Expanding your UK business to Hong Kong presents exciting opportunities, but it also comes with important tax considerations.
One of the key questions business owners ask is: do we need to register for tax in Hong Kong?
The answer depends on factors such as your business structure, the nature of your activities, and where your profits are generated.
Understanding Hong Kong’s tax system
Hong Kong is well known for its territorial tax system, meaning that only income derived from or arising in Hong Kong is subject to Profits Tax.
This differs from the UK, where businesses are taxed on worldwide income. As a result, if your UK company generates income outside Hong Kong, you may not have tax obligations there.
The current Profits Tax rates in Hong Kong are:
- 25 per cent on the first HK$2 million of assessable profits (around £200,000)
- 5 per cent on profits above HK$2 million
This competitive tax regime, combined with the absence of VAT, Capital Gains Tax, or withholding tax on dividends, makes the Pearl of the Orient an attractive destination for UK businesses.
Setting up a legal entity in Hong Kong
If your UK business establishes a subsidiary, branch, or representative office in Hong Kong, you will generally need to register with the Inland Revenue Department (IRD) for Profits Tax purposes.
The timeline for registration is within one month of commencing business.
Earning income from Hong Kong
Your UK business may be liable for Profits Tax if it has:
- A permanent establishment (such as an office, warehouse, or employees) in Hong Kong
- Sales contracts that are negotiated and concluded in Hong Kong
- Services that are performed in Hong Kong
- A Hong Kong customer base generating local revenue
If your company earns income from Hong Kong but does not have a physical presence there, a tax exemption may apply under the territorial tax system.
Hiring employees in Hong Kong
If your UK business hires staff in Hong Kong, you will need to register with the IRD for Employer’s Return of Remuneration and Pensions (ER) and comply with local payroll tax and social security obligations.
How to register for tax in Hong Kong
If your UK business is required to register for tax in Hong Kong, the process typically involves:
- Obtaining a Business Registration Certificate (BRC) from the Companies Registry
- Registering with the Inland Revenue Department for tax purposes
- Filing annual Profits Tax returns and, if applicable, payroll tax returns
For businesses seeking a tax exemption on foreign-sourced income, an application for an offshore tax claim may be required.
Next steps for UK businesses
Before expanding to Hong Kong, you should assess your tax obligations and structure your business in the most efficient and compliant way. We can help you:
- Determine whether you need to register for tax in Hong Kong
- Structure your business to minimise tax liabilities
- Navigate compliance requirements and avoid penalties
If you are considering expanding your business to Hong Kong, get in touch with our team for expert advice on tax registration and planning.
Reanda UK is a subsidiary of leading independent accountancy firm Grunberg & Co Limited. Our aim is to help businesses and individuals to navigate the UK’s world-renowned business and tax infrastructure, and to support them with their international ambitions. To find out how we can help you, please contact us.