For a Hong Kong company to be qualified for Offshore Profits Tax Exemption its business must take place entirely outside of Hong Kong and granted by the tax authority. However this will mean that the company’s profits to be tax-free in Hong Kong.

If the Hong Kong company would be using our address as its respective business address as well as a bank account in Hong Kong it would also have tax-free profits.

Example of a company that would qualify for this :

  • The company is being operated overseas by its owner or employees
  • The company’s employees do not reside in Hong Kong or rarely visit Hong Kong.
  • The company’s business with clients and suppliers happens outside of Hong Kong.
  • The company’s clients are not located in Hong Kong and do receive payments from theirs Hong Kong bank accounts.
  • The company’s suppliers are located outside of Hong Kong and the company does not make any payment to its suppliers on the respective Hong Kong bank account. But take notice that the company is allowed to make payments to professional firms located in Hong Kong incl. accountants, lawyers and ourselves. As it would not disqualify the company from offshore profits tax as these activities are support services provided to the company and not a business activity done by the company itself.
  • The company’s products does not enter Hong Kong.
  • The company’s services are not provided in Hong Kong.

Claim an Offshore Profit Tax Exemption

If the Hong Kong company passes all the required conditions that is mentioned above, it will be able to apply for the tax exemption when filling its annual Profits Tax Return.

All records must be kept for demonstrating how and where the company operates

The Hong Kong tax authority may want to check and see that the company has no business activities taking place in Hong Kong. This means that it would normally happen by the tax authority randomly select a business transaction and thereby review the activity involved and check where the activities of the transaction took place. Therefore its recommended to keep all the completed records to strength that the transactions takes place outside of Hong Kong, incl. emails with clients and suppliers, notes of meeting with respective, travel documents to demonstrate any visits, copies of sales orders, copies of purchase orders and copies of shipping documents to show its origin and destination of the product supplied to its client. To summarise the company should keep everything that can help strengthen the truth.

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