Hong Kong companies are only required to pay profits tax annually, calculated at a rate of 16.51% (2007/08: 17.51%) of profits. If a company does not generate profits, it is not required to pay profits tax.

By convention, either March 31 or December 31 of each year serves as the tax base period. For Hong Kong companies, the first-year tax base period may extend up to 18 months.

Generally, imported/exported goods are not subject to customs duties, except for tobacco, alcoholic beverages, and petroleum. However, all imported and exported goods must be declared to customs.

Hong Kong taxation comprises three types of taxes: profits tax, salaries tax, and property tax. Profits tax is levied at 16.51% (17.51% for the 2007/08 fiscal year) on a company's assessable profits. Salaries tax is calculated at progressive rates based on salary income, with the tax liability capped at 15% of total salary income (161% TP3T for 2007/08); property tax is calculated at 151% TP3T (161% TP3T for 2007/08) on rental income from property holdings after deducting a standard allowance of 201% TP3T for repairs and expenses.

The base period is one of the following periods:
The most common fiscal year-end dates are March 31 or December 31.
Can be designated as other months for year-end closing

Donations to approved charitable organizations are tax-deductible. However, the total amount of such donations must be no less than $100 and no more than 35% of the assessable profits (2007/08: 25%).

Losses incurred during a taxable year may be carried forward to offset profits in subsequent years.

Profits tax is levied based on the actual profits earned during the tax year. Since the profits for a given year cannot be determined until after the year ends, the Inland Revenue Department collects provisional tax payments before the year concludes. The following year, once the profits for that year are assessed, the provisional tax already paid can be applied toward the profits tax due for that year.

If a company's profits are not derived from Hong Kong, and the company has neither established an office in Hong Kong nor employed Hong Kong employees, the profits earned will be exempt from profits tax.

Required. Since the company was established for profit-making purposes, even if the Hong Kong company only performs the duty of collecting and paying on behalf of others, it is still regarded as an agency service business. Its income stems from monetary transactions such as collections and payments made on behalf of others.

No. Under Hong Kong law, all Hong Kong companies are obligated to report their financial status to the Inland Revenue Department, regardless of whether their business activities occur in Hong Kong. If the company has no income sources in Hong Kong, it may apply to the Inland Revenue Department for tax exemption.