Profit tax in Hong Kong: A definitive guide (2025)

Profit tax in Hong Kong is a key consideration for any business operating or planning to operate in one of Asia’s top financial hubs.

Don’t worry, you don’t have to figure profit tax of your company all out alone. 

At Global Link Asia Consulting, we guide founders, CFOs, and SMEs through Hong Kong’s tax landscape to ensure they stay compliant while maximizing savings.

Our clients regularly use this definitive guide to understand how profit tax works, what’s taxable (and what’s not), and how to handle offshore income properly.

By the end, you’ll know more than 90% of the founders Googling “profit tax Hong Kong.”

However, before we delve into strategies, let’s briefly review how Hong Kong views taxable profits (and why the source of income is crucial).

1. What is the Profit tax in Hong Kong?

According to the Hong Kong government’s official site and the Inland Revenue Department source,

Hong Kong Profits Tax is a tax imposed on profits derived from any trade, profession, or business carried on in the Hong Kong Special Administrative Region (SAR).

Here's what makes it unique:

It's based on a territorial system. This means you only pay tax on profits arising in or derived from Hong Kong. 

Profits earned outside Hong Kong are generally not taxable, even if you bring them back to Hong Kong (But you must declare the foreign-sourced profit in your Offshore tax claim form).

The tax applies to all types of business entities:

• Limited Liability Companies
• Partnerships
• Sole proprietorships
• Other business structures

2. Who needs to pay profit tax?

The simple answer: Anyone carrying on a trade, profession, or business in Hong Kong.

That means that if you have a company and it makes a profit in Hong Kong, the company must pay tax on that profit.

But let's break this down further.

2.1. Are there any different requirements between residents and non-residents?

Here's something that surprises many people:

There's generally no distinction between residents and non-residents when it comes to Profits Tax liability on Hong Kong-sourced profits.

Whether you're a Hong Kong resident or a foreign investor, if you're making profits from Hong Kong business activities, you're liable for Profits Tax.

However, non-residents face some additional requirements:

2.2. Special rules for non-residents

Non-residents face some additional requirements:

1. Agent responsibility: If you're a non-resident, you're chargeable to tax either directly or through your Hong Kong agent. Your agent must retain sufficient funds to pay your tax liability.
2. Withholding requirements: For certain types of income (like entertainment fees or intellectual property royalties), the person paying you must withhold tax at source.
3. Consignment sales: If you're a non-resident selling goods through a Hong Kong consignee, they must file quarterly returns and pay 1% of gross proceeds (or an agreed lesser amount).

3. What makes profits “Hong Kong-sourced”?

We know that the Hong Kong Profits Tax is a tax that applies to income earned from any business, trade, or profession conducted within the Hong Kong Special Administrative Region (SAR).

Building on this definition, Hong Kong courts have established several key principles:

• Location of operations: Where do you conduct your business activities?
• Decision-making location: Where are key business decisions made?
• Contract negotiation and conclusion: Where do you negotiate and finalize your deals?
• Service delivery location: Where do you provide services or deliver goods?

Let's take a look at the examples below to understand the key principles above

Example 1 - Trading company

A Hong Kong company buys goods from China and sells them to customers in the US. 

If the buying and selling negotiations happen in Hong Kong, the profits are Hong Kong-sourced and taxable. (The decision-making location)

Example 2 - Consulting services

A Hong Kong consultant provides services to clients in Singapore via video calls from their Hong Kong office. These profits are Hong Kong-sourced. (The location of operation).

4. Current profit tax rates in Hong Kong (2025)

You’ve probably heard that Hong Kong has low corporate taxes. 

But the details? They’re not always easy to follow.

I’ve seen businesses miss savings simply because they didn’t understand how the system works.

So here’s a clear breakdown of the latest rates, waivers, and incentives—no jargon, just what you need to know.

Tax waivers for the years 2024 and 2025 are a 100% waiver up to HK$1,500 per case.

For example, a corporation earns HK$3,000,000 in assessable profits.

