Hong Kong Corporate Tax - Guide for International Expansion

Are you considering expanding your business to Hong Kong? Understanding the city's corporate tax system is crucial for making informed decisions about this strategic financial hub.

Hong Kong offers one of the most competitive tax environments in Asia, with a territorial taxation system that only taxes profits arising within the territory. Whether you're establishing a regional headquarters or exploring new market opportunities, grasping your tax obligations will be essential for successful operations.

If you're looking for efficient ways to manage international payments and reduce currency conversion costs, Wise Business can help streamline your cross-border transactions and simplify financial management as you expand into Hong Kong's dynamic market.

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This publication is provided for general information purposes and does not constitute legal, tax, or other professional advice from Wise Payments Limited, its subsidiaries or affiliates, and it is not intended as a substitute for obtaining business advice from a tax advisor or any other professional.

Hong Kong Corporate tax rate in 2025

Hong Kong operates a two-tiered profits tax system with rates of 8.25% on the first HKD 2 million of assessable profits and 16.5% on profits above that threshold for corporations. For unincorporated businesses, the rates are 7.5% and 15% respectively.¹ Hong Kong follows a territorial taxation system, meaning only profits arising in or derived from Hong Kong are subject to tax, whilst offshore income may qualify for exemption under specific conditions.²

The profits tax applies to every person carrying on a trade, profession, or business in Hong Kong, regardless of their tax residence status.³ There's no distinction between residents and non-residents when it comes to liability, except in tax treaty contexts. Notably, Hong Kong doesn't impose capital gains tax, dividend tax on local companies, or withholding tax on interest income, making it one of the most business-friendly tax jurisdictions in Asia.^{4 5}

Read more about Corporate Tax Planning best practices

How to pay corporate tax in Hong Kong

Corporate tax payments in Hong Kong are made in Hong Kong Dollars (HKD) to the Inland Revenue Department (IRD). Companies must file annual profits tax returns using form BIR51 for corporations or BIR52 for unincorporated businesses, with returns typically issued every April covering the previous year of assessment (1 April to 31 March). ^{6 7}

The filing deadline is generally one month from the issue date stated on the tax return notice, though electronic filing through eTAX grants an automatic one-month extension.⁸ For newly incorporated businesses, the first tax return usually arrives around 18 months after incorporation once a full set of accounts has been prepared.⁹

Hong Kong operates a provisional profits tax system requiring companies to prepay based on estimated current-year profits.⁸ The first instalment covers 75% of estimated tax payable, with a second instalment of 25% due several months later. Once actual profits are confirmed, any overpayment is refunded or credited toward the next tax year.¹⁰

Let's calculate the annual tax due for a company with HKD 1.5 million turnover. Assuming a 10% profit margin, the taxable profit would be HKD 150,000. Under Hong Kong's two-tiered system, this entire amount falls within the first HKD 2 million threshold, so the tax owed would be:

HKD 150,000 × 8.25% = HKD 12,375

Missing tax deadlines can result in estimated assessments by the IRD, a 10% surcharge on late payments (rising to 50% for repeat offences), or legal action in serious cases. Companies must maintain proper financial records and submit accurate returns to avoid penalties.^{11 12 13}

When expanding your business to Hong Kong, the right financial tools will make the process smoother. Using a platform like Wise Business makes it easy to manage international finances. A multi-currency account allows businesses to pay for incorporation costs, registration fees, and government taxes in local currency without paying high exchange rate fees.

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Tax Compliance in Hong Kong

To stay compliant with tax regulations in Hong Kong, companies should note the following requirements:¹⁴

Annual Profits Tax Return:

• Issued by the Inland Revenue Department (IRD) on April 1 each year.
• Newly incorporated companies usually receive it 18 months after incorporation.
• Must be filed with audited accounts; late filing can result in penalties or prosecution.

Annual Return to Companies Registry:

• Private limited companies must file within 42 days of their incorporation anniversary.
• Includes details of directors, shareholders, secretary, and registered address.
• Late submission leads to higher fees and possible fines.

Corporate Governance Requirements:

• At least one director (a natural person, aged 18 or above, local or foreign) must be appointed.
• A local company secretary (individual or body corporate) is required.

By meeting these obligations, businesses can maintain compliance and benefit from the competitive Hong Kong corporate tax rate. This is their chance to leverage the city’s position as one of the lowest corporate tax countries, offering strong corporate tax solutions.

International Expansion to Hong Kong

Hong Kong isn’t just another business hub. It’s one of the most attractive environments worldwide for companies aiming to expand into Asia.

One of the strongest advantages is the tax system. Another compelling reason for expanding to Hong Kong is its free-market environment. The region consistently ranks as the world’s freest economy, thanks to unrestricted capital flows, zero tariffs, simple import/export procedures, and equal treatment of foreign and local companies.

