offshore income hong kong

Hong Kong is a great business location that can give your business a foothold in the Asian Market. It is a prime location for setting up your business as an international company. Offshore companies are companies that does their businesses solely outside the country. Interestingly, offshore companies in Hong Kong may qualify for a tax exemption known as Offshore Income Hong Kong Tax.

What Is Offshore Tax?

If you conduct business in Hong Kong or are familiar with the landscape, you may know what offshore tax is. Offshore tax refers to an exemption of tax payment by offshore companies, and Hong Kong only charges taxes on businesses that have customers within the country. Therefore, any business that doesn’t have locally based clients in Hong Kong is classified as an offshore company.

With the offshore tax exemption in Hong Kong, many businesses consider Hong Kong a tax shelter. Tax shelters allow businesses to hide money from tax authorities in various countries. Since the company would be filed as an offshore company, it will not be required to pay tax in Hong Kong. Offshore tax doesn’t mean that there are no taxes paid in Hong Kong but simply limits who pay the taxes.

Offshore tax in Hong Kong refers to a tax-free status on all profits generated solely outside the country.

Who Is Qualified For An Offshore Claim?

With many businesses seeking to use the offshore tax claim to their benefit, some legalities will need to be met. The most important thing you will need to know is whether or not your company qualifies for an offshore claim. Companies that qualify are those that will be exempt from tax payment. Some of the criteria that must be met for your company to be eligible for an offshore claim include:

  • 100% clientele outside Hong Kong as well as all profits from outside the country
  • Having no Hong Kong-based website
  • No offices or staff based in Hong Kong
  • Offering no services, sales or business of any kind in Hong Kong
  • Owning no Hong Kong-based warehouses or fulfillments

If you should meet all the criteria set, you will still need to consult with the appropriate authorities to ensure you are qualified for an offshore claim. PremiaTNC offers consultation services relating to offshore claims in Hong Kong.

When Is The Ideal Registration Window For An Offshore Claim?

Once your company qualifies for an offshore claim, you must register for one. The registration will make it official and exempt you from taxes. The process can take a while, as there will be a need to verify that your company qualifies for an offshore claim. To help beat the legalities and ensure your business or your finances are not affected while waiting for an offshore claim, you need to register at the right time.

Ideally, you will need to register for an offshore claim while registering your company. The next viable time to register for an offshore claim is when your profit tax return is due, usually 18 months after registering the company. Once you can register for an offshore tax in either of these periods, your finances won’t be affected too much by the verification process.

Can You Get An Offshore Claim Easily?

Getting an offshore claim is easy, especially when you time it appropriately. With a profit tax return (PTR) necessary, it is ideal for applying for an offshore claim and your first profit tax return. The first PTR filing is 18 months after the company is registered, but subsequent fillings are yearly after the first. You will need to have all the required documents when applying for an offshore claim. Some of the documents you will need when applying for an offshore claim include:

  • Bank Statements
  • Expense receipts
  • Contracts and invoices

Some other documents are not mandatory but can prove helpful for an offshore claim. Some of these documents include:

  • Shipping documents
  • Trading proofs, e.g. Purchase orders
  • Travel documents logging time with clients and suppliers
  • Communication records proving negotiation with clients and suppliers.

Once you provide all the required documents, the offshore claim verification process will commence. The process isn’t quick and can last for several months before a verdict is reached.

Conclusion

Hong Kong is one of the most sought-after business locations in the world. Thanks to its favourable business policies and Offshore Income Tax, businesses love Hong Kong. Companies that qualify for the offshore tax claim tend to use Hong Kong to store their funds. Moreover, with its favorable income tax policies, wealthy entrepreneurs and corporate workers also seem attracted to Hong Kong.

FAQs

Registering for and being issued an offshore claim isn’t a fixed process and can take several months. It is important to note that the duration of the claim is usually dependent on your company’s structure. The larger the company or more complicated the structure, the longer the claim will take. The investigation needs to be thorough before your offshore claim is granted or rejected.

Hong Kong isn’t tax-free, but it is still a hot zone for businesses. The main reason businesses are in abundance in Hong Kong is that the taxes are considerably low in Hong Kong. The taxes in Hong Kong only applies to the business that operates in and generates profit in the country. Non-residents also aren’t required to pay taxes in Hong Kong, so long as they only keep their money there, not live there.

The fixed tax rate for companies in Hong Kong is 16.5%. The rate is standard, but companies can use specific incentives and programs to help lower their taxes. Under special conditions, a company may only be required to pay half the tax due.

No, Hong Kong does not levy a tax on income generated outside the country. The major criteria for an income to be taxed is that it must be generated entirely in the country. Any income generated outside the country is tax-free, making Hong Kong a paradise for foreign businesses.

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