TL;DR
- Companies pay 8.25% on their first HK$2 million of assessable profit and 16.5% on the rest.
- Only Hong Kong-sourced profits are taxed, but claiming profits are offshore takes evidence.
- For 2025/26 there's a one-off reduction of up to HK$3,000 off the final tax bill.
- The lower rate is one per group of connected entities. Splitting into several companies doesn't get you more of it.
- Losses carry forward indefinitely, but only within the same company.
The rates
A company pays 8.25% on its first HK$2 million of assessable profit and 16.5% on anything above that. Sole traders and partnerships pay slightly less, at 7.5% and 15%, and the 2026/27 Budget left all of these rates alone.
To put numbers on it, HK$1.5 million of profit costs HK$123,750. At HK$3 million you pay HK$165,000 on the first two million and another HK$165,000 on the third, so HK$330,000.
The lower band is available once per group of connected entities, broadly businesses under common control of more than 50%. If you own three Hong Kong companies, only one can elect the 8.25% rate each year, and the group chooses which. We're often asked whether splitting a business across several companies gets the lower band more than once, and it doesn't.
There's also a one-off reduction for 2025/26, the year most companies are filing for now. It takes 100% off final tax payable, capped at HK$3,000 per business, and the IRD applies it automatically.
Hong Kong only taxes Hong Kong profits
The system is territorial. Profits that arise in or are derived from Hong Kong are taxed, so if your company genuinely earns its profits from work done entirely outside Hong Kong, you can claim them as offshore.
Two warnings before anyone plans around that. The first is that the IRD will want evidence, such as where contracts were negotiated and signed, where the work was done and where your people are. If the director's sitting in a Hong Kong office running things, the claim is going to struggle. The second is that since 2023 the foreign-sourced income rules can tax interest, dividends, IP income and disposal gains that multinational groups receive in Hong Kong, unless an exception such as economic substance applies. A standalone trading company rarely runs into this, but holding structures often do.
What you can deduct
Expenses are deductible to the extent they were incurred in producing chargeable profits. That covers salaries, rent, professional fees, marketing, software and, subject to conditions, interest on business loans. Capital spending isn't deducted straight away and gets depreciation allowances instead, although computer hardware and software can be written off in full in the year you buy them. Private and domestic spending isn't deductible.
A salary the company pays you is deductible for the company. You then pay salaries tax on it personally, at progressive rates up to 17%, or at the standard rate of 15% (16% on net income over HK$5 million) if that works out lower. Dividends aren't deductible for the company but aren't taxed in your hands either. Which mix makes sense is a conversation to have with your accountant.
Filing
The IRD issues profits tax returns on the first working day of April, and a new company usually gets its first one around 18 months after incorporating. It has to go in with audited accounts and a tax computation whatever the company's size, unless the company is dormant under the Companies Ordinance and so doesn't need an audit.
The deadline depends on your year-end, assuming a tax representative files for you under the block extension scheme. It's early May for year-ends from April to November, mid-August for December (31 August in 2026) and mid-November for January to March, and voluntary e-filing adds about a month.
Tax is then demanded in two instalments, which cover the final tax for the year and provisional tax for the next. If you expect next year's profit to fall below 90% of this year's, you can apply to hold over part of the provisional tax.
Losses
Losses carry forward indefinitely against the same company's future profits. They can't be carried back to an earlier year or moved to another company in your group.
For a small company, in practice
Take a company with HK$800,000 of profit. The tax is HK$66,000, or 8.25%, before the one-off reduction. There's no employer social security beyond MPF, which is 5% of each employee's relevant income, capped at HK$1,500 a month. For most small businesses the audit behind the return takes more work than the tax bill, which is why our accounting plans focus on getting the books closed and the audit lined up well ahead of the deadline.
