Profits tax in Hong Kong is Direct tax and also classified into Income tax.
According to Cap 112 Hong Kong Ordinance - Inland Reveue Ordinance (in short, IRO) Section 14, unless otherwise provided, profits tax shall be charged at the standard rate on any person who carries on a trade, profession or business in Hong Kong and assessable profits arising in or derived from Hong Kong for a year of assessment.
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The formula is:
The Approved charitable donations are limited to 10% of the amount after deducting of the Depreciation allowances, per IRO Section 16D. And after the amendment recently, it is changed to 25% of the amount after deduction of Depreciation allowances
The term person includes corporation, partnership, trustee and sole properiter and so on.
The period of assessment mostly is from 1 April to 31 March of the following year, but it is up to taxpayer's wish with reasonable excuse. The example is financial year of the business.
Any trade may be subject to profit tax unless a reasonable man can provide evidence to proof that there is not any revenue profit. In Hong Kong, capital profit is not subject to tax.
In order to prove the nature of a trade, the badges of trade are to be considered: