Hong Kong introduces two-tier tax rate for businesses
On March 21, 2018 the Hong Kong legislative Council approved the introduction of new tax measures with the Inland Revenue Amendment No. 7, that officially entered into force on 1 April.
The Amendment modifies the existing tax rates for businesses and corporations by establishing a new two-tier corporate tax regime.
This new regime breaks corporate profits tax rate in two areas, introducing a reduced rate for companies with a low enough turnover.
Corporations making profits up to USD255,000 will be subject to the rate of 8.25%.
Profits above this amount continue to be subject to the normal Hong Kong corporate tax rate of 16.5 %.
The two-tiered rate applies also to unincorporated businesses (partnerships and sole proprietorships) with the low rate at 7.5 % and the normal rate at 15%, respectively.
Connected entities will follow a special rule that would make the reduced rate applicable only to one of the companies of the group.
According to The Inland Revenue, the new regime will see annual savings of up to 165,000 HKD for corporations and 150,000 HKD for unincorporated businesses.
The new rates apply starting from the year of assessment of 2018/19.
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