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HongKong TaxationRegulationsIntroduction

Introduction to the Inland Revenue Ordinance
◆ Under the Hong Kong Inland Revenue Ordinance, profits tax must be paid as long as the profits are derived from Hong Kong, and the person in charge must retain the relevant business records.

◆ The company shall keep all kinds of invoices and vouchers and submit the audit report to the Inland Revenue. The Hong Kong Government levies only profits tax on all individuals, limited companies, non-limited companies or organizations that earn profits in Hong Kong for business, trade or professions , The company in operation, in addition to pay profits tax, no other taxes.

◆ However, if you are operating a legal person and you have reported a loss to the Inland Revenue Department in the last financial year, you will not receive a tax return. If your financial statements show that your company is profitable, you must take the initiative to notify the Inland Revenue Department in writing. Tax assessment, the tax authorities have the right to assess the tax payable to the person or company concerned in the following circumstances:
1. The person or business does not submit the tax return and the relevant data within the specified time;
2. The tax return is not accepted by the Inland Revenue Department or the data submitted is incomplete and the Inland Revenue Department can not assess the data submitted;
3. The person or business does not have a complete business record.
◆ postponement and opposition
If you are not expected to submit a tax return within the specified time limit, you must submit an application in writing to the Inland Revenue Department for an extension.
In addition, if you are not satisfied with the tax authorities to assess your tax burden you can make a written objection within a specified period of time.
Introduction to Tax Types
Profits tax
Profits tax is based on the company‘s profit, the profits tax rate of 16.5% of net profit, while the individual and partnership tax rate was 16%.
◆ Geographic sources Taxes:
The Hong Kong Inland Revenue Ordinance provides that Hong Kong companies are subject to geographical origin taxation and only profits from Hong Kong need to be taxed in Hong Kong and profits from Hong Kong are not subject to profits tax in Hong Kong. The principle itself is very clear and clear, but in practical use, and sometimes may be controversial.
 
◆ Hong Kong Inland Revenue Department levies profits on operators from 1998 onwards. Hong Kong uses the principle of geographical origin to levy profits derived from any industry, profession or business in Hong Kong. Profits tax is levied only if profits are generated in Hong Kong or derived from Hong Kong. Any person who profits is obtained from a place outside Hong Kong is not required to pay tax in Hong Kong.
◆ The prerequisites for determining the profits tax, over the years, the court has to determine the source of profits to make a decision on this issue. The following principles are based on the court‘s authoritative decision.
Determine the source of the profits to be determined on the basis of the facts of the case, so there is no general rule that can be applied to a variety of situations. Whether the profits are generated in Hong Kong or derived from Hong Kong is determined by the nature of the profits and the nature of the transactions that generate the profits.
◆ job verification method
 The general principle of determining the source of profits is to identify the taxpayer‘s activity to earn the profit and the place where the taxpayer is engaged in the activity. In other words, the correct method of verification is to identify the job that generates the profit and determine where the job is going.
◆ the gross margin of the transaction
The profit from a transaction is earned from Hong Kong or outside Hong Kong and may be determined based on the gross profit generated by the transaction. When determining the source of the profit, only those commercial activities that generate gross profit are considered, and general administrative activities are usually not considered.
 
◆ the location where the investment decision is made
The place where the day-to-day investment / business decision is made is only one of the factors to be taken into account when determining the source of the profit, and in general it is not a decisive factor.
Overseas offices
A company may set up an office abroad to make profits outside Hong Kong; but if the unit does not have an overseas business office, it does not mean that all of its profits must be generated in Hong Kong or from Hong Kong. However, in most cases, if the principal place of business of the unit is located in Hong Kong and the unit does not have an overseas business office, the profits it earns are likely to be subject to profits tax in Hong Kong.
 
◆ The profit of the trading company is determined
Contract for sale: When determining the source of profits from goods and merchandise transactions, it is generally based on the place where the contract is entered into. The term "contract" not only means a lawful enforcement contract, but also includes provisions for the negotiation, formulation and enforcement of the contract.
There is a need for broad consideration when determining the source of profits. The right way is to study all the facts. In other words, we have to consider all the facts, not just the sale of goods.

Where to buy and sell goods is obviously an important issue, but there are other issues to consider. For example, how does the goods buy and store? How about the sale? How is the order processed? How is the goods shipped? How to arrange financing? How do I pay? "

When considering the facts, the nature and characteristics of the business activity are more important than the frequency of the activity. The causal relationship between the activity and the profit is the decisive factor.

