Hong Kong - PKF

1 2015/16 hong kong PKF Worldwide Tax Guide 2015/16 1 FOREWORD A country's tax regime is always a key factor for any business considering moving into new markets. What is the corporate tax rate? Are there any incentives for overseas businesses? Are there double tax treaties in place? How will foreign source income be taxed? Since 1994, the PKF network of independent member firms, administered by PKF International Limited, has produced the PKF Worldwide Tax Guide (WWTG) to provide international businesses with the answers to these key tax questions. As you will appreciate, the production of the WWTG is a huge team effort and we would like to thank all tax experts within PKF member firms who gave up their time to contribute the vital information on their country's taxes that forms the heart of this publication.

2 The PKF Worldwide Tax Guide 2015/16 (WWTG) is an annual publication that provides an overview of the taxation and business regulation regimes of the world's most significant trading countries. In compiling this publication, member firms of the PKF network have based their summaries on information current on 1 January 2015, while also noting imminent changes where necessary. On a country-by-country basis, each summary such as this one, addresses the major taxes applicable to business; how taxable income is determined; sundry other related taxation and business issues; and the country's personal tax regime. The final section of each country summary sets out the Double Tax Treaty and Non-Treaty rates of tax withholding relating to the payment of dividends, interest, royalties and other related payments.

3 While the WWTG should not to be regarded as offering a complete explanation of the taxation issues in each country, we hope readers will use the publication as their first point of reference and then use the services of their local PKF member firm to provide specific information and advice. Services provided by member firms include: Assurance & Advisory; Financial Planning / Wealth Management; Corporate Finance; Management Consultancy; IT Consultancy; Insolvency - Corporate and Personal; Taxation; Forensic Accounting; and, Hotel Consultancy. In addition to the printed version of the WWTG, individual country taxation guides such as this are available in PDF format which can be downloaded from the PKF website at hong kong PKF Worldwide Tax Guide 2015/16 2 IMPORTANT DISCLAIMER This publication should not be regarded as offering a complete explanation of the taxation matters that are contained within this publication.

4 This publication has been sold or distributed on the express terms and understanding that the publishers and the authors are not responsible for the results of any actions which are undertaken on the basis of the information which is contained within this publication, nor for any error in, or omission from, this publication. The publishers and the authors expressly disclaim all and any liability and responsibility to any person, entity or corporation who acts or fails to act as a consequence of any reliance upon the whole or any part of the contents of this publication. Accordingly no person, entity or corporation should act or rely upon any matter or information as contained or implied within this publication without first obtaining advice from an appropriately qualified professional person or firm of advisors, and ensuring that such advice specifically relates to their particular circumstances.

5 PKF International is a family of legally independent member firms administered by PKF International Limited (PKFI). Neither PKFI nor the member firms of the network generally accept any responsibility or liability for the actions or inactions on the part of any individual member firm or firms. PKF INTERNATIONAL LIMITED JUNE 2015 PKF INTERNATIONAL LIMITED All RIGHTS RESERVED USE APPROVED WITH ATTRIBUTION hong kong PKF Worldwide Tax Guide 2015/16 3 STRUCTURE OF COUNTRY DESCRIPTIONS A. TAXES PAYABLE FEDERAL TAXES AND LEVIES PROFITS TAX TAX YEAR TAX RATES DEEMED TRADING RECEIPTS BRANCH PROFITS TAX OTHER TAXES PROPERTY TAX ESTATE DUTY STAMP DUTY CAPITAL GAINS SALES TAX / VALUE ADDED TAX FRINGE BENEFITS TAX LOCAL TAXES B.

