Hong Kong Tax Case Studies

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

– 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

Certificate of Resident Status


– Hong Kong has concluded more than 30 bilateral comprehensive tax treaties. 

– Hong Kong tax residency certificate, i.e Certificate of Resident Status, is issued by IRD

– IRD takes a more strict approach to issue the Certificate of Resident Status in order to avoid treaty abuse.

– IRD generally requires the company to have its management or control normally exercised in Hong Kong for granting the Certificate.

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[Hong Kong] Offshore Income claim

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