◆ irrelevant facts:
 The fact that there is no direct relationship with the commercial activity, such as renting an office, recruiting a general staff, opening an office, etc., is regarded as irrelevant when establishing a source of profits for a commercial activity.
The general principle of taxation
(1) If the sale and purchase agreement is entered into in Hong Kong, the profits shall be taxed in Hong Kong.
(2) Where the sale and purchase contract is made outside Hong Kong, the profits are not payable in Hong Kong.
(3) If a contract of purchase or a contract of sale is made in Hong Kong, the initial assumption is that the profits are taxable in Hong Kong, but all facts must be taken into account to determine the source of the profits.
(4) Where the object of sale is a Hong Kong customer, the relevant contract of sale is normally deemed to have been made in Hong Kong.
(5) If the person concerned does not have to leave Hong Kong but is in Hong Kong through a telephone or other electronic medium, including the Internet, a contract of carriage shall be deemed to have been made in Hong Kong.
(6) Profits earned from trade can only be classified as all taxable in Hong Kong or do not have to be taxed in Hong Kong at all, and the calculation of the relevant profits does not apply.
Manufacturing profits

◆ place to make the goods:
The source of the manufacturing industry is the place where the goods are made. The profits arising from the sale of goods sold in Hong Kong shall be taxed in Hong Kong. If the part of the manufacturing process of the goods is carried out in Hong Kong and partly outside Hong Kong, the profits relating to the manufacturing processes other than Hong Kong will not be treated as profits arising in Hong Kong. It is irrelevant whether the finished product is sold.
Manufacturing or assembling arrangements for the manufacture of goods and units in mainland China
It is very common for Hong Kong manufacturers to enter into processing or assembly arrangements with Chinese mainland units. Under this arrangement, Hong Kong manufacturers will generally provide raw materials, technical knowledge, management, production technology, design, technical labor, training, supervision, etc., while the Mainland units to provide goods processing, manufacturing or assembly required plant, land and labor.

◆ Strictly speaking, the Mainland units are an independent subcontractor separate from the Hong Kong manufacturers. As a result, the profits from Hong Kong manufacturers from the sale of goods should not be subject to the problem of apportionment. However, the Inland Revenue Department will take a pragmatic approach whereby the profits from the sale of the goods are assessed at a rate of 50:50, only 50% of the profits are assessed as derived from Hong Kong. This approach takes into account the role that Hong Kong manufacturers play in the process of manufacturing goods in the Mainland.

◆ manufacturing work by the Chinese mainland‘s independent subcontractor contract
If the Hong Kong manufacturer contracted the independent subcontractors awarded to the Mainland for manufacturing work and paid on the basis of the unrelated basis of the two parties and the Hong Kong manufacturers were also involved in the manufacturing work, the manufacturing work carried out in the Mainland was not considered By the Hong Kong manufacturer. Therefore, the profits of the manufacturing unit are not subject to tax in Hong Kong. However, the profits from the sale of goods by Hong Kong manufacturers are all taxable in Hong Kong.
From the sale of the exchange to earn the commission

◆ the location where the service is provided
A business unit who earns a commission for finding a product buyer or a supplier of the product required by the customer is an arrangement for the purpose of the business transaction of the client, which is the relevant activity to generate the commission income. The source of the income depends on where the agent carries out the activity. If such an activity is carried out in Hong Kong, the source of the commission income shall be Hong Kong.

◆ where the client‘s location, the agent to find the client, and the relevant activities before and after the commission to carry out such issues, usually with the commission to determine the source of income has nothing to do.

◆ If the commission income is earned by a person operating in Hong Kong, but the commissions are all carried out outside Hong Kong, the commission is not taxable in Hong Kong.
Other profit processing methods
Real estate rental income
If the property is in Hong Kong, the rental income shall be taxed in Hong Kong
Profit from the sale of real estate
If the property is in Hong Kong, the profits shall be taxed in Hong Kong
Profit from the sale of listed shares
If the relevant stock is traded on the Hong Kong stock exchange, the profits are taxable in Hong Kong
Business units (other than financial institutions) from the sale of securities issued outside Hong Kong and not listed on any exchange of securities
If the sale and purchase agreement is entered into in Hong Kong, the profits shall be taxed in Hong Kong