• The first HK$2,000,000 is taxed at 8.25% = HK$165,000
• The remaining HK$1,000,000 is taxed at 16.5% = HK$165,000
• Total tax payable = HK$330,000

5. What income is subject to profit tax?

Understanding what constitutes taxable income is crucial for compliance.

5.1. Revenue and capital: Which is taxable?

As a general principle, all profits arising in or derived from Hong Kong from any trade, profession, or business are subject to Profits Tax.

But here's the key distinction: Capital gains are generally not taxable.

5.2. Deemed trading receipts

Certain types of income are automatically considered taxable, regardless of where they're actually earned:

Intellectual property Income

• Royalties for patents, trademarks, copyrights used in Hong Kong
• Income from secret processes or formulas
• Performance rights for Hong Kong performances

Media and Entertainment:

• Income from exhibiting films or TV content in Hong Kong
• Revenue from sound recordings used in Hong Kong

Equipment rental:

• Income from renting movable property for use in Hong Kong

Government assistance

• Grants, subsidies, or financial assistance (excluding capital expenditure)

6. How to file your Hong Kong company’s profit tax return?

You must file your Profits Tax Return through your registered tax agent if you are a foreigner opening a Hong Kong company.

They help you prepare and submit your tax return properly, the right way. 

If you want to find a trusted partner who helps you prepare and file your profit tax the right way, you can always count on our experts at Global Link Asia Consulting.

This guide helps you understand what to expect during the process.

6.1. When to file your tax return?

You usually have 1 month from the date your Profits Tax Return is issued to file it. If you file online, you can apply for a 1-month extension to make electronic filing easier.

6.2. When and who should file?

• New businesses: You’ll get your first Profits Tax Return about 18 months after starting or incorporating.
• Continuing businesses: Returns are sent in bulk every April.

6.3. What are supplementary forms?

According to the definition of the Inland Revenue Department on Supplementary Forms

Supplementary forms are extra forms that come with your Profits Tax Return. You’ll need to fill these out if your business uses any tax incentives or preferential regimes. 

These forms must be completed electronically and submitted via the eTAX system or the new Business Tax Portal (BTP) / Tax Representative Portal (TRP), launching soon.

6.4. Types of profit tax returns you need to know

Profit tax returns come in different types depending on your business structure: corporations, partnerships, or sole proprietorships. 

If you run a sole proprietorship, you have to report profits through your Tax Return (BIR60).

There are three main forms for Profits Tax Returns:

• Corporations: BIR51 (This is the form you must know if you are a foreign entrepreneur running your company in Hong Kong)
• Persons other than corporations: BIR52
• Non-resident persons: BIR54

An example of the form BIR51

6.5. How to file your profit tax returns: Step by step with the support of your filing agent

7. How can we help you help you optimize your Hong Kong company’s profit tax?

• Register a company in Hong Kong;
• Hire a trusted, experienced company secretary in Hong Kong
• Open a corporate bank account in Hong Kong with a 99% success rate;
• Choose the right company types for tax optimization in Singapore;
• Consular legalize all your important documents;
• Apply for Singapore business licenses;
• Get an affordable, professional registered office address for business;
• Support to open, authenticate, and manage Stripe Paypal Business in Singapore, Hong Kong, and the U.S;
• Handle all your Hong Kong tax accounting needs, timely annual filings, auditing, and more.

8. FAQs about the profit tax in Hong Kong

1. Do I need to pay tax if my company made no profit?

If your company had no assessable profits, you won’t owe tax, but you still must file the return to declare your company's operational status. This requirement is for all companies 

2. Do offshore profits need to be reported?

3. What are supplementary forms and do I need to file them?

4. Can my accountant or tax agent file on my behalf?

We offer a comprehensive range of accounting and tax services for US companies. Our services include:

• Tax Consulting .
• Monthly/Annual Tax Accounting services in accordance with HKFRS.
• QuickBooks Consulting and Licensing.
• Profits Tax Return Preparation.
• Offshore claim form Preparation.

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