Hong Kong Corporate Tax Rate 2024/25: Two-Tiered Profits Tax Explained

Hong Kong is famous for having one of the simplest and lowest corporate tax regimes in the world. The Hong Kong corporate tax rate for 2024/25 continues to apply at 16.5% for corporations, while unincorporated businesses benefit from two-tiered rates of 8.25% and 16.5%. This guide explains the corporate tax structure, source of profits rules, tax residency, and filing deadlines. Use our Hong Kong profits tax calculator to estimate your corporate tax.

Corporate Tax Rate: 16.5%

Corporations incorporated in Hong Kong or with central management and control in Hong Kong are subject to profits tax at 16.5% on assessable profits arising in or derived from Hong Kong. The rate applies to the entire extent of assessable profits, unlike the two-tiered rates that benefit unincorporated businesses. The IRD determines tax residency based on where the company is incorporated and where its central management and control are exercised, which typically refers to the location of board meetings and strategic decision-making.

Two-Tiered Rates for Unincorporated Businesses

Sole proprietorships, partnerships, and other non-corporate entities operating in Hong Kong enjoy two-tiered rates. For 2024/25, the first HK$2 million of assessable profits is taxed at 8.25%, and excess profits are taxed at 16.5%. This structure provides immediate tax relief to small business owners and mirrors the benefits enjoyed by incorporated entities through the SME concession. As noted in our Hong Kong profits tax guide, the cap applies across connected entities.

Source of Profits

Hong Kong's territorial system only taxes profits sourced in Hong Kong. The IRD uses a multi-factor test to determine source, including the place where contracts are negotiated, where goods are sold, where services are rendered, and where risks are borne. For trading profits, the key test is the contract effected test: where the sale contract is effected, and where title to goods passes. For service businesses, the place where services are rendered is the primary indicator. Non-Hong Kong sourced offshore profits are generally exempt, regardless of whether they are remitted to Hong Kong.

Tax Residency

A corporation is considered a Hong Kong tax resident if it is incorporated in Hong Kong or if its central management and control is exercised in Hong Kong. Tax residency determines eligibility for certain tax incentives and treaty benefits under double tax agreements. Tax residents can apply for certificates of residence from the IRD to claim treaty benefits where applicable. For a discussion of individual tax residency, see our Hong Kong tax residency guide.

Filing Deadlines

Profits tax returns for corporations are typically issued by the IRD on April 2 each year, with due dates varying based on the company's year-end date. For example:

• Companies with a December year-end: file within one month of the return issue date
• Companies with a March year-end: generally receive a later issue date and extended filing period
• Small and medium enterprises may be eligible for a later issue date

Always confirm your exact deadline on the IRD notice. Late filing may trigger a penalty of up to HK$10,000. For a comprehensive schedule, refer to our Hong Kong tax deadline calendar.

Frequently Asked Questions

Is Hong Kong corporate tax 16.5%?

Yes, the corporate profits tax rate in Hong Kong is 16.5% for corporations. Unincorporated businesses benefit from two-tiered rates of 8.25% and 16.5% for 2024/25.

What is a connected entity for profits tax?

Connected entities are businesses controlled by the same owner or group. The HK$2 million two-tiered concession is shared among connected entities. This is important if you operate multiple businesses through a single ownership structure.

Do I need to pay provisional profits tax?

Yes, most businesses are required to pay provisional profits tax in two installments based on the previous year's profits. See our Hong Kong provisional tax guide for more details.

How does source of profits affect my tax?

Only profits sourced in Hong Kong are taxable. Offshore profits are generally exempt. The IRD evaluates where trading contracts are effected, services rendered, and risks assumed to determine source.

What are capital allowances?

Capital allowances are tax deductions for the acquisition or improvement of capital assets such as buildings, plant, and machinery. They replace operating deductions for certain expenditures and reduce your assessable profits.