◆ service charge:
Such as the cost of the service provided in Hong Kong, the service fee charged in Hong Kong to pay taxes, a business unit charged royalties,
If the activities relating to the patent are carried out in Hong Kong, the royalties charged shall be taxed in Hong Kong
Persons who are not resident in Hong Kong receive royalties from Hong Kong for the use of intellectual property rights
If the relevant intellectual property is used in Hong Kong, the profits shall be taxed in Hong Kong
Interest income of a business unit (excluding financial institutions)
If the lender provides payment to the borrower in Hong Kong, the interest income must be paid in Hong Kong
Profit and expenditure
The profits of manufacturing profits or service fees earned by businesses with major activities outside Hong Kong and Hong Kong may be assessed on a share basis. We generally use pragmatic arrangements, the total profit or income by 50:50 ratio of the calculation.
The use of apportionment arrangements may lead to the question of how indirect expenses should be allocated. In short, if these expenses are used simultaneously to earn profits from Hong Kong and Hong Kong, they should be assessed on the basis of the proportion of profits derived from Hong Kong and Hong Kong
 
◆ Hong Kong‘s tax revenue is mainly three categories: property tax, salaries tax and profits tax.
The rate of property tax is calculated on the basis of 16.5% of the rental income of the property.
Salaries tax is calculated at a progressive rate based on salary income, which does not exceed 16.5% of the total salary income.
The corporate profits tax rate is 16.5 percent of the company‘s taxable profits. Taxable profits are the profits earned by the Company in operation and operation in Hong Kong. As many domestic customers, their Hong Kong companies are not operating in Hong Kong (for example, there is no office in Hong Kong, office or recruitment of staff), so there is no need to pay Hong Kong profits tax. Please note that there are payments in the local bank account and the registered address in Hong Kong is not equivalent to "operating and operating in Hong Kong"
 
Q: The terms of reference of shareholders and directors
A: The shareholders are investors of the stock company, the directors are elected by the shareholders, the company‘s managers, the chairman of the board is the person in charge of the board. Hong Kong companies require at least one shareholder and director. More than one shareholder, not necessarily every shareholder has become a director, of course, more often, the shareholders are directors.
 
Q: Where is the registered capital of Hong Kong companies? Is the registered capital in place?
A: Hong Kong limited liability company minimum registered capital of 10,000 yuan in Hong Kong, not in place (capital verification). Hong Kong company certificate does not have a registered capital column, the registered capital is only reflected in the articles of association. If the customer to prove their registered capital, come up with a statute is enough to prove.
 
Q: What is the difference between the local and Mainland offshore accounts in Hong Kong?
A: What are the differences between Hong Kong and offshore accounts?
The first aspect is that Hong Kong funds are out of control and the offshore accounts are accounts opened by foreign banks in China and should be subject to the supervision of the Chinese financial institutions. As a result, offshore accounts are currently unable to deposit cash;
The second is the bank charges, the Hong Kong local accounts are rarely charged, and offshore accounts are charged for each.
The third is the account opening different documents, offshore accounts can accept the arrival of mainland ID card holders to open an account, and Hong Kong local account requires the opening account must have a passport or pass.
Fourth aspect: Hong Kong local accounts are fully functional, and offshore accounts are limited in some functions.
Fifth is the account speed, the former faster, the latter is slower
 
Q: the establishment of the Hong Kong company, after each year to pay any fees?
A: There are two annual fees to pay: annual report and do the audit.
1, the annual review of the Inland Revenue Department and the annual fee of the annual report of the company is the amount that must be paid each year. Prices will be adjusted with government adjustments. Even if the company does not have any business, the cost must be delivered.
2, As for the accounting account, auditing audit, if the enterprise began to operate, there are business, the enterprise must do the audit. If the business does not have business, companies do not have to do the audit. But tax is necessary
 
Q: What is the difference between your legal secretarial service and the business secretarial service?
A: The Government stipulates that the company must have a statutory secretary, and the statutory secretary is a local natural person or legal person in Hong Kong.
In terms of, we can help you arrange the legal secretary. The legal secretary is required by the Hong Kong Government to have the form of secretary to facilitate
Contact and deal with government documents.
Business Secretary is based on the needs of customers tailor-made for the business business services, from answering the phone, passing information, readily available. The advantage of the business secretary is to be able to build your corporate image, equal to your own staff in Hong Kong, your own office, there is a set of company supporting resources. Deal with the business, Shun Shun Dangdang, a single fall.
 
Q: Which department does the Hong Kong company‘s invoice receipt produce?
A: Hong Kong company‘s invoice receipt is not printed by the Inland Revenue Department, but by the company‘s board of directors printed according to the nature of the company‘s business. Invoice receipts and other documents as long as the stamped with the company seal, and by the person in charge of the agency can take effect
 

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