The ability of Hong Kong to attract potential investors and corporate leaders is due the low taxation and an understandable procedure. This has made it to grow tremendously to be a trade and investment centre at world stage. It has been in position 4 worldwide as the place you should look in investing.
Despite their simple laid out format for setting up the business, Hong Kong tax filing requirements and allowances make it favorable for local or international companies operating in Hong Kong. This reduces the ever-problematic taxes that make business operations slug down. This results to economical benefit.
You can ask that taxes accrued to be removed if the firm running does not come from Hong Kong or is a product from Hong Kong. This makes it to be the attractive.
Have you taken an interest in Hong Kong for your business? Do you have an in-depth understanding of how the profit tax operates? If you lack all this then you have come to the best place to make you knowledgeable.
This will be informative on the area of profit tax derived by a person, partnership or incorporated company performing operations in Hong Kong.
Welcome aboard as we break this down.
Understanding What Profit Tax in Hong Kong
Territorial system is the rules Hong Kong for business tax gotten from the city. In simple terms, it means it is the geographical setup that dictates where the tax comes from.
Hong Kong has three types of taxes, namely: Salaries Tax, Property Tax, and Profits Tax.
The tax that is accrued on firms that operate in Hong Kong is what we call profit tax. Inland Revenue Ordinance (IRO), this is charged on “assessable profits” of legally abiding limited companies, partnerships, sole proprietorship or individuals conducting business in Hong Kong.
What is Needed For and Timelines For Registering Profit Tax?
People do not get the meaning of what is required in profit Hong Kong tax filing requirements and the timelines for application. Discussed prior, companies performing trade, professional and business activities in Hong Kong and have a return of revenue are subject to the profit taxation. On the contrary, if a firm conducts its activities outside of Hong Kong it should ask for the offshore tax cancellation.
Offshore profits, those gotten from abroad, are the ones regarded to be far away from the geographical space of Hong Kong’s taxation system despite being registered locally.
Instances where a company does not accrue PTR (Profits tax return), the best remedy is contacting IRD and make yearly accountability.
Tax Year of Hong Kong
While ensuring that you are legally abiding to the rules regarding profit tax, understanding Hong Kong’s tax year is very crucial. This is the fiscal year, which runs from 1 April to 31 March the following year.
Consequently, PTR follows the same pattern. For instance, 2019 (2018/19) PTR will be for April 1st, 2018 until March 31st, 2019.
The determinants of setting a suitable fiscal year are business cycle or what is needed for keeping tax statements for oneself.
Previous financial statements are used in recording the following year PTR for the firm.
Initial Tax Request Submission
When is the stipulated timeline for you to get the initial profit tax for the firm? This should be just after 18 months from the date it is set up as separate from owners. For example, if the company became as a separate entity in 01 February 2019, the PTR will be awarded to the business by the government any day from July 2020.
Ensuring the financial statements for local and abroad Hong Kong companies are clearly set is a requirement. Corporate activities conducted outside of Hong Kong should be declared with the profits accrued and ask for profit tax exclusion.
After being awarded the PTR, it should be filled and send back with all the required documents in a spun of three months from date it was given. Inside it should be Audit Report of the financial statements, which a Hong Kong Certified Public Accountant has the knowledge on how to make it. These persons can audit the financial accounts and finalize PTR filing for a firm.
The Sources of Income Eligible for Profit Tax
The following categories are the only sources that have profit tax accrued-
- Firms trading inside the boundaries of Hong Kong
- The income gotten from the trade
- Revenue arising or gotten from Hong Kong
This does not look if one is an occupant or non-occupant. Simply, a non-occupant can have revenue from firms’ activities in Hong Kong and be charged profit tax while a Hong Kong occupant can have revenue from overseas and not be charged the profit tax.
This essentially rotates around the physical address of the company in determining what to tax. However, this is subject to legal jurisprudence interpretation by the laws of Hong Kong.
To sum up, this solely depends on the territorial space from where the revenue is accrued.