Besides this, its role as a gateway to mainland China further enhances its appeal. Through the Closer Economic Partnership Arrangement (CEPA), Hong Kong businesses gain preferential access to the Chinese market.¹⁵ The city is China’s third-largest trading partner, which enhances its importance as a cross-border hub.

Ranked third globally in the Global Financial Centres Index¹⁶, Hong Kong hosts over 70 of the world’s 100 largest banks, and over 29 multi-national banks have their regional headquarters here.¹⁷ Its airport and seaport are among the busiest worldwide, ensuring seamless global connectivity. The world-class infrastructure also attracts global ventures. For example, its seaport ranked as the 8th largest container port globally, handling 14.4 million TEU in 2023.¹⁸

The steps for expanding your business in Hong Kong are as follows:

1. Conduct market research to understand competition, target audience, and pricing.
2. Develop a business plan tailored to the Hong Kong market.
3. Choose your business name, location, and entity structure.
4. Register with the Business Registration Office.
5. Complete your corporate tax registration with the Inland Revenue Department.
6. Maintain robust bookkeeping to stay compliant with the corporate tax in Hong Kong.

Hong Kong’s competitive corporate tax rate, free-market economy, and strategic position as a gateway to China make it one of the most attractive destinations for global expansion. As Wise highlights, Hong Kong is a strong base for international business and ‘a great gateway for establishing your business in China or other Asian nations.

Discover the top 5 best Corporate Tax softwares

Incorporation of Business in Hong Kong

Despite its lucrative environment for business setups, establishing a business isn’t complex. Companies must prepare essential documentation and follow clear procedures with the Companies Registry and the Inland Revenue Department.

The steps you should complete when starting a business here are:¹⁹

• Choose a company type: Find what best suits your business purposes (details below).
• Select a registered address: It must be within Hong Kong.
• Reserve a company name: It must not conflict with any already registered in the Companies Registry.
• Submit incorporation documents: These include the Incorporation Form (Form NNC1 for companies limited by shares or Form NNC1G for companies not limited by shares), a copy of the Articles of Association, and a Notice to the Business Registration Office (IRBR1). Filing can be completed electronically via the e-Services Portal or in hard copy at the Queensway Government Offices.
• Appoint a Company secretary: This person is responsible for ensuring compliance, handling annual filing requirements, and managing operational records.

Companies must comply with the competitive corporate tax rates in Hong Kong. It would help if newly starting companies (or even established ones) relied on a corporate tax service to ensure timely submissions, calculate liabilities, and track the corporate tax payment deadline. Note that Hong Kong’s streamlined tax regime, including opportunities for Hong Kong corporate tax exemption on certain offshore profits, makes it one of the most business-friendly jurisdictions compared to corporate tax rates around the world.

Business entity types in Hong Kong

There are three primary forms of companies under Hong Kong law:²⁰

• Private Limited Company: This is the most common entity type for small and medium-sized enterprises. A private limited company is a separate legal entity from its owners, protecting personal assets from business liabilities. Shareholders are limited to a maximum of 50.
• Public Limited Company: A public company limited by shares allows for more than 50 shareholders and the ability to raise capital by offering shares or debentures to the public. Many of these companies are listed on the Hong Kong Stock Exchange.
• Public Company Limited by Guarantee: Typically used by non-profit organizations, charities, or trade associations, this entity does not issue share capital. Instead, members guarantee to contribute a predetermined sum if the company is wound up. It provides limited liability while maintaining member control.

Hong Kong combines an efficient incorporation process with a highly favorable tax regime, no capital gains, withholding, VAT, or sales taxes 1. Backed by a world-class banking sector, it stands out as a premier destination for companies seeking stability and international growth.¹⁶

International corporate tax best practices

Successful international tax management requires staying compliant with local and international tax laws whilst leveraging available opportunities to optimise tax efficiency. Companies should complete legal registration processes in every jurisdiction where they operate, file all required returns on time, and maintain up-to-date knowledge of local tax regulations to ensure full compliance.

Understanding global frameworks like the OECD's Base Erosion and Profit Shifting (BEPS) initiatives and Pillar Two Global Minimum Tax helps companies maintain transparency and avoid legal risks. Hong Kong has implemented domestic legislation for the GloBE rules under Pillar Two, with the Income Inclusion Rule and Hong Kong Minimum Top-up Tax taking effect for fiscal years beginning on or after 1 January 2025.

Companies should leverage double taxation treaties to prevent being taxed twice on the same income. Hong Kong has signed Comprehensive Double Taxation Agreements (CDTAs) with over 40 jurisdictions, providing benefits such as tax credits for foreign taxes paid, exemptions from certain taxes, and lower withholding tax rates on cross-border payments.

