Home /Our Blogs /A 2026 Guide to Hong Kong Corporate Tax and Treaties
A 2026 Guide to Hong Kong Corporate Tax and Treaties
Published on: 07 May 2020By Admin
Hong Kong has evolved into an economic powerhouse. The thriving financial sector and inclination toward global trade make it a perfect business hub. But that’s not the only reason why Hong Kong enjoys such a position. Its two-tier tax system plays a crucial role in boosting its appeal as a credible offshore base. If you seek Hong Kong offshore company formation, knowing the tax system inside out should be your priority. That said, this article gives a brief overview of all forms of taxes, including Hong Kong corporate tax and withholding tax. Besides, we will also take a closer look at tax rules for foreigners.
How Does the Hong Kong Tax System Work?
Simply put, Hong Kong does not tax any income generated outside its territory. It means foreign-sourced income is non-taxable in Hong Kong. Companies doing business in Hong Kong and generating profits are subject to a two-tier tax system. It is worth noting that the value-added tax (VAT) and a capital gain tax do not exist in Hong Kong.
Although the Hong Kong tax system is simplified and sorted, foreign companies can have a hard time dealing with it. By relying on tax compliance services, you can seamlessly demonstrate compliance with the tax rules.
Ready to take the first step in your business journey?
We'll walk you through every step – no guesswork needed.
From 1 April 2018, Hong Kong has introduced a two-tier profit tax regime, i.e., there are two tax rates: one for profits up to HK$2 million, and the other beyond that. Here’s a tabular representation of the HK company tax that varies depending on the profit threshold.
Entity Type
Applicable Profit Tax Rate
Profit Threshold
Corporation (Typical Company)
8.25%
On the first HK$2 million of assessable profits
Corporation (Typical Company)
16.50%
On assessable profits above HK$2 million
Unincorporated Business (Sole Proprietorship/Partnership)
7.50%
On the first HK$2 million of assessable profits
Unincorporated Business (Sole Proprietorship/Partnership)
15%
On assessable profits above HK$2 million
Is Foreign-sourced Income Taxable in Hong Kong?
Taxes are levied on a company carrying on business in Hong Kong, on profits derived from within the country. Thus, offshore profits do not fall within the territorial scope of Hong Kong’s tax system, including those of locally incorporated companies.
To promote its offshore appeal and curb tax avoidance, Hong Kong introduced the Foreign-Sourced Income Exemption (FSIE) regime in 2023. The FSIE regime makes the following income sources tax-free, provided the companies meet the economic substance requirements:
Foreign-Sourced Interest
Foreign-Sourced Dividends
Foreign-Sourced Disposal Gains (from sale of assets)
You can navigate the official website of Hong Kong’s Inland Revenue Department to learn more about the FSIE regime.
Tax Return Filing Due Date in Hong Kong
The Inland Revenue Department (IRD) of Hong Kong officially informs taxpayers about return filing on 1st April every year. Taxpayers must file a tax return within one month of such a date. Corporations can apply for an extension provided they meet the specific criteria.
To promote online filing, the authority grants a one-month extension upon receipt of the prescribed application. The table below reflects the extended due date for electronic filing.
Accounting Year (start and end date)
Normal Filing Due Date
Extended Due Date
Extended Due Date for e-Filing
1 April- 30 Nov
2 May
No Extension
2 June
1 Dec - 31 Dec
2 May
15 August
15 September
1 Jan - 31 March
2 May
15 November
15 December
Tax Filing for Newly Incorporated Companies
Newly incorporated entities will receive profit tax returns 18 months after the date of incorporation. The following inclusions are mandatory when filing the profit tax return.
Completely filed the tax return form issued by the IRD.
IRD-issued supplementary form to add information regarding tax and finance.
Audited financial statements
A complete detail about how the assessable profit has been estimated
Note: Even if the company has no profits or business activity, it must still file a “NIL” return with supporting documents.
Withholding Tax Rate in Hong Kong
Only specific types of payments, such as royalties, are subject to withholding tax in Hong Kong. Dividends and interest enjoy tax-free treatment. When a local entity pays royalties to an overseas company for services rendered in Hong Kong, a portion of the payment must be remitted to the IRD as tax.
An Outlook on Hong Kong Tax Treaties
To prevent double taxation, Hong Kong has concluded tax treaties with more than 40 countries. Have a glance at the some of the nations with which Hong Kong has signed tax treaties.
France
The DTA between France and Hong Kong came into effect on 1 December 2011. The motto behind this agreement is to help you avoid being taxed twice.
Income Type
Rate Before DTA (Approx. French Domestic Rate)
Revised Treaty WHT Rate (Max.)
Dividends
25%
10%
Interests
15% to 25% (Non-cooperative state rates could reach 75%)
10% (Reduced to 0% for government/institutional entities)
Royalties
33.33%
10%
Canada
The Canada-Hong Kong tax treaty is similar to a set of rules that guarantee individuals and businesses won't have to pay income tax twice when they're working or investing between the two territories.
For instance, if a Canadian business earns profits in Hong Kong, the double taxation treaty ensures that Canada will credit them with the tax already paid in Hong Kong, so they won't have to pay the full tax again in Canada.
In the same way, it would reduce the taxes Hong Kong would levy on payments such as dividends or royalties to Canadian citizens. Thus making it more affordable and easier to conduct business overseas.
Income Type
Rate Before DTA (Canadian Domestic Rate)
Revised Treaty WHT Rate (Max.)
Dividends
25%
5% (for ≥10% corporate control) or 15% (all other cases)
Interests
25%
10% (Often 0% under Canadian domestic law for arm's length payments)
Royalties
25%
10%
Thailand
The DTA between Thailand and Hong Kong sets out tax rules and defines the residency of business owners.
The treaty also defines how different types of income, such as dividends and royalties, will be taxed. Usually, the source country of the income offers a lower tax rate in this respect.
Income Type
Rate Before DTA (Thai Domestic Rate)
Revised Treaty WHT Rate (Max.)
Dividends
20%
10%
Interests
15%
10% or 15% (Varies based on recipient)
Royalties
15%
5%, 10%, or 15% (Varies based on IP type)
Types of Income Covered by Hong Kong Tax Treaties
The types of income that Hong Kong Tax treaties cover are:
Business Profits
Income from Immovable Property
Dividends
Interest
Royalties
Capital Gains
Employment Income (Salaries)
Pensions
Hong Kong’s taxation is simplified, transparent, and most importantly, a boon for businesses relying on foreign-sourced income. By starting an offshore company in Hong Kong, you can leverage this tax system to streamline your income. If you seek professional help for incorporation purposes, BSW can be your best bet.
Business Setup Worldwide (BSW) has remained a go-to partner for offshore company formation for more than 8 years. Contact us now to book a free consultation.
Frequently Asked Questions
1. What is a basis period for tax assessment in Hong Kong?
The Year of Assessment (YA) is one of the primary factors to consider when determining profit income tax in Hong Kong. In Hong Kong, a YA runs from 1 April to 31 March of the following year.
2. How many countries are in a treaty with Hong Kong to overcome double taxation?
Hong Kong has double taxation treaties with 40 nations.
3. Do I need to pay taxes on royalties received in Hong Kong from a local client?
Yes, you have to pay profit tax on such earnings.
4. Can a company apply for an extension of the due date?
Yes, it is possible if you want to leverage online filing.
5. How is foreign-sourced income taxed in Hong Kong?
A foreign-sourced income remains non-taxable in Hong Kong.
