Understanding Tax Treatment for Losses in Hong Kong
Losses arising in Hong Kong from the carrying on of a trade, profession, or business in Hong Kong are allowable for set off against the future assessable profits.
If a corporation carrying on more than one business, it may have losses in one business offset the profits of the others, with any balance being carried forward.
Time limit
There is no fixed time limit for carrying forward losses which provides significant potential for future tax savings to taxpayers. However, the tax losses cannot be carried back to prior years.
Group relief of losses
In Hong Kong, there is no provision for group relief of losses. This means that losses cannot be transferred between entities within the same corporate group.
Anti-avoidance provision
Moreover, there is an anti-avoidance provision that restricts the use of losses brought forward against subsequent profits. It applies if there is a change in shareholding in the loss company and, as a result, profits have arisen to the company and that change in shareholding was made to utilize the company’s tax losses against those profits.
