How are companies taxed in Hong Kong?

Corporation tax in Hong Kong

Tax for companies in Hong Kong

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Hong Kong has an attractive tax system for businesses with relatively low tax rates and a simple tax procedure. Below you can read more about the most important aspects of corporate tax in Hong Kong:

Standard tax rate: The corporate tax rate in Hong Kong is 16.5% on profits for domestic companies. This applies to profits generated within Hong Kong.

Reduced tax rate for small and medium-sized enterprises (SMEs): For the first HKD 2 million of taxable income, the tax rate is reduced to 8.25%. Income above this amount is subject to the standard tax rate of 16.5%.

Advantages of the tax system in Hong Kong
No withholding tax on dividends: Hong Kong does not levy any withholding tax on dividends paid to shareholders, whether domestic or foreign.

No capital gains tax: There is no capital gains tax in Hong Kong. Gains from the sale of assets, including stocks and real estate, are not taxable.

No VAT (value added tax): Hong Kong has no VAT, which simplifies business operations and reduces costs for businesses.

No tax on interest and royalties: Hong Kong does not levy any tax on interest or royalties received by or paid to non-residents.

Territorial tax system: Only income generated within Hong Kong is taxable. Income earned outside Hong Kong is exempt from tax, even if repatriated to Hong Kong.

Simple tax administration: The tax system in Hong Kong is known for its simplicity and transparency. There are fewer administrative requirements and documentation compared to many other jurisdictions.

Extensive network of double taxation agreements: Hong Kong has entered into double taxation treaties with many countries, which help companies avoid double taxation and facilitate international business transactions.

Hong Kong Corporate Tax Summary
Hong Kong offers a very competitive corporate tax system with a corporate tax rate of 16.5% on profits and a reduced rate of 8.25% on the first HKD 2 million of taxable income. The absence of capital gains tax, withholding tax on dividends, interest and royalties, as well as no VAT, make Hong Kong an attractive jurisdiction for businesses. In addition, companies benefit from a simple and transparent tax system and an extensive network of double taxation agreements.