Hong Kong uses two-tiered profits tax rates: a corporation pays just 8.25% on its first HK$2 million of profits. If your profits are sourced outside Hong Kong, an offshore claim may reduce your tax or remove it altogether. Answer 4 questions and see your tax bill and savings potential in 30 seconds.
Hong Kong taxes company profits through Profits Tax only; there is no VAT or similar turnover tax. The charge falls on assessable profits arising in or derived from Hong Kong. Under the two-tiered regime, assessable profits are split in two: a limited company (corporation) pays 8.25% on the first HK$2 million and 16.5% on the rest; a sole proprietorship or partnership (unincorporated business) pays 7.5% and 15%. This calculator uses exactly those thresholds and rates: your profit is split at HK$2 million and each slice is taxed at its own rate.
Connected companies cannot each claim the two-tiered rates. Within a group, usually only one entity gets the lower rate; if another entity has already taken it, yours is taxed entirely at the full rate (16.5% for corporations, 15% for unincorporated businesses). A common way to overpay is to give the lower tier to a low-profit shell while the high-earning company pays the full rate on everything.
The other question is source. If your profits genuinely arise outside Hong Kong and meet the Inland Revenue Department's (IRD) test for offshore profits, you may be able to claim they are not chargeable (the so-called offshore exemption). The claim has to be backed by evidence: contracts, where decisions are made, where staff are based, bank records, where customers are located. Ticking "offshore" does not bring your tax to zero. Where Hong Kong and offshore profits are mixed, apportion them on a sound basis: pay tax on what is taxable, claim what can be claimed, and keep both sides clean.
A limited company (corporation) pays 8.25% / 16.5%; a sole proprietorship or partnership (unincorporated business) pays 7.5% / 15%. In both cases the lower rate applies to the first HK$2 million of assessable profits and the higher rate to the rest. When choosing an entity type, consider tax at the shareholder level too, not just the company rate.
No. Among connected entities, the lower two-tiered rate can usually be used by only one nominated entity. That is why, if you select "Yes, and another one already uses the two-tiered rates", this tool taxes all of your profit at the higher rate.
Not necessarily. The territorial source rule looks at where the profits arise, not whose name is on the invoice or where the receiving bank account is held. An offshore claim has to be explained to the IRD through your books, audit and tax return, and it only holds up with a complete chain of evidence. The tool's "0 if the claim succeeds" figure is a scenario estimate, not an IRD ruling.
No. The result simply applies the two-tiered formula to the profit and options you entered. It ignores depreciation allowances, enhanced R&D deductions, adjustments for non-deductible expenses, basis period differences and so on. Your actual return must be based on complete books, an audited report and the IRD's assessment.
A Hong Kong company pays Hong Kong Profits Tax. If its place of effective management is found to be in mainland China, China may also tax it as a resident enterprise. When profits go back to mainland shareholders, withholding tax, the tax arrangement and mainland reporting also come into play. Hong Kong tax is only one link in the cross-border tax chain.