What profits tax rate do sole proprietors and partnerships pay in Hong Kong?
Unincorporated businesses pay 7.5% on the first HK$2 million of assessable profits and 15% on the remainder, from year of assessment 2018/19. This is the two-tiered system. As with companies, only one entity in a group of connected entities can use the lower rate.
Sole proprietorships and partnerships are chargeable to profits tax at lower rates than corporations:
| Slice of assessable profits | Rate (unincorporated) |
|---|---|
| First HK$2,000,000 | 7.5% |
| Remainder | 15% |
A few practical points:
- A sole proprietor reports business profit on the individual tax return (BIR60) with supplementary forms; a partnership files a profits tax return for persons other than corporations (BIR52).
- A proprietor's own salary, drawings, interest on capital, and MPF contributions for themselves (other than the self-employed mandatory deduction) are not deductible against business profit. In a partnership the same applies to partners and their spouses.
- If a sole proprietor elects personal assessment, personal allowances can reduce the tax. The profits tax and salaries tax of the same person are separate charges.
- The HK$2 million threshold is shared among corporate and non-corporate partners according to their profit-sharing ratio.
- The one-off 2025/26 tax reduction (100%, capped at HK$3,000) applies per business for profits tax.
The tax year is 1 April to 31 March, and the basis period is normally the accounting year ending in it.
Legal basis
- Inland Revenue Ordinance (Cap. 112), Schedule 8
- Inland Revenue Ordinance (Cap. 112), s.17
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 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.
- What is the profits tax rate for a Hong Kong company?Under the two-tiered system, a corporation pays 8.25% on its first HK$2 million of assessable profits and 16.5% on the rest. The lower rate is available to only one entity in a group of connected entities. This applies from year of assessment 2018/19 onwards.
- What are the salaries tax rates in Hong Kong?For 2025/26 the progressive scale is 2%, 6%, 10%, 14% on successive HK$50,000 bands, then 17% on the rest. Tax cannot exceed the standard rate on net income before allowances: 15% on the first HK$5 million and 16% above. The lower of the two results applies.
- What are the personal allowances for Hong Kong salaries tax?For 2025/26 the basic allowance is HK$132,000, married person's HK$264,000 and each child HK$130,000. From 2026/27 these rise to HK$145,000, HK$290,000 and HK$140,000 respectively, under the 2026-27 Budget law gazetted on 22 May 2026. The IRD applies new amounts to provisional tax automatically.
- How does property tax work for rental income in Hong Kong?Property tax is charged on the owner of land or buildings in Hong Kong at the standard rate of 15% on net assessable value. Net assessable value is the rent received less rates paid by the owner and a 20% statutory allowance for repairs and outgoings. Companies that rent property are usually under profits tax instead.