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

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

Generally, no customs duties are levied on imported or exported goods, with the exception of tobacco, alcoholic beverages and petroleum products. However, all imported and exported goods must be declared to customs.

Hong Kong taxation comprises three types of tax: profits tax, salaries tax and property tax. Profits tax is levied at 16.51% (17.51% for the 2007/08 year) on a company's assessable profits; salaries tax is calculated at progressive rates based on salary income, with the tax payable not exceeding 15% of the total salary income (161% of tax payable for 2007/08); property tax is levied at 151% of tax payable (161% of tax payable for 2007/08) on rental income from property holdings after deducting a standard allowance of 201% of tax payable for repairs and expenses.

The base period shall be one of the following periods:
The more common practice is to have a year-end on 31 March or 31 December.
May be designated as other months for year-end closing

Donations to approved charitable organisations are eligible for tax relief. However, the total amount of such donations must be no less than 1% of taxable profits and no more than 3% of taxable profits (2007/08: 2.5%).

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

Profits tax is levied on the actual profits realised during the tax year. As the profits for a given year cannot be ascertained until after the year has ended, the Inland Revenue Department collects provisional tax payments before the year concludes. The following year, once the profits for that tax year have been assessed, the provisional tax already paid may be applied towards the profits tax due for that year.

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

Required. As the company was established for profit-making purposes, even if the Hong Kong company can only fulfil responsibilities to collect and make payments on behalf of others, it is still regarded as an agency service business. Its income derives from monetary transactions such as collections and payments made on behalf of others.

No. Under Hong Kong law, all Hong Kong companies are obliged to declare their financial status to the Inland Revenue Department, regardless of whether their business activities occur within Hong Kong. Should the company have no source of income in Hong Kong, it may apply to the Inland Revenue Department for tax exemption.