FAQ about Profits Tax

1) Q：

What tax does Hong KongCompany need to pay every year?

A：

Hong KongCompany needs only to pay Profits Taxevery year, which is calculated by 17.5% of net profits. The companywithout profits needs to pay no Profits Tax.

2) Q：

What's the year end of Hong KongCompany?

A：

It's generally 31 March to 31 December of each year for the basis period of taxationaccording to custom. Hong KongCompany has maximum 18 months for the first year's basis period of taxation.

3) Q：

Does Hong Kong import/export commodity need to pay tariff?

A：

Generally import/export commodities need not pay tariff, except tobacco, liquor and petroleum. But import/export commodities must be declared at customs.

4) Q：

Can Blueprint provide services of Hong Kong accounting and tariff declaration?

A：

Yes. You need only to provide relevant information, and then we can process accounting, auditing and tariff declaration and other service s on your behalf, at expenses to be determined by actual workload. For details, please contact us.

5) Q：

What are the items of Hong Kong taxation?

A：

There are three kinds of Hong Kong taxation: Profits Tax, Salaries Taxand Property Tax.

Profits Taxshall be 17.5% of the taxable profits of the company; Salaries Taxshall be calculated by salary income at progressive tax rate, and paid up to 16% of total salary income; Property Tax16% of the net rent income earned from owning properties after deduction of 20% standard tax relief for renovation and expenditure.

6) Q：

How is the accounting year (base period of assessment) determined?

A：

The bas is period of assessment shall be one of the following periods:

7) Q：

What restriction will Inland Revenue Ordinance have on deduction for donation?

A：

Donation granted to recognizable charitable organization is permitted to be deducted, but total donation as requiredshall not be less than $100 and not more than 25% of assessable profits.

8) Q：

Can the profits of Hong Kong Company offset the losses of previous year?

A：

Losses incurred in a taxable year can be carried forward and used to offset the profits of the companyin subsequent years.

9) Q：

What's Provisional Profits Tax payable?

A：

Profits Tax shall be levied according to the actual profits of the taxable year. Since the profits of one year shall be determined only after the end of year, Inland Revenue Department will levy provisional tax before the end of that year. After the profits of relevant year are assessed in the following year, the provisional tax already paid can be deducted from the Profits Tax payable of this year.

10) Q：

In which case will Hong Kong Company be free from Profits Tax?

A：

If corporate profits do not arise from Hong Kong , and the companyhas not set up an office in Hong Kong nor hired Hong Kong employees, then its earned profits will be exempt from Profits Tax.

11) Q：

My Hong Kong Company only opens account at bank, to collect and pay bills for other China Company, then does this Hong Kong Company need to process accounting, auditing and tax declaration?

A：

Yes. Because companyincorporation is profit-oriented, even if Hong Kong only performs the role of collecting and paying for others, the companyshall be deemed as agency service business, and the income shall be the commission for collection and payment for others.

12) Q：

My Company only opens an account at a foreign bank in China and does not open account in Hong Kong; shall the businessconducted by my Company be free from tax declaration?

A：

No. According to Hong Kong laws, every Hong Kong Company has the obligation to declare its financial condition to Inland Revenue Department, whether its businesstakes place in Hong Kong or not. If this Company does not have its source of income in Hong Kong , it can apply to Inland Revenue Department for exemption from taxation.