Maintaining clear, up-to-date financial records is essential for preparing accurate tax returns, reducing error risks that could lead to penalties, and simplifying audit processes. Proper documentation also supports offshore income claims and other tax positions that may be subject to regulatory review.

Take the complexity out of international expansion with Wise Business

Researching corporate tax is a crucial step when expanding your business into a new country. The next step is setting up the financial infrastructure to handle the complexities of operating across borders, from managing multi-currency cash flow to mitigating FX risk.

The Wise Business account provides the financial tools to make your international expansion to Hong Kong efficient and simple. It's the one account for managing your money globally.

With a Wise Business account, you can:

• Pay suppliers and initial fees: Pay suppliers, global payroll, and one-off incorporation costs in the local currency.

• Get paid like a local: Use local account details for 8+ major currencies to easily receive payments from customers or investors.

• Manage your money across borders: Hold and exchange 40+ currencies in one account, always with the mid-market exchange rate and low, transparent fees.

• Streamline your accounting: Integrate with tools like Xero or QuickBooks to simplify tracking your company's international finances.

• Empower your team: Provide multi-user access for your finance team and issue expense cards for international spending.

Wise is designed to support every step of your journey, from paying your first registration fee to receiving international payments and managing your global treasury.

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FAQs - Corporate tax in Hong Kong

Who is liable for corporate tax in Hong Kong?

Any company carrying on a trade or business in Hong Kong is subject to profits tax on assessable profits generated from local business operations. This includes Hong Kong-incorporated companies, non-resident businesses with offices or activities in Hong Kong, and unincorporated businesses such as sole proprietorships and partnerships. There's no residency requirement for the taxpayer - both Hong Kong and overseas companies are taxed on profits earned within Hong Kong.

Are there any tax incentives for businesses in Hong Kong?

Hong Kong offers several tax incentives, including the Foreign-Sourced Income Exemption (FSIE) regime for certain overseas income, environmental protection deductions allowing full deduction of qualifying capital expenditure on green equipment, and intellectual property tax incentives with a reduced 5% rate on qualifying IP income. Companies may also claim deductions for charitable donations (up to 35% of assessable profits), normal operating expenses, and capital allowances for eligible fixed assets.

What is the tax treatment of dividends in Hong Kong?

Dividends from local Hong Kong companies that are chargeable to tax are exempt from profits tax. Dividends from overseas companies are generally considered offshore in nature and not subject to tax in Hong Kong. However, under the refined Foreign-Sourced Income Exemption regime effective from 1 January 2023, certain offshore dividends received by multinational enterprises may be deemed taxable if specific conditions aren't met.

What is the process for registering for corporate tax in Hong Kong?

Companies don't need to separately register for corporate tax in Hong Kong. Once a company is incorporated and begins carrying on business activities, it automatically becomes liable for profits tax on any assessable profits arising in Hong Kong. The Inland Revenue Department will issue the first profits tax return approximately 18 months after incorporation, once the company has prepared its first set of accounts.

What are the common pitfalls to avoid regarding corporate tax in Hong Kong?

Common pitfalls include assuming foreign-sourced income is automatically exempt without proper documentation, failing to submit complete supporting documents for offshore income claims, overlooking provisional tax payment requirements, missing filing deadlines, which can trigger penalties and estimated assessments, and inadequate record-keeping that may complicate tax compliance or audit processes. Companies should also be aware that the two-tiered tax rates can only be claimed by one entity within a group of connected companies per year of assessment.

Sources used in this article:

1. PwC Tax Summaries: Hong Kong SAR Corporate Tax
2. Dentons: Global Tax Guide to Doing Business in Hong Kong
3. HK Inland Revenue Department: Profits Tax Return
4. PwC Tax Summaries: Hong Kong SAR Income Determination
5. InvestHK: Low, Simple, and Competitive Tax System
6. Sleek: Filing Profit Tax Returns in Hong Kong
7. Statrys: Hong Kong Profit Tax Return
8. PwC Tax Summaries: Hong Kong SAR Tax Administration
9. Sleek: Hong Kong Tax Filing Deadlines
10. Premia TNC: Provisional Tax in Hong Kong
11. HK Inland Revenue Department: Individuals Filing Tax Returns
12. Startup Registry: Hong Kong Tax Penalties
13. Sleek: Hong Kong Tax Compliance
14. Incorp: Hong Kong Tax Compliance and Annual Filing Requirements
15. Hawksford: Starting a Business in Hong Kong
16. Reuters: London Gains Ground on New York in Financial Hub Survey
17. Statrys: Moving Your Business to Hong Kong
18. World Shipping Council: Top 50 Ports
19. Companies Registry: Introduction of Company Re-domiciliation Regime
20. SME Link: Company Types in Hong Kong

Sources last checked 03/09/2025