FAQs About Accounting and Tax

Q: What tax does Hong Kong company need to pay every year?

A: Hong Kong company needs only to pay Profits Tax every year, which is calculated by 16.5% (2007/08:17.5%) of the profits. The company without profits needs to pay no Profits Tax.

Q: What is the year end of Hong Kong company?

A: 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.

Q: Does Hong Kong need to levy tariffs on imported/exported commodities?

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

Q: Can Accolade provide services of Hong Kong accounting and tariff declaration?

A: Yes. You only need to provide relevant information, and then we can process accounting, auditing and tariff declaration and other service on your behalf, at expenses to be determined by actual workload.

Q: What are the taxes of Hong Kong taxation?

A: There are three kinds of taxes in Hong Kong taxation: Profits Tax, Salaries Tax and Property Tax. Profits Tax shall be 16.5% (2007/08:17.5%) of the taxable profits of the company; Salaries Tax shall be calculated by salary income at progressive tax rate, and paid up to 15% (2007/08:16%) of total salary income; Property Tax 15% (2007/08:16%) of the net rent income earned from owning properties after deduction of 20% standard tax relief for renovation and expenditure.

Q: How is the accounting year (base period of assessment) determined?

A: 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
Q: What restriction will Inland Revenue Ordinance have on deduction for donation?

A: 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% (2007/08:25%) of assessable profits. 

Q: Can the profits of a Hong Kong company offset the losses of previous year?

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

Q: What is Provisional Profits Tax payable?

A: 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.

Q: In which case will Hong Kong company be free from Profits Tax?

A: 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.

Q: My Hong Kong company only opens account at bank, to collect and pay bills for other China Company, then does this Hong Kong company need to process accounting, auditing and tax declaration?

A: 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.

Q: My Company only opens an account at a foreign bank in China and does not open account in Hong Kong; shall the business conducted by my company be free from tax declaration?

A: 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.