Hong Kong Companies

CONTACT REQUEST

Which office would you like to deal with?

Please fill in all fields in correct format

Offshore Income

The Tax Law in Hong Kong states that profits arising or derived outside Hong Kong are not subject to Hong Kong tax. However, it is the responsibility of the taxpayer to provide sufficient evidence and documentations to satisfy the Tax Department for their offshore claim, a case of "Guilty until proven Innocent"

In order to claim that the Company's business activities were not carried on in Hong Kong and hence the profits earned not subject to Hong Kong Profits Tax, the Company must provide evidence to the Tax Department to support their offshore claim. This simple concept can however produce cases which are not clear cut and hence difficult to ascertain the final outcome of the offshore claim.

If the Company has no presence in Hong Kong (i.e. no office and no staff) and is involved in the trading of goods, buying from overseas suppliers and selling to overseas customers then the offshore claim is more clear and matters can be easily resolved with the Tax Department. However, if the Company has no presence in Hong Kong (i.e. no office and no staff) but is involved in the trading of goods, buying from Hong Kong suppliers and selling to overseas customers then the offshore claim becomes more problematic. The offshore concept is that profits arising or derived outside Hong Kong is not subject to Hong Kong profits tax, however, the Company is engaged in business with a Hong Kong supplier, the question is how to prove to the Tax Department that work was not performed in Hong Kong regarding the Hong Kong supplier's transactions. This is sometimes extremely difficult to do.

In respect of a Company receiving commission, the determining factor is what work was performed to earn the commission. If the work involved in earning the commission was performed overseas then an offshore claim can be submitted. Again the Company must successfully provide evidence to the Tax Department to support the offshore claim.

A Hong Kong company can claim "Tax Apportionment" for its offshore activities and it will then only need to be pay on its Hong Kong sourced income. The claim has to be supported with the relevant documentation and CMS can assist you with this claim.

For more information on Hong Kong companies, please visit our Jurisdiction section.