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Encyclopedia > Profit tax

Profit tax in Hong Kong is Direct tax and also classified into Income tax. A direct tax a tax that is collected directly by government from the persons (legal or natural) on which it is levied. ... An income tax is a tax levied on the financial income of persons, corporations or other legal entities. ...

According to Cap.112 Hong Kong Ordinance, Inland Reveue Ordinance (in short, IRO) IRO Section 14, unless otherwise provides, profit tax shall be charged at the standard rate on any person who carries on a trade, profession or business in Hong Kong and assessable profits arising in or derived from Hong Kong for a year of assessment.



Tax computation

The formula is:

HK profit tax payable = Net assessable profit X Profit tax standard rate
Net assessable profit = Assessable profit - Loss brought forward (if any) + Loss transferred from partnership (if any)
Assessable profit = Profit or (Loss) per financial account + (Disallowable expenses charged in account - Non-taxable income credited in account) - Depreciation allowances - Approved charitable donations

Loss has several meanings including: Loss in electronics is the ratio of the system output to system input In electronics, loss is the ratio of system output to system input. ... In the common law, a partnership is a type of business entity in which partners share with each other the profits or losses of the business undertaking in which they have all invested. ...

Approved charitable donations

The Approved charitable donations are limited to 10% of the amount after deducting of the Depreciation allowances.


Profit Taxpayer

The term person includes corporation, partnership, trustee and sole properiter and so on. A corporation is a legal person which, while being composed of natural persons, exists completely separately from them. ... In the common law, a partnership is a type of business entity in which partners share with each other the profits or losses of the business undertaking in which they have all invested. ... The word trustee is a legal term that refers to a holder of property on behalf of some other beneficiary. ...


Year of Assessment

The period of assessment mostly is from April 1st to March 31st of the following year, but it is up to taxpayer's wish with reasonable excuse. The example is financial year of the business.


Badges of Trade

Any trade may be subject to profit tax unless a reasonable man can provide evidence to proof that there is no any revenue profit. In Hong Kong, capital profit is not subject to tax. Revenue is a U.S. business term for the amount of money that a company earns from its activities in a given period, mostly from sales of products and/or services to customers. ...

In order to proof the nature of a trade, the badges of trade are to be considered including the taxpayer's intention of profit, the length of ownership, frequency of similar transactions, reason for disposal, supplementary work and so on.


See also


// Property tax is an ad valorem tax that an owner of real estate or other property pays on the value of the thing taxed. ...

Reference links

  • Cap.112 of Hong Kong Ordinance, Inland Revenue Ordinance (in short, IRO) IRO Section 14
  • HK Inland Revenue Department: Questions and Answers
  • Different profit tax standard rates apply to corporation and unincorporated business



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