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Hong Kong Profits Tax - Computation of profits tax liability

The beginning figure is: Net Profit / Loss per accounts. Then, to this figure,


add:

depreciation,


remuneration to business owners (for unincorporated business),


domestic or private expenses (for unincorporated business),


non-deductible contribution to retirement scheme (for unincorporated business),


expenses or losses of a capital nature,


less:

gain on disposal of fixed assets,


dividends income ,


non-assessable profits (e.g. those do not have a Hong Kong source),


cost of computer hardware and software,


cost of patents ... etc.,


cost of manufacturing plant or machinery,


depreciation allowance of plant and machinery ,


Industrial Building Allowance ,


Commercial Building Allowance ,


tax loss brought forward ,



and the balance (if positive) is Assessable Profit.

Tax payable = Assessable Profit * Tax rate

(Tax rate for corporation: 17.5%; for sole-proprietor and partnership business: 16%)

If the balance is negative, it is called tax loss which is to be carried forward to set-off the next year's assessable profits.



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