For more than a decade, World Bank has ranked Hong Kong among the top jurisdictions on ease of doing business. The procedure of opening an offshore bank account is simple, tax regime is very straight forward, and the government is very supportive of new ventures. To start operating in Hong Kong and take advantage of this lucrative market, it prudent to understand all the tax obligations. This article lists the main tax obligations for a start-up in Hong Kong.
Ensure to register the business with the Inland Revenue Department
The first step to operating legally in Hong Kong is incorporating a limited liability company. Once the company is issued with a certificate of incorporation, you need to register the business with the IRD one month before commencing operations. This registration certificate must always be displayed in the business office at all times for authorities to see and verify. Note that the registration is used to give IRD details of the business operations and is not meant to regulate it. Registering with IRD ensures that the business is available on Government records for easy review and support. For example, it will be very vital when applying for Tax Resident Certificate.
Business profit tax obligation
All parties in Hong Kong including companies, trustees, bodies of experts, and partnerships among others are required to pay taxes on any profit made from professional services or trade. The only exemption is profit drawn from the sale of capital assets.
The Hong Kong administration will require your business to pay the required taxes on all profits made when transacting in its jurisdiction. Besides, you have to file returns capturing all the details by close of every financial year. These records must be maintained for 7 years and produced when authorities need them. If your business wants to change its form or nature of operations, it is very important that IRD is notified immediately.
Operation stamp duty
If your business is involved in the sale of property, stamp duty will be levied on all related agreements. According to the Stamp Duty Ordinance, the tax also includes any stock transfer at the Hong Kong Capital markets. If you are unsure of the tax to remit to IRD, it is advisable to work with a financial expert.
Property taxes in Hong Kong
If your business is in the real estate niche or wants to acquire land, it is important to get acquainted with the property tax. If you make any proceeds from property rent, make sure to pay the property tax and maintain the records well for perusal and review by authorities when necessary.