[Hong Kong] Offshore Income claim

Offshore Income Claim

Territorial (Source) basis of taxation

  • Hong Kong adopts territorial basis of taxation.
  • It means only business profits, employment income and property rental income arising in or derived from Hong Kong is taxable.
  • It applies to both residents and non-residents of Hong Kong.

Key issue

  • Determine by facts and depend on the nature of profits as well as of the transactions which give rise to such profits.
  • Focus on the location of profit generating activities.

Tax filing

  • All Hong Kong companies have legal obligation to do tax reporting to Hong Kong Inland Revenue Department (“IRD”).
  • Offshore income claim is not automatically given by IRD.
  • Offshore income claim is a year-by-year basis exercise.
  • Taxpayer can submit a claim for offshore income together with its audited accounts and profits tax return to IRD.
  • IRD usually raises queries regarding to the details of taxpayer’s mode of operation and requests taxpayer’s transaction documents of some representative transactions in order to support the offshore income claim.

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