1. What are the current rates for Profits Tax?
Profits Tax rates
(1) Normal rate (for the year of assessment 2008/09 onwards)
| Corporations (businesses/companies incorporated according to the Companies Ordinance e.g. limited company): | 16.5% |
| Unincorporated Businesses (businesses/companies NOT incorporated according to the Companies Ordinance e.g. sole-proprietorship or *partnership): | 15% |
(*If one of the partners in a partnership is a corporation, the Profits Tax rate on that partner is 16.5%)
Two-tiered rates (for the year of assessment 2018/19 onwards)
| Corporations | 8.25% on assessable profits up to $2,000,000; and 16.5% on any part of assessable profits over $2,000,000; |
| Unincorporated Businesses | 7.5% on assessable profits up to $2,000,000 and 15% on any part of assessable profits over $2,000,000 |
However, for “connected entities”, only one entity may be elected in its Profits Tax Return to be eligible for the two-tiered Profits Tax rates regime for a year of assessment. The others would not qualify for the two-tiered Profits Tax rates.
An entity is a "connected" entity of another entity if:
- one of them has "control" over the other; or
- both of them are under the “control” of the same entity;
For sole proprietorship business, one is "connected" to another if it is carried on by the same natural person.
"Control" generally refers to directly or indirectly owning or controlling, or being entitled to directly or indirectly own or control, more than 50% of issued share capital, voting rights, capital, or profits in another entity.
(2) Concessionary rate
Concessionary tax rates may apply to certain qualifying profits received or derived from certain eligible transactions/activities, such as from “short and medium debts instruments” issued before 1 April 2018 (currently 8.25%), qualifying debt instruments issued on or after 1 April 2018 (currently 0%), running of corporate treasury centre for the year of assessment 2016/17 onwards (currently 8.25%), aircraft and ship leasing (currently 0% or 8.25% as the case may be), professional reinsuring for the year of assessment 2018/19 onwards (currently 8.25%), insuring for the year of assessment 2020/21 onwards (currently 8.25%), family office for the year of assessment 2022/23 onwards (currently 0%) etc. Taxpayers who wish to take advantage of these tax concessions should seek professional advice from their tax advisors to see if they are eligible.
(3) Other assessment methods
There are circumstances where certain classes of taxpayers demand alternative assessment methods, such as insurance corporations, ship owners and aircraft owners.
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