A number of rates apply:

• Companies pay a standard rate of 17.5% on assessable profits.
• Businesses other than corporate entities pay a rate of 16% on assessable profits.
• Special concessionary rates of profits tax which are substantially less than the standard rates apply to the following businesses or sources of income:
  • Interest or capital gains made on qualifying maturity debt instruments are taxed at 8%.
  • The re-insurance of offshore risks is taxed at 8% of assessable profits.
  • Life insurance businesses are assessed at 5% of the value of the premiums arising in Hong Kong.
  • An entity whose business is to grant rights to use a trademark, copyright, patent or know how pays a flat profit tax of 1.75% (or 17.5% on 10%) of the payment received with all related expenses being non tax deductible. If the recipient of the payment is a related offshore licensing company the Hong Kong company must withhold and hand over 1.75% of the fee paid over.
  • Income from the international operations of shipping companies is exempt from tax unless the ships are operating in Hong Kong waters or proximate to the same in which case only that proportion of income earned in Hong Kong is subject to local tax of 17.5%. Shipping profits meeting the conditions of the double taxation agreement with the USA are exempt from profits tax in Hong Kong.
  • Irrespective of whether or not the company is managed and controlled from Hong Kong assessable profits are the proportion of income arising within Hong Kong (from the uplift of passengers and freight locally) to the proportion of worldwide income. Under a number of international aircraft double taxation agreements the government has agreed to include income arising abroad for taxation in Hong Kong where that income is exempted abroad under the agreement. Likewise profits meeting the conditions of the double taxation agreements are exempt from profits tax locally. The rate is 16% of assessable profits.
  • The sale of goods on consignment from Hong Kong on behalf of a non resident is subject to a tax of 1% of the turnover without any deductions unless the non resident can produce accounts to show that he would have paid less profit tax than consignment tax in which case a normal rate of tax will apply .The selling of goods on consignment is deemed to be the equivalent of creating a permanent establishment.
  • An entity whose business is to rent out a film, tape or sound recording for use in any cinema or television program pays a profit tax of 1.75% (or 17.5% on 10%) of the payment received with all related expenses being non tax deductible.