Can I carry forward tax losses in Hong Kong?
Yes. A trading loss in a year is carried forward and set off against future profits of the same business. There is no stated time limit in the IRD's guidance. Losses are not carried back. Anti-avoidance rules may restrict use, for example after a change in ownership.
A business loss for tax purposes (the adjusted loss in your tax computation) is not refunded; instead:
- Companies: the loss is carried forward and set against future assessable profits of that trade. A corporation carrying on more than one trade can set a loss in one trade against profits of the other.
- Sole proprietors and partners: a loss can be carried forward against future profits of the same business, if the person has not elected personal assessment for the loss year. If they elect personal assessment, the loss can be set against total income instead.
- No carry-back to earlier profitable years.
- No time limit is stated in the IRD's guidance for carrying a loss forward.
Practical points
- Report the loss in the return (the "adjusted loss") and keep it separate from losses brought forward; the return shows the current-year figure only.
- If you expect a loss, you may be able to hold over provisional tax.
- Anti-avoidance rules (section 61B, explained in IRD practice note DIPN 15) can limit loss relief in certain arrangements, such as buying a company mainly to use its losses.
- Losses on concessionary activities have special rules.
For an M-code business with a current-year loss, a further return extension may be available (see the block extension answer).
Legal basis
- Inland Revenue Ordinance (Cap. 112), s.19C
- Inland Revenue Ordinance (Cap. 112), s.61B
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
- How does provisional profits tax work in Hong Kong?Provisional profits tax is an advance payment charged for a year of assessment, calculated from the previous year's assessed profits. It is then offset against the final tax for that year, with any excess applied to the next year's provisional tax or refunded. It is paid in instalments set out on the demand note.
- How can I hold over (reduce) my provisional profits tax?You can apply in writing to pay less or none of your provisional profits tax on prescribed grounds, most commonly if profits for the year are likely to be below 90% of the base figure. Apply at least 28 days before the due date or within 14 days after the demand note is issued, whichever is later.
- What tax reduction did the 2026-27 Budget give to Hong Kong businesses?The 2026-27 Budget provides a one-off 100% reduction of profits tax for year of assessment 2025/26, capped at HK$3,000 per business. It applies to the final tax, not to provisional tax, and needs no application. Profits tax rates were not changed. The legislation was passed on 13 May 2026 and gazetted on 22 May 2026.
- Which business expenses are deductible for Hong Kong profits tax?Expenses are deductible to the extent they are incurred in producing chargeable profits, and are not of a capital nature or private. Typical allowable items include rent of business premises, staff costs, bad debts, repairs, trade mark registration, MPF contributions for employees, and approved charitable donations within limits.
- What expenses cannot be deducted for Hong Kong profits tax?The law prohibits deductions for domestic or private expenses, capital losses and expenditure, insurance recoveries, rent of premises not used for the business, profits tax and other IRO taxes, and remuneration or interest paid to a sole proprietor or partners and their spouses.