Tax-Savvy Secrets : The 3 Attractive Direct Taxes in HK for Startups

Contributed by AsiaBC | 26 Aug 2021

Asia Business Centre (Asia Business Centre (AsiaBC) [HK+SG Bank Account Opening / Company Formation / Company Secretary / Accounting & Tax])

Every business owner’s dream is for their brand to get recognized globally, and it takes guts to take that leap of faith, but the outcome is always rewarding when you’ve picked the right jurisdiction to start.

If you are looking for a sign to expand overseas, this is it! Developing your business does not only mean building the reputation of your company – you also flourish it by taking it to larger markets.

Expanding your business abroad holds different advantages such as finding a new customer base, testing the waters in emerging markets, building greater access to talents, increasing your sales, and reducing your operational costs – materials, labor, import, export, etc..

When expanding their company abroad, every business owner considers a country’s economic and political stability as these two will play a big part in their business future. Most entrepreneurs see Labuan, much like Hong Kong, as a great alternative in setting up their business because of its friendly offshore incorporation laws and attractive tax benefits — zero or low taxes depending on the type of offshore company established.

However, with the current global situation, some countries including the Federal Territory of Labuan are starting to reassess their tax policies, eventually making businesses no longer consider these countries tax havens. For example, Labuan has recently increased its corporate tax as follows ::

  • 3% for all Labuan Companies net audited profits that comply with the substance requirements.
  • 24% for all Labuan Companies net audited profits that did not comply with the substance requirements.
  • The Pure Trading Companies tax rate is still to be confirmed. The company should clarify it directly with the Inland Revenue Department.
  • 3% for Labuan Companies net audited profits that are Licensed Entities and Special Entities. It is still mandatory to adhere to the substance requirements to maintain good standing for future license renewal.

Hong Kong is a Better Alternative to Expand Your Company

If you are looking for a dynamic location that will bring success to your business, we highly recommend setting up your expansion in Asia’s World City, Hong Kong.

There are many good reasons why small and medium enterprises and established companies choose to expand their business in the city. From easy company registration hong kong, strategic location, competitive telecommunication and transportation, strong labor force, and exceptional quality of life it offers. But among all these things, entrepreneurs take advantage of Hong Kong’s simple and low tax rate system.

We listed down below the enticing factors that make Hong Kong Company Incorporation attractive to business owners ::

The 3 Direct Taxes

Profits Tax

The Profits Tax applies to all incorporated businesses. It follows the 2-tier tax administration, whereas 8.25% is applied for every first HK$2 million net profits while net profits over HK$2 million will be at 16.5%.

Salaries Tax

The Salaries Tax applies to an employee’s income where individuals are taxed based on their net chargeable income’s progressive rate. The tax rate application is as follows :

Net Chargeable Income (in HKD)
$0 – $50,000
$50,001 – $100,000
$100,001 – $150,000
$150,001 – $200,000
Above $200,001
Net total income (no allowances)
Standard rate 15%

Property Tax

A Property Tax comes from renting out a property in Hong Kong. Its standard rate is at 15% of the property’s net assessable value.

Other Taxes

Aside from having the lowest tax rate in the world, Hong Kong does not impose other taxes such as the following :

  • Retention charge on profits or interest
  • Business charges
  • Capital additions expense
  • Inheritance charge
  • Capital gains
  • Withholding tax; and
  • Tax for imports

Whether you are a startup or an established company planning to expand, Hong Kong’s simple tax regime offers you a thriving opportunity to help your business flourish and be ready to compete across the globe.

Understanding taxes can be confusing and overwhelming if you are new to the business world, but having good basic knowledge before setting up your company puts you at an advantage. It can help you build a strong foundation for your business and avoid making mistakes in the future.

If you want to learn more about Hong Kong taxes and how to handle them properly, our email and Whatsapp +852 6547 1314 are always open for business and happy to help. Are you ready to set your global entrepreneurial dreams with the right partner to guide you through? Send us a message today!


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