By Rashmi Pandya, Macalvins’ COO
Hong Kong – often called the Pearl of the Orient – has long been a gateway to the Asian market, attracting businesses from around the world.
With its low tax rates, business-friendly environment, and strategic location, it is easy to see why UK companies are eyeing expansion opportunities there.
Before you make the leap, have you considered whether you need to register for tax in Hong Kong?
The answer is not always straightforward and depends on how your business operates. Let’s break it down.
How does Hong Kong tax businesses?
Unlike the UK, which taxes companies on their worldwide income, Hong Kong operates a territorial tax system.
This means that only income earned in or derived from Hong Kong is subject to Profits Tax. If your business is making money elsewhere, Hong Kong is not interested in taxing it.
So, what does this mean for you? If your UK company generates income outside of Hong Kong, you might not need to register for tax there at all.
But if you have business activities on the ground, it is a different story.
What are the tax rates in Hong Kong?
One of the biggest draws for UK businesses is Hong Kong’s competitive tax regime:
- 25 per cent on the first HK$2 million of assessable profits (around £200,000)
- 5 per cent on profits above HK$2 million
There is no VAT, no Capital Gains Tax (CGT), and no withholding tax on dividends, making Hong Kong one of the most attractive destinations for international business, but is it the right move for your company?
Do you have a physical presence in Hong Kong?
If you set up a subsidiary, branch, or representative office in Hong Kong, you must register with the Inland Revenue Department (IRD) and file tax returns.
This needs to be done within one month of starting business activities.
Are you generating income from Hong Kong?
Your UK business might be liable for Profits Tax if:
- You have an office, warehouse, or employees based in Hong Kong
- Your sales contracts are negotiated and concluded in Hong Kong
- Your services are performed in Hong Kong
- You have a local customer base generating revenue
If you are doing business without a physical presence, you may still be able to claim an offshore tax exemption, but this requires careful structuring and proper documentation.
Are you hiring employees in Hong Kong?
If you are employing staff in Hong Kong, you will need to register with the IRD for Employer’s Return of Remuneration and Pensions (ER) and comply with local payroll tax and social security obligations.
How do you register for tax in Hong Kong?
If your UK business needs to register for tax in Hong Kong, the process generally involves:
- Obtaining a Business Registration Certificate (BRC) from the Companies Registry
- Registering with the Inland Revenue Department (IRD) for Profits Tax
- Filing annual tax returns (including payroll tax returns, if applicable)
For businesses looking to claim an offshore tax exemption, an application for an offshore tax claim may be required.
Is expanding to Hong Kong the right move for you?
Hong Kong’s tax benefits and pro-business environment make it an attractive option – but is it the right fit for your company?
Here are some questions to ask yourself:
- Are you planning to establish a physical presence in Hong Kong?
- Will your business be generating income from Hong Kong-based customers?
- Have you considered the compliance and regulatory requirements of operating in Hong Kong?
Expanding into a new jurisdiction is a major step, and getting the tax strategy right from the start can save you significant costs down the line.
Thinking about taking your business to Hong Kong?
We can help you with tax registration, structure your business efficiently, and ensure you stay compliant while maximising opportunities. Contact us today for assistance.