Profits tax is charged only on net profits arising in or deriving from Hong Kong, from a trade, profession or businesscarried on in Hong Kong.
Incorporated and unincorporated businesses are taxed at different rates - incorporated businesses at 17.5% and unincorporated at 16%.
Profits tax is charged on the basis of profits actually made in the accounting year ending in the assessment year which runs from 1 April to 31 March.
Some general details in calculating profits tax:
deductible items include:
all expenses incurred in the production of assessable profits
losses of the company(can also be carried forward indefinitely)
capital allowances on eligible capital expenditure and plant and machinery, varying from 4-30% and up to an immediate write off of 100%
certain trademarkand patent purchase costs
contributions to an employee retirement scheme, up to specified limits
some costs attributable to scientific research
items exempt from profits tax
interest income, other than that received by financial institutions, and dividends received from corporations
capital gains
there is no withholding tax on dividends paid by corporations
groups cannot file a consolidated tax return in Hong Kong
Profits tax produces about 20% of the Government's revenue.
