Hong Kong Provisional Profit Tax? WTF is this?

[banafinfodafuggiano]

I was about to pay to set up a company infrastructure in Hong Kong when I luckily read about the
Provisional Profit Corporate Tax rule where you basically have to pay 2 years of profit tax in one ( if this year you make $400,000 in profit, the government expect you to pay 16.5% of $800,000 in tax instead of the 16.5% on the $400,000).

Is there a way to avoid and get excluded from this rule?

Even if I will have to pay less tax next year in case the business doesn't perform as expected, it's still a major extra tax that I didn't expect to exist in Hong Kong,
I don't want to pay my taxes 2 years in advance and this just sounds ridiculous.


Any idea if this is avoidable at all? Except waiting for the application for foreign offshore status to be approved since that is not a guarantee and it will take more than two years to be accomplished.

 

[bibing]

On the first 2,000,000HKD you actually pay 8,5%.

In addition there are exception about the provisional tax
Please read this official Gov page GovHK: Holding Over of Provisional Tax

 

[banafinfodafuggiano]

On the first 2,000,000HKD you actually pay 8,5%.

In addition there are exception about the provisional tax
Please read this official Gov page GovHK: Holding Over of Provisional Tax

8.5% twice makes 17%, they want me to pay 8.5% two times to cover next year taxes, what a joke lol.

If you pay, and your business closes or doesn't make enough profit, rest assured they won't make any tax refund...

 

[FreedomSearcher]

Does this apply if your revenue comes from outside of HK?

 

[bibing]

If you pay, and your business closes or doesn't make enough profit, rest assured they won't make any tax refund...

This is Hong Kong, not some shitty European country.

Anyway as you can see there are some exception.

And no, Hong Kong doesn't need to steal your taxes. They absolutely make tax refunds

 

[banafinfodafuggiano]

This is Hong Kong, not some shitty European country.

Anyway as you can see there are some exception.

And no, Hong Kong doesn't need to steal your taxes. They absolutely make tax refunds

Do they really issue tax refunds for foreign owned offshore corporations? hmm...

 

[bibing]

Do they really issue tax refunds for foreign owned offshore corporations? hmm...

Yes, why they shouldn't

 

[JimBeam]

There is something somewhat similar in Cyprus as well.
There you need to asses the amount of profit you'll have in the next year and pre-pay tax OR you can pay it once it's due (no pre-payment) BUT then you'll pay 1% extra on top (so the 12.5% tax becomes 13.75%).

 

[FixieHartmann]

There is something somewhat similar in Cyprus as well.
There you need to asses the amount of profit you'll have in the next year and pre-pay tax OR you can pay it once it's due (no pre-payment) BUT then you'll pay 1% extra on top (so the 12.5% tax becomes 13.75%).

Where can I read more about that?

 

[banafinfodafuggiano]

On the first 2,000,000HKD you actually pay 8,5%.

In addition there are exception about the provisional tax
Please read this official Gov page GovHK: Holding Over of Provisional Tax

So, if I pay myself a big salary every month, the company will have virtually no profit at the end of the year, and therefore minimal tax?

or does HK tax salary as well? (non HK tax resident)

 

[intlman]

So, if I pay myself a big salary every month, the company will have virtually no profit at the end of the year, and therefore minimal tax?

or does HK tax salary as well? (non HK tax resident)

There are many ways to reduce your taxable profit, but best to speak with a professional in Hong Kong.

Provisional tax does catch quite a few people out, but if you have a good accountant then they can write a letter to IRD to explain why you should not be subject to it (source: I did just that back in 2015 - things may have changed since though).