In this course · 5 of 7
Course 1
Understand Hong Kong tax
7 lessons · 9 min
- 1What is Hong Kong's territorial basis of taxation (source principle)?
- 2Does Hong Kong have VAT or sales tax? What taxes do businesses pay?
- 3Does a Hong Kong company pay tax on profits earned overseas?
- 4Are dividends taxable in Hong Kong for shareholders and companies?
- 5What is the profits tax rate for a Hong Kong company?
- 6Profits tax rate for a Hong Kong sole proprietorship or partnership?
- 7If I own several companies, can each use the 8.25% profits tax rate?
The short answer
Hong Kong companies pay profits tax of 8.25% on the first HK$2 million of assessable profits and 16.5% on the rest (2025/26; unchanged in the 2026-27 Budget). Only one entity in a group of connected entities can use the lower rate. The two-tiered system applies from the 2018/19 year of assessment.
For a corporation, two rates apply to assessable profits for each year of assessment (which runs from 1 April to 31 March):
| Slice of assessable profits | Rate |
|---|---|
| First HK$2,000,000 | 8.25% |
| Remainder | 16.5% |
Before 2018/19 the single corporate rate was 16.5%. The 8.25% rate is half the headline rate.
Points to note:
- One entity per connected group. If you have connected entities, only one can be nominated for the lower tier (see the answer on connected entities).
- Assessable profits (profits after tax adjustments), not accounting profit. Tax is charged after the tax computation adjusts the accounts for non-deductible expenses, depreciation allowances, exempt items and losses brought forward.
- Partnerships with corporate partners have the HK$2 million threshold shared among partners in the profit-sharing ratio.
- Concessionary rates exist for specific activities (for example certain qualifying treasury, insurance and IP income), but they are not the general rule.
- One-off reduction. For 2025/26 the final tax is reduced by 100% up to HK$3,000 (see the answer on the 2026-27 Budget tax reduction).
Tax is paid in the stages described in the provisional profits tax answer. The Budget for 2026-27 made no change to these rates.
Legal basis and sources
The law
- Inland Revenue Ordinance (Cap. 112), Schedule 8
General information for business owners, not legal, tax or professional advice. Rules change, so check the sources or ask a licensed professional before you act.
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