Understanding Hong Kong Tax Rules (Part 1): Profits Tax

Hong Kong tax rules usually are not very complicated. However, some people are confused while preparing their tax statements because there are a small number guidelines around. Therein group of articles, i will explain some key concepts and rules for Hong Kong taxes. Within this part, i will focus on the profits tax. Which can be really benefit for people that want to hk company set up.

To comprehend Hong Kong's profits tax, first you need to comprehend who definitely are necessary to pay. Sole proprietorship businesses, whether have business activities or not, are required to report their profits tax.

Partnerships which you were a person or sole proprietorship businesses which has changed to partnerships and the opposite way round in the past year need not be reported within your return. Corporations of which you had been a shareholder needn't be reported inside your tax return either.

You have to declare the benefits / (losses) on the businesses, trades or professions for that basis period, and once you may register company hk, you must recognize the Hong Kong taxs. "Basis period" means either 4 seasons ended 31 March over the relevant year of assessment or perhaps the annual accounts from the business comprised to any date inside relevant year of assessment.

Here are some key concepts you need to understand in profits tax.

Revenues:

Gross income means all kinds of income, including ordinary business income, proceeds from sale of capital assets along with non-taxable receipts, whether or not based on the primary activities.

Turnover:

Turnover includes amounts received / receivable from goods sold or services rendered.

Gross Profit / (Loss):

This can be the quantity of turnover after deducting price of goods sold. For business not involving sales of goods, enter '0' with this item in the tax return.

Assailable Profits / (Adjusted losses):

Assailable Profits / (Adjusted losses) must be computed according to the Inland Revenue Ordinance of Hong Kong. Add non-deductible expenses charged in the accounts on the profit per account or deduct on the net loss to reach for the assailable profits / adjusted losses. Salaries paid to, benefits received through the proprietor and his/her spouse, proprietor's domestic and expenditure, capital expenditure and non-business expenses usually are not deductible.

For calculating profits tax, you may use the Performa Profits Tax Computation Form [IR957A(e)] given by the Hong Kong Inland Revenue Department.

Above are a handful of key concepts and rules relevant to Hong Kong's profits tax. In case you are still confused, you are able to consult Hong Kong Government's website, with a lots of useful helpful tax. Also, you may want to consider working with a professional to organize your tax.