tax due in Hong Kong?

The BIR52 Profits Tax Return filing deadline depends on accounting year-end: April and December year-ends by 15 August, November year-ends by 15 May, other year-ends within 1 month of issue. Tax is paid in two instalments: 75% provisional tax with the current year assessment, balance when the assessment finalises.