OFFSHORE INCOME (HONG KONG COMPANY
AND RESIDENT)
Profits Tax
There is only one kind of tax for a Hong Kong company i.e.
Profits Tax (Corporate Income Tax) which is at 17.5% on its assessable profits. There
is no Value Added Tax (VAT), and no tax on dividend or interest income in Hong
Kong.
Basically a Hong Kong company is not subject to Hong Kong
taxes if its operations are not carried out in Hong Kong.
In determining whether a Hong Kong company's operations are
carried out in Hong Kong, all the company's operations (starting
from customers' enquiries about product prices, place of orders
from the customer, place of a purchase order to completion
of sale and purchase) will be considered to find out which
processes are carried out in and outside Hong Kong. The location
of bank accounts is insignificant for this matter. For instance,
a Hong Kong trading company with a bank account in Hong Kong
will not be subject to Hong Kong taxes if :
1. it has no real office in Hong Kong and only uses our office
as a registered office
2. it has an overseas office in which the company's directors
and staff are working
3. it has no staff in Hong Kong, its staff and directors rarely
come to Hong Kong, e.g. about 2 weeks per annum
4. it negotiates and concludes contracts with suppliers and
customers outside Hong Kong
6. shipment does not go through Hong Kong and arrangement
of shipment is not done in Hong Kong
7. physical inspection of goods is not carried out in Hong
Kong
We have assisted a lot of our clients to have successfully
claimed for taxes not subject to Hong Kong taxes and some
of them even have Hong Kong customers, Hong Kong suppliers
or goods going through Hong Kong. However any Hong Kong involvement
will increase the possibility of being subject to Hong Kong
taxes.
Whether profits are subject to Hong Kong taxes is a matter
of fact not a matter of law, so it depends on the evidence
you can provide. As the Hong Kong Inland Revenue Department
will select some transactions and request all the documents
relating to these transactions to be submitted to ensure that
all the company's operations are carried out outside Hong
Kong. Therefore you are recommended to keep all the correspondence
for all the transactions e.g. faxes, emails, telephone bills,
memos of meetings, purchase orders, sales orders, shipping
documents.
A company can only submit a claim for offshore income together
with its audited accounts and profits tax return, i.e. it
has commenced business for more than 18 months, not before
commencement of business.
A British Virgin Company (BVI) company's situations are different. If all its directors,
shareholders and staff are not Hong Kong residents, it will
be considered same as other overseas companies even though
its bank account is maintained in Hong Kong provided that
it has no staff nor director working in Hong Kong. If it has
Hong Kong suppliers or customers, it will only be considered
as doing business with Hong Kong companies not doing business
in Hong Kong.
Salaries Tax
An individual receiving salaries from a Hong Kong source
will be wholly subject to Hong Kong taxes (Individual Income Tax) unless all the services
under the employment are rendered outside Hong Kong. In determining
whether all the services are rendered outside Hong Kong, the
individual must be a visitor (i.e. not having a form of permanent
base e.g. a home or property) and visits Hong Kong for whatever
purpose not more than 60 days in the year of assessment. This
is not applicable for Government employees, seafareres nor
aircrew.
N.B. It should be noted that the information is presented
in summary form for reference only and readers are advised
to seek professional advice before formulating business decisions. |
