How to qualify Hong Kong Offshore Tax Exemption?

Hong Kong is undeniably appealing to new enterprises. If you want to establish a business on a global scale, Hong Kong may be the location for you. Hong Kong ranks first finest place in the world to do business. It is excellent for banking, international commerce, investment, and asset protection. Furthermore, the People’s Republic of China provides Hong Kong with autonomy and financial independence from mainland China. It is one of the reasons Hong Kong has some of the lowest taxes in the world.

Hong Kong has a straightforward tax framework that makes it quite simple to form a corporation. The corporate tax rate is only 16.5%. The best part is that get not taxed on income earned outside of the autonomous area. So, if you intend to form a company in Hong Kong, you must educate yourself on tax processes, including tax exemption. Take a close look at the information below to understand Hong Kong tax exemption.

What exactly is the Hong Kong Overseas Tax Exemption?

A corporation is qualified for an overseas tax exemption only if it conducts business outside of Hong Kong and earns money outside of Hong Kong. Because Hong Kong operates on a territorial basis, only earnings in Hong Kong offshore company setup are taxed. Corporations and corporations that are exempt from paying foreign taxes include:

  • A corporation based totally outside of Hong Kong.
  • A business that does not offer services in Hong Kong.
  • A firm that conducts business with suppliers and customers located outside of Hong Kong.
  • Outside of Hong Kong, business decisions and agreements. Hong Kong does not import products or goods.
  • There are no Hong Kong suppliers or customers, and the directors spend less than 60 days in Hong Kong every year.

How to apply for tax exemption on foreign profit:

If a Hong Kong firm achieves all of the requirements above, it can apply for a foreign profits tax exemption when filing its annual profit tax return.

How and where does the company work:

The Hong Kong Tax Authority may attempt to verify a company’s declaration that it does not do business in Hong Kong. Typically, this would be on a sampling basis, with the tax authority picking a sales transaction and evaluating the numerous activities linked with that transaction to establish where those activities occurred.

As a result, it is best to keep detailed records to demonstrate that all activities are taking place outside of Hong Kong. Such as emails with customers and suppliers, meeting notes with customers and suppliers, travel documents to prove visits to customers and suppliers, and photocopies of sales records. Orders, copies of purchase orders, and copies of shipping papers to demonstrate the origin and destination of products supplied to the client, Hong Kong-based enterprises can expand their worldwide market potential.

Aside from prestige, offshore status enhances desirability since firms may save significant money on yearly expenditures. As a result, entrepreneurs increased, and company owners and freelancers chose to incorporate in Hong Kong. It’s now your time!