Taxation Hong Kong is one of the low tax regime in the world.
Apart from the simple tax system, Profits Tax liabilities only arise on profit deriving in Hong Kong from trade, profession or business. In short, only "onshore profit" are chargeable to HK Profits Tax and there is no Capital Gain Tax, Value Added Tax (VAT), Sales Tax nor Dividend Tax . Interest earned from deposit with a financial institution is also exempted from the HK Profits Tax. The current Profits Tax rate is 16.5% . Whether profit earned will be subject to HK Profits Tax is a matter of fact.In general if a company satisfy the following requirement, their profits are generally considered as offshore profit and is not liable to HK Profits Tax.
· There is no permanent establishment in HK, e.g. place of business, office, shops or workshops
· There is an overseas office where the company's director and staff resides and managing the business
· There is no staff employed in HK and the directors/staff travel to HK on occasionally basis
· The sales and purchase contracts are negotiated and executed outside HK
· There is no HK based supplier and customers
· The Shipment of goods is directly from a port outside HK to another port outside HK
· The goods are physically inspected outside HK
The company if find its transaction satisfies the above requirements are suggested to claim their profit as offshore to the HK Inland Revenue Department for assessment. However, it is necessary for the company to keep strong evidence to prove the above. These may include telephone bills, faxes, memorandum of meeting, shipping documents, overseas lease, sales orders and purchase orders.
