What taxes apply to a company located in Hong Kong?
This page is intended to present the main taxes applicable to a Hong Kong company.
It is recommended that any plan to establish a company in Hong Kong be subject to a prior tax compliance review conducted by a tax lawyer located in the country of tax residence of the company’s shareholders.
Taxation of profits
Hong Kong applies a territorial tax system. This means that only profits arising in or derived from Hong Kong are taxable in Hong Kong. Simply put, if you have customers/suppliers/employees/etc. located in Hong Kong, your company’s profits will be taxable in Hong Kong.
In practice, if you declare to the Hong Kong tax authorities that your profits are not taxable in Hong Kong (because you do not conduct any business there as described above), the Hong Kong tax authorities may ask you in which country your company pays its taxes. This also makes sense from the perspective of international tax regulations, since conducting business activities in another country constitutes a “permanent establishment” in that country and therefore makes the company subject to that country’s taxes.
Regarding the corporate profits tax rate in Hong Kong, it is 16.5%. If the company’s annual profits are less than HKD 2,000,000 (approximately USD 255,000), a reduced profits tax rate of 8.25% applies.
Compensation, dividends and capital gains
Taxation of remuneration
Remuneration paid to the company's employees and Directors is subject to tax ranging from 2% (from HKD 50k/year) to 17% (above HKD 200k/year). Being married and having dependent children entitles you to deductions.
Here is an IRD page for a calculation: Hong Kong Salaries Tax Computation.
Taxation of dividends received
Dividends, whether from Hong Kong or abroad, are not taxable.
Withholding tax on distributed dividends
Dividends paid to a resident or non-resident of Hong Kong are not subject to withholding tax.
Capital gains taxation
There is no capital gains tax in Hong Kong. Capital losses therefore cannot be deducted.
Interest, royalties, and the FSIE regime
Taxation of interest received
Interest income from Hong Kong received by a company carrying on business in Hong Kong is subject to profits tax.
Withholding tax on interest paid
Interest paid to a resident or non-resident of Hong Kong is not subject to withholding tax.
Taxation of royalties received
Royalties related to the use or right to use intellectual property (IP) in Hong Kong are taxable at a rate of 4.95%.
Foreign-sourced income exemption (FSIE) regime
As of 2023, multinational companies receiving interest, dividends, capital gains, and intellectual property income must demonstrate economic substance in Hong Kong.