Taxation – Special Occasion
Starting from last blog, we have been talking about the taxation system in Hong Kong. As regulated by the Inland Revenue Ordinance, all registered Hong Kong companies, both unlimited company and limited company, would have to submit their tax report and pay for the associated profit tax.
OneStart Business Centre has been helping hundreds of companies to deal with their taxation. Except for calculation, just like all the other laws and ordinance, there are always some exceptions and also deductions one could apply for or be subjected to. Therefore, OneStart Business Centre’s professional team of accountants could help you not only to calculate the correct tax value, but also deal with such complicated special instructions.
In the calculation of the assessable profits, which means the profits of your company to be subject to taxation, there are a few sums that could be excluded and exempted. For example, If the company profits do not arise from Hong Kong, and the company has not set up an office in Hong Kong nor hired Hong Kong employees, then its earned profits will be exempt from Profits Tax. Other special conditions are listed as follows:
- dividends received from a corporation which is subject to Hong Kong Profits Tax
- Amounts already included in the assessable profits of other persons chargeable to Profits Tax
- interest on Tax Reserve Certificates
- interest on, and any profit made in respect of a bond issued under the Loans Ordinance or the Loans (Government Bonds) Ordinance, or in respect of an Exchange Fund debt instrument or in respect of a HK dollar-denominated multilateral agency debt instrument
These are all just part of the examples that could be exempted from the calculation of assessable profits. More of the list of exemptions, please go to the Inland Revenue Department’s website or phone-in to our professional consultants!
Calculation of the assessable profits would take time, and therefore often will lead to an existence of a provisional profits tax payable. A profits tax should be levied on the actual profits of the taxable year, and such profits would only be able to be determined after the end of the year. In light of this, the Inland Revenue Department have decided to levy a provisional tax before the end of that taxable year. After revenue and profits being assessed in the following year, the provisional tax already paid in the taxable year could be deducted from the profits tax payable of that taxable year.
Except from exemptions in calculations, there are also deductions when calculating the Profits Tax. The outgoings and expenses that have been incurred by the taxpayer in the production of chargeable profits would be allowed as deductible expenses. Other deductible expenses are as follows:
Expenditure on building refurbishment: such capital expenditure on the renovation or refurbishment of business premises is allowed to be deducted. The deductible expenditure could be spread over in across a periods of 5 years, from the commencement year in which the expenditure is made, and should be in equal instalments.
Expenditure on plant and machinery specially related to manufacturing, and on computer hardware and software: a full deduction is allowed in the basis period in which the expenditure was incurred.
Expenditure on Environmental Protection Facilities:
- a full deduction during the basis period in which the expenditure is incurred for expenditure on environmental protection machinery; and expenditure on environment-friendly vehicle.
- For expenditure on environmental protection installation, you can either choose to enjoy a 20% deduction of the expenditure in each of the 5 consecutive years commencing from the year in which the expenditure is incurred; or a full deduction on the specific taxable year during the basis period in which the expenditure is incurred.
For other form of deductible expenses please also go to the Inland Revenue Department’s website, or call our professional consultants to find out more!
To be able to identity and calculate a precise and accurate number of assessable profits and the corresponding tax, is a difficult and complicated tasks. Therefore, OneStart Business Centre would suggest our readers to seek professional advice and help, in order to file an accurate tax document to the government department.
OneStart Certified Public Accountants (Practising) is a Certified Public Accountants (CPA) of The Hong Kong Institute of Certified Public Accountants based on the "Professional Accountants Ordinance" in Hong Kong. In addition, our Certified Public Accountants are the members of CPA Australia (CPAA).