Hong Kong Tax Guide: Profits Tax, Salaries Tax and Compliance for Companies and Individuals

Hong Kong Tax Guide for Companies and Individuals

Hong Kong taxes only income that arises in or derives from Hong Kong. This territorial source principle applies regardless of where the taxpayer is resident. The IRD’s interpretation is in Departmental Interpretation and Practice Note 21 (DIPN 21). Profits sourced outside Hong Kong are not chargeable.

Hong Kong Profits Tax Rates

Profits tax is charged on the assessable profits of every person carrying on a trade, profession or business in Hong Kong. Two-tiered rates apply.

Corporations pay 8.25% on the first HK$2,000,000 of assessable profits and 16.5% on the remainder. Unincorporated businesses pay 7.5% on the first HK$2,000,000 and 15% on the remainder. Only one entity in a group of connected entities may elect the two-tiered rates. The others are charged at the upper rate on all profits. The connected entity rule restricts the concession to genuine small businesses.

Corporations file on Form BIR51. Persons other than corporations file on Form BIR52. Non-residents file on Form BIR54. Supplementary forms S1 to S18 accompany the return for specific income types or claims.

Returns are due within one month of issue. If a tax representative is appointed, the IRD publishes a block extension letter setting later filing dates by accounting date. Most companies file several months after the standard deadline under the block extension scheme.

Provisional tax is payable in two instalments based on estimated assessable profits for the current year of assessment. A taxpayer may apply to hold over payment of provisional tax on grounds such as an expected reduction in profits or a cessation of business. The IRD may reject an application if the grounds are not sufficiently supported.

Failure to file a return by the due date results in the IRD raising an estimated assessment. Interest is charged on tax paid late, from the due date to the date of payment. A penalty may also be imposed for late filing.

For full detail on rates, forms, deadlines and compliance steps, see the profits tax page.

Hong Kong Salaries Tax Filing

Salaries tax is charged on income arising in or derived from Hong Kong from an office, employment or pension. The year of assessment runs from 1 April to 31 March. Individuals file on Form BIR60, issued by the IRD after the year-end.

Employers must file an annual employer’s return on Form BIR56A with Forms IR56B for each employee. Other employer forms include IR56E for a new employee, IR56F for an employee about to cease employment, IR56G for an employee about to leave Hong Kong, and IR56M for payments to persons other than employees.

The 60-day rule exempts short-term visitors from salaries tax if they are present in Hong Kong for not more than 60 days in a year of assessment. This rule does not apply to directors of a Hong Kong company. Employment income is time-apportioned when duties are performed partly outside Hong Kong. The IRD examines employment contracts, leave records and travel itineraries to determine the days worked in and outside Hong Kong.

If an individual fails to file Form BIR60 by the due date, the IRD will issue a notice demanding the return. Continued non-compliance can lead to prosecution and a penalty. Employers who fail to file the employer’s return or employee forms are also subject to penalties.

For full detail on the 60-day rule, time-apportionment, share option taxation and employer obligations, see the salaries tax page.

Hong Kong Stamp Duty on Shares

A transfer of Hong Kong stock attracts stamp duty at 0.1% from the buyer and 0.1% from the seller, plus a fixed duty of HK$5 on the instrument of transfer. Duty is charged on the higher of the consideration and the value of the shares.

Stamp the instrument of transfer within two days of execution, or within 30 days if executed outside Hong Kong. Late stamping attracts penalties. The Stamp Office may impose a penalty of up to ten times the amount of duty payable, depending on the length of the delay.

An instrument that is not stamped is not admissible as evidence in court. This can affect the enforceability of the share transfer agreement. The Stamp Office can also compel stamping by issuing a notice to the parties.

For full detail on rates, calculation, lease stamping and exemptions, see the stamp duty on shares page.

Hong Kong Tax Compliance Calendar

The IRD issues profits tax returns in April each year for companies with a 31 December accounting date, and throughout the year for other accounting dates. The block extension scheme sets later filing dates by accounting date:

Employer returns on Form BIR56A and Forms IR56B are due by 1 May each year. Individuals file Form BIR60 by 2 June, or 2 July if the return is filed electronically.

Provisional tax is payable in two instalments: the first is due in November or December, the second in April or May of the following year. Apply for a holdover before the due date for payment. The application must be made on the prescribed form and supported by evidence, such as revised management accounts.

Missing a provisional tax payment deadline incurs interest at a rate specified by the IRD. The IRD may also take recovery action, such as a third party order, to collect the outstanding tax.

For full detail on all deadlines, including the block extension scheme and holdover grounds, see the tax compliance calendar page.

FSIE Regime and Offshore Claims

The foreign-sourced income exemption (FSIE) regime took effect on 1 January 2023 and was expanded from 1 January 2024 to cover disposal gains. Covered income received in Hong Kong by a member of a multinational group is chargeable unless an exception applies. Principal exceptions are the economic substance requirement, the nexus requirement for intellectual property income, and the participation exemption.

The economic substance requirement means the entity must employ an adequate number of qualified employees in Hong Kong and incur a sufficient amount of operating expenditure in Hong Kong. The participation exemption applies to dividends and disposal gains from shares in a connected entity if specific conditions are met, such as a minimum holding period.

An offshore claim is a separate process. A taxpayer argues that profits are sourced outside Hong Kong and therefore not chargeable. The IRD requires detailed evidence: contracts, invoices, correspondence and records of where business activities took place. DIPN 21 provides guidance on the locality of profits. The burden of proof is on the taxpayer.

If the IRD rejects an offshore claim, the taxpayer can object against the assessment. If the objection is disallowed, the taxpayer may appeal to the Board of Review and subsequently to the courts.

For full detail on the FSIE regime, economic substance requirements, participation exemption and offshore claim evidence, see the FSIE page and the offshore claim page.

Losses and Group Structures

Losses may be carried forward indefinitely and set against future assessable profits of the same trade. Hong Kong has no group loss relief and no consolidated filing. Each company is assessed separately. Losses in one company cannot offset profits in another.

A change of business ownership can restrict the use of brought-forward losses. If a person acquires a business from another and the loss-making company is a 51% or more subsidiary of the acquiring company, the use of those losses is subject to restrictions under the anti-avoidance provisions.

The lack of group relief means intra-group transactions must be conducted at arm's length. The IRD may scrutinise transactions between connected companies to ensure profits are not artificially shifted to a loss-making entity.

For full detail on loss carry-forward, transfer pricing documentation and group structures, see the loss carry-forward page and the group structures page.

Electronic Filing and iXBRL

Filing is available through the Business Tax Portal and the Tax Representative Portal. Mandatory electronic filing began on 1 April 2026 for relevant entities of in-scope multinational enterprise groups, from the year of assessment 2025-26. The threshold follows the OECD Pillar Two rule of consolidated revenue of EUR 750 million or more.

Electronic filers tag financial statements and tax computations in iXBRL. The IRD provides preparation tools. The Department has stated an intention to reach full electronic filing by 2030. Entities that are required to file electronically but fail to do so may be subject to a penalty.

The iXBRL requirement applies to the full set of financial statements, including the statement of profit or loss and other comprehensive income, the statement of financial position, and related notes. The IRD may reject a filing that does not meet the required tagging standards.

For full detail on iXBRL tagging, mandatory e-filing timelines and the Business Tax Portal, see the e-filing page and the iXBRL tagging page.