Does a Hong Kong company pay tax on profits earned overseas?
Generally no. Profits sourced outside Hong Kong are outside the profits tax charge, even if the company is incorporated here. The exceptions are certain foreign-sourced passive income received in Hong Kong by members of multinational groups under the FSIE regime, and any profits the IRD finds are actually sourced in Hong Kong.
Incorporation in Hong Kong does not decide tax. What matters is whether the profits arise in or are derived from Hong Kong.
Generally not taxable: profits from a business activity whose profit-producing operations take place outside Hong Kong, if you can support that position with evidence.
Still taxable or at risk:
- Profits the IRD concludes are sourced in Hong Kong despite the claim (for example, contracts negotiated and concluded here).
- Foreign-sourced dividends, interest, disposal gains and IP income received in Hong Kong by a member of a multinational enterprise group, unless an exception such as economic substance or the participation exemption is met (FSIE regime, from 1 January 2023 for most categories and 1 January 2024 for other disposal gains).
- Royalties for the use of intellectual property in Hong Kong, which are deemed to be Hong Kong profits.
In your return: the profits tax return asks you to report amounts you exclude as offshore, so excluded profits are visible to the IRD. Keep the contracts, correspondence and records of who did what, and where.
A company with only individual shareholders and no foreign group is not within the FSIE definition of a multinational group member.
Legal basis
- Inland Revenue Ordinance (Cap. 112), s.14
- Inland Revenue Ordinance (Cap. 112), ss.15H–15M (FSIE)
Sources
Applies to YA 2025/26 · Last reviewed 29 October 2026
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.
Related questions
- Does it matter where a Hong Kong company's directors make decisions when claiming offshore profits?It is a factor but usually not the deciding one. The IRD and the courts look first at the operations that actually earned the profit and where they took place. The place where day-to-day investment or business decisions are taken is only one factor, so directors abroad do not by themselves make profits offshore.
- Does the FSIE regime apply to my small Hong Kong company?Only if the company is a member of a multinational enterprise group, meaning a group with at least one entity or permanent establishment outside the ultimate parent's jurisdiction. A Hong Kong company owned by individuals with no foreign branch or subsidiary is outside the FSIE rules. A foreign parent or overseas subsidiary generally brings you in.
- Does Hong Kong's global minimum tax (Pillar Two) affect my SME?No, unless your group is very large. The global minimum tax and Hong Kong minimum top-up tax apply only to multinational groups with annual consolidated revenue of EUR 750 million or more in at least two of the four preceding fiscal years. They apply from fiscal years beginning on or after 1 January 2025.
- What is Hong Kong's territorial source principle of taxation?Hong Kong charges profits tax only on profits that arise in or are derived from Hong Kong from a trade, profession or business carried on here. Profits that have a source outside Hong Kong are not chargeable. Where the source lies is a question of fact, decided case by case.
- Does Hong Kong have VAT, GST or sales tax?No. Hong Kong has no value-added tax, goods and services tax or sales tax. The only taxes on income are profits tax, salaries tax and property tax, plus duties such as stamp duty. The government also confirms there is no capital gains tax and no withholding tax on dividends or interest.