6 DETERMINATION OF TAXABLE INCOME CAPITAL ALLOWANCES 1. INDUSTRIAL BUILDING ALLOWANCE 2. COMMERCIAL BUILDING ALLOWANCE 3. DEPRECIATION ALLOWANCE ON PLANT AND MACHINERY 4. EXPENDITURE ON PRESCRIBED FIXED ASSETS 5. EXPENDITURE OF PRESCRIBED ENVIRONMENTAL PROTECTION FACILITIES 6. CAPITAL EXPENDITURE ON INTELLECTUAL PROPERTY 7. REFURBISHMENT ALLOWANCE INVENTORY CAPITAL GAINS AND LOSSES DIVIDENDS INTEREST DEDUCTIONS LOSSES OFFSHORE INCOME TAX INCENTIVES C. CORPORATE GROUPS D. RELATED PARTY TRANSACTIONS E. WITHHOLDING TAXES F. EXCHANGE CONTROL G. PERSONAL TAX SALARIES TAX OTHER INCOME TAXES H. TREATY WITHHOLDING TAX RATES hong kong PKF Worldwide Tax Guide 2015/16 4 MEMBER FIRM For further advice or information please contact: City Name Contact information hong kong Ricky Lai +852 2969 4015 BASIC FACTS Full name: hong kong Capital: N/A.

7 hong kong is a Special Administrative Region of the People's Republic of China Main language: Chinese (Cantonese) Population: million (2014 PRB) Major religions: Buddhism, Taoism, Christianity, Islam and others Monetary unit: hong kong Dollar (HKD) Internet domain: .hk Int. dialling code: +852 KEY TAX POINTS Profits tax is charged on any person (including a corporation, partnership or individual) carrying on a trade, business or profession in hong kong . Income derived from outside hong kong is exempt (subject to rules deeming certain receipts to be derived from hong kong ) regardless of residence status. Property tax is charged at 15% on the net assessable value of any land or buildings in hong kong . There transfer pricing regime is not very developed but there are general anti-avoidance rules.

8 Dividends received by a hong kong corporate, whether from a domestic or overseas company, are not chargeable to tax and payments by hong kong resident companies are not subject to withholding tax. There is no VAT or sales tax. There is no capital gains tax, and capital gains are not subject to personal or corporate income tax. There is no inheritance tax. 'Estate Duty' was abolished with effect from 2006. A. TAXES PAYABLE FEDERAL TAXES AND LEVIES PROFITS TAX Profits tax shall be charged on every person (including corporations, partnerships and individuals) hong kong PKF Worldwide Tax Guide 2015/16 5 carrying on a trade, business or profession in hong kong .

9 Income derived outside hong kong is generally exempt from tax. In the case of a financial institution carrying on business in hong kong , foreign sourced interest income is treated as taxable income in hong kong . No distinction is made between residents and non-residents. TAX YEAR The tax year covers a period of 12 months commencing on 1 April and ending on 31 March of the following year. Profits earned by a person during an accounting year ending within the tax year will be deemed to be their profits for that tax year. TAX RATES The profits tax rates are as follows: 2014/15 (year ended 31 March 2015) 2015/16 (year ended 31 March 2016) Corporations Persons other than corporations DEEMED TRADING RECEIPTS The following income of a non-resident person is deemed to be receipts from a trade, profession or business carried on in hong kong : (1) Royalties receivable from the exhibition or use in hong kong of cinematograph or television film or tape, any sound recording or any advertising material connected with such film, tape or recording; (2) Royalties receivable for the use of, or right to use in hong kong a patent, design, trademark, copyright, formula or other property of a similar nature.

10 (3) Royalties receivable for the use of, or right to use outside hong kong a patent design, trademark, copyright, formula or other property of a similar nature if the payee of such royalties has claimed a tax deduction in hong kong ; (4) Sums received or accrued in respect of the hire, rental or similar charges for the use of movable property in hong kong . The assessable profits for cases (1) to (3) above are equal to 30% of the sum receivable by the non-resident person if the Inland Revenue Department is satisfied that no person carrying on a trade, profession or business in hong kong has, at any time, wholly or partly-owned the relevant intellectual property. However, if the above condition is not satisfied, the assessable profits will be the full amount receivable by the non-resident person.