The Hong Kong tax system
Simple, low and territorial — here is what that means in practice
Hong Kong taxes where profits are made, not where the company is registered or its owners live. Combined with low rates and the absence of most indirect and capital taxes, this makes it an exceptionally efficient base for international trade, services and holding activities.
| Tax | Rate | Notes |
|---|---|---|
| Profits tax (corporations) | 8.25% / 16.5% | Two-tier: 8.25% on first HK$2M of assessable profits, 16.5% thereafter. One company per group for the lower tier. |
| Offshore-sourced profits | 0% | Not chargeable if sourced outside Hong Kong — subject to an accepted offshore claim. |
| VAT / GST / sales tax | None | No indirect tax on goods or services. |
| Capital gains tax | None | Gains on disposal of capital assets are not taxed (trading gains are). |
| Dividends — paid or received | 0% | No withholding on outbound dividends; inbound dividends exempt (FSIE rules for MNE groups). |
| Withholding tax on interest | None | No withholding on interest paid to non-residents. |
| Withholding on royalties to non-residents | 2.475% / 4.95% | Effective rates (30% of royalty deemed taxable); higher for related parties in some cases. |
| Salaries tax (employees) | 2–17% / 15% cap | Progressive rates or 15% standard rate on net income, whichever is lower. |
| Stamp duty — share transfers | 0.2% + HK$5 | 0.1% payable by each of buyer and seller on the higher of consideration or value. |
| Estate, gift, wealth tax | None | Abolished / never introduced. |
Offshore profits claim
0% on offshore profits — how the claim really works
Under the source principle, profits are taxable in Hong Kong only if they arise in or are derived from Hong Kong. If your company negotiates and concludes contracts abroad, ships goods directly from supplier to customer without touching Hong Kong, and makes its decisions outside the city, its trading profits may be offshore and exempt.
But the IRD does not take your word for it. The claim is lodged in the Profits Tax Return and triggers a detailed enquiry — typically a letter with 20–40 questions and requests for evidence. The company bears the burden of proof. A weak or inconsistent claim is rejected, with the tax assessed in full plus interest and, in some cases, penalties.
What the IRD looks at
- Where contracts were negotiated and concludedEmails, chat logs, meeting records, travel evidence
- Where goods were sourced, stored and deliveredShipping documents, bills of lading, warehouse locations
- Where the people doing the work are locatedDirectors, employees, agents — and whether they ever work from Hong Kong
- Where management decisions are takenBoard minutes, resolutions, decision-making trail
- Whether the company has any office, staff or operations in Hong Kong
- Consistency with the audited accounts and bank records
How we support your claim
- Eligibility reviewHonest assessment of whether a claim is viable for your business model — before you build around it.Free
- Documentation frameworkChecklists and templates so the right evidence is created and retained from day one.Set-up
- Claim preparationTax computation, claim statement and supporting schedules filed with the return.Yearly
- IRD enquiry handlingWe draft responses, compile evidence and correspond with the assessor until the claim is accepted.As needed
Important. An offshore claim is not a loophole — it is a factual position that must be true and provable. Offshore companies still require an annual audit, still file a tax return, and may face questions from banks and foreign tax authorities. We only recommend claims we believe will succeed.
Structuring
Holding, trading and IP structures with Hong Kong at the centre
Hong Kong is a natural hub for groups operating across Asia and beyond. We design structures that are tax-efficient, bankable and compliant — and we coordinate with your advisers at home so nothing is planned in isolation.
Holding company
Hong Kong parent holding subsidiaries in China, SE Asia or Europe. No tax on dividends received; treaty access via Certificate of Resident Status.
Trading & sourcing hub
Centralised procurement and sales company between Asian suppliers and global customers, with onshore or offshore profit position.
Service & licensing company
Billing entity for consulting, software, agency or IP licensing, with attention to the royalty withholding and FSIE rules.
China gateway
Hong Kong as shareholder of a Mainland WFOE: 5% dividend withholding under the HK–PRC arrangement versus 10% standard.
Founder relocation
Coordinated planning for founders moving to Hong Kong: salaries tax, director's fees, visa and personal residence.
Pre-sale & investment
Preparing a company for investors or exit: clean tax history, documented offshore position, transfer pricing files.
