What is Profit Tax Return in Hong Kong?

Starting a business venture in Hong Kong is one of the most attractive options for investors worldwide due to its impressive corporate tax system.

The corporate tax regime only taxes such profits that arise from a trade, business, or profession carried out in Hong Kong. 

The filing for such taxes is commonly known as Profit Tax Returns.

Given the various forms and filing processes that businesses in Hong Kong need to follow for filing the taxes, it can be incredibly confusing for business owners to figure it out independently.

This article will tell you everything you need to know about Profit Tax Returns, along with the forms and the filing processes.

Who should file Profit Tax Returns?

Every Hong Kong company, including small businesses, partnerships businesses, and self-employed individuals, is under the obligation to file the Profit Tax Returns.

The forms for filing the Profit Tax Returns are provided by the Inland Revenue Department in Hong Kong. 

The Inland Revenue Department issues three series of forms for filing the Profit Tax Returns. These are:

• BIR-51 – Corporations
• BIR-52 – Persons other than corporations (such as partnerships)
• BIR-54 – In respect of Non-Resident Persons (non-resident persons who receive an income from practicing any trade, profession, or businesses in Hong Kong)

In case you are carrying out a business as a sole proprietor, you can file the Profit Tax Returns through Tax Return – Individuals (BIR60).

For filing these forms, one needs to log on to eTax, the gateway set up by the Inland Revenue Department.

When do you start filing Profit Tax Returns?

If you are a newly registered Hong Kong Company, you’ll need to file Profit Tax Returns 18 months from the date of incorporation.

For instance, if your company is incorporated on 1 January 2020, you will receive the request to file PTR around June 2021.

After that, each subsequent PTR needs to be filed annually.

In case your company has also commenced business, whether in Hong Kong or outside Hong Kong, you will also need to draw up the accounts and report them in your Profit Tax Returns filing.

Corporations need to file the Profit Tax Returns in Form BIR 51 along with the audited financial statements prepared by a certified public accountant. 

Small corporations (where the total gross income does of the company is less than HKD  500,000 for the assessment year), only need to submit Form BIR51 along with the necessary supplementary forms.

They are exempted from submitting audited financial statements.

However, all the information provided in Form BIR51 should be based on the audited financial statements.

It is advisable to maintain copies of the same in case the authorities request you to present it. 

Please note the Inland Revenue Department usually issues the request for Profit Tax Returns on the first working day of April every year, and companies need to file within one month of the issuance.

The fiscal year in Hong Kong is from April to March, but the accounting year for the company may vary.  

What are supplementary forms for Profit Tax Returns?

If you are the beneficiary of any preferential tax treatment or want to claim tax incentives, you can fill up the supplementary forms.

This practice was introduced in April 2019. At present, there are ten such forms:

• Supplementary Form S1 – Person electing for two-tiered profits tax rates
• Supplementary Form S2 – Transfer pricing
• Supplementary Form S3 – Expenditure on research & development
• Supplementary Form S4 – Expenditure on energy-efficient building installation
• Supplementary Form S5 – Ship-owner
• Supplementary Form S6 – Professional reinsurer
• Supplementary Form S7 – Authorized captive insurer
• Supplementary Form S8 – Qualifying corporate treasury center
• Supplementary Form S9 – Qualifying aircraft lessor
• Supplementary Form S10 – Qualifying aircraft leasing manager

Can I claim exemption from Profit Tax Returns?

If your business activities occur outside Hong Kong, you are exempted from Profit Tax Return, even when you remit such profits to Hong Kong.

This allows you to enjoy a tax-free profit. 

However, you need to file for Profit Tax Exemption to enjoy this status.

This includes:

• Filing the Profit Tax Return along with audited financial statements.
• Filing for an offshore status. However, you can only file for this 18 months after filing your first Profit Tax Return.

After this, the Inland Revenue Department, based on the documentation provided and the corporate structure, issues an offshore claim inquiry letter for the firm as proof.

The key personnel of the company, including directors, may also need to provide relevant documents to the Department.

Finally, the offshore status is issued —  however, you must disclose critical changes to the company structure or status every 12 months from the date on which offshore status was granted. 

Can I get an extension for the submission of Profit Tax Returns?

Extensions are provided only if you can show sufficient reasons.

Typically, the Inland Revenue Department offers a Block Extension Scheme at the beginning of each year when companies can apply for extensions for filings.

Failure to comply with the deadlines can result in imprisonment of up to 3 years and a fine up to a maximum of HKD 50,000.

Can I declare the Profit Tax Return as NIL?

If you have not commenced any operations or carried out any business transactions during the assessment year, the Profit Tax Return can be filed as NIL.

This simply indicates that your company has not conducted any business outside or within Hong Kong. 

Final Words

Getting everything organized for filing the Profit Tax Return can be an overwhelming task.

It tends to eat up a lot of your time, thanks to the copious amount of paperwork involved.

That’s why it makes perfect sense to outsource such activities, so you can have more time to look after your business.

At Air Corporate, we can do just that! We take care of incorporation, secretarial, and accounting tasks and simplify your life.

Our team of experts can help you keep your business on track without you having to break a sweat.

Register your business in Hong Kong with Air Corporate today, or switch your company secretary to us, and we’ll handle all your profit tax needs!

Simply focus on your business and we will do the rest.