Hong Kong Profits Tax Two-Tier Rates Calculator

Introduced from the 2018/19 year of assessment onwards, the two-tier profits tax regime lowers the tax rate on the first HK$2,000,000 of assessable profits: For corporations, the first HK$2M is taxed at 8.25% (half the standard 16.5% rate), and profits exceeding HK$2M are taxed at 16.5%. For unincorporated businesses (sole proprietorships/partnerships), the rates are 7.5% on the first HK$2M and 15% on the remainder.

To prevent groups of companies from splitting profits across multiple shell entities, an enterprise with connected entities can only nominate one single entity in the affiliated group to benefit from the preferential 8.25% two-tier tax rate; all other group companies must be taxed at the standard flat rate of 16.5%.

Hong Kong operates on a strict territorial principle of taxation: only profits arising in or derived from a trade, profession, or business carried on in Hong Kong are subject to Profits Tax. Capital gains are generally non-taxable unless classified trading under the Foreign Sourced Income Exemption (FSIE) regime for multinational enterprise groups.

Taxpayers must pay Provisional Profits Tax for each year of assessment based on the assessable profits of the preceding year. The provisional tax is credited against the final tax assessment when actual profits are declared.

Deductible expenses include all outgoings and expenses incurred in the production of assessable profits: rent for business premises, employee salaries and MPF contributions, commercial utilities, approved charitable donations (up to 35% of assessable profits), and statutory tax depreciation allowances on plant, machinery, and commercial buildings.