Treaties & residence
Double taxation agreements and the Certificate of Resident Status
Hong Kong has signed comprehensive double taxation agreements (CDTAs) with more than 45 jurisdictions — including Mainland China, the UK, France, Italy, Spain, the Netherlands, Belgium, Luxembourg, Switzerland, Austria, Japan, Korea, Thailand, Vietnam, Indonesia, Malaysia, India, the UAE, Qatar, Saudi Arabia, Russia and many more. These reduce withholding taxes on dividends, interest and royalties paid to your Hong Kong company and prevent double taxation.
To claim treaty benefits, the Hong Kong company usually needs a Certificate of Resident Status from the IRD, which requires demonstrating that the company is genuinely managed and controlled in Hong Kong. We assess your substance, prepare the application and advise on what needs to change if the current set-up is too thin.
- Treaty eligibility analysis for your specific income flows
- Certificate of Resident Status application and renewal
- Substance review: directors, meetings, office, staff
- Beneficial ownership and principal purpose test (PPT) assessment
- Coordination with foreign withholding agents and tax advisers
- FSIE compliance for foreign dividends, interest, gains and IP income
Our tax services
Advice when you need it — compliance every year
| Service | What you get | Fee basis |
|---|---|---|
| Initial tax consultation | Review of your model, risks and opportunities; written summary | Free (30 min) |
| Offshore claim assessment & set-up | Eligibility opinion, documentation framework, checklist | Fixed |
| Annual offshore claim & IRD enquiries | Claim preparation with the tax return; full enquiry correspondence | Fixed per year |
| Structure design | Options memo, recommended structure, implementation plan | Fixed |
| Certificate of Resident Status | Substance assessment, application, IRD follow-up | Fixed |
| Transfer pricing documentation | Local file / master file where thresholds are met; benchmarking | Quoted |
| Tax health check | Review of past filings and positions; risk report and remediation plan | Fixed |
| IRD field audit & investigation support | Representation, document preparation, settlement negotiation | Quoted |
| Written tax opinions | Formal opinion for banks, investors or foreign advisers | Fixed |
Routine profits tax return filing is part of our accounting & audit packages.
FAQ
Hong Kong tax — frequently asked questions
Essentially one: profits tax on Hong Kong-sourced profits at 8.25% (first HK$2M) and 16.5% (above). There is no VAT or GST, no capital gains tax, no withholding tax on dividends or interest, and no tax on dividends received. Stamp duty applies to share transfers (0.2%) and property; salaries tax applies to employees' income; a small royalty withholding applies on payments to non-residents.
It is a position taken in the Profits Tax Return that profits were earned outside Hong Kong. Typical candidates are trading companies whose goods never enter Hong Kong and whose contracts are concluded abroad, and service companies whose staff and clients are entirely outside Hong Kong. Companies with Hong Kong staff, offices, local customers or decision-making in Hong Kong generally do not qualify for the relevant portion of profits.
Historically foreign-sourced passive income was simply not taxed. Since 1 January 2023 (expanded in 2024), the Foreign-Sourced Income Exemption regime applies to companies that are part of multinational enterprise groups: foreign dividends, interest, disposal gains and IP income received in Hong Kong remain exempt only if the company meets an economic substance requirement, a participation requirement (for dividends and gains) or the nexus requirement (for IP). Stand-alone companies outside an MNE group are not affected. We assess whether FSIE applies to you and what substance is needed.
You apply to the IRD on the prescribed form, describing the company's management and control in Hong Kong: where directors are located, where board meetings are held, whether there is an office and staff, and the nature of the income for which treaty relief is sought. The IRD assesses substance on a case-by-case basis; a pure "letterbox" company is usually refused. We prepare the application and, where necessary, advise on strengthening substance first.
No. Hong Kong is not on the EU list of non-cooperative jurisdictions and is a member of the OECD Inclusive Framework on BEPS. It was briefly placed on the EU "grey list" in 2021 pending FSIE reforms and was removed in 2024 after implementing them. Hong Kong participates in CRS automatic exchange of information with its partner jurisdictions.
Possibly — this depends on your country's controlled foreign company (CFC), management-and-control and permanent establishment rules, not on Hong Kong law. A Hong Kong company run entirely from another country may be considered tax-resident there. We flag these risks and coordinate with your home-country adviser so the overall structure works, rather than optimising Hong Kong in isolation.