Reduced Profits Tax Rate of 8.25% for Hong Kong Companies

10 things to learn about... Audit and Tax 10 things to learn about... Visas 10 things to learn about... Company Formation Tax Compliance Hiring Influencers, Affiliates and Contractors Immigration Implements Civil Partnerships and Unions Dependant Visa Procedures


The proposed reduced profits tax rate of 8.25% had been gazetted on 29 Dec 2017 in the Inland Revenue (Amendment) (No.7) Bill 2017 for introduction to the Legislative Council on 10 Jan 2018. If passed, the reduced tax rate will become effective from 01 April 2018 onward. 

Chief Executive Carrie Lam introduced the idea of a two-tiered profits tax regime first in her election manifesto. The proposal sees a reduced profits tax rate of 8.25% for the first HKD 2million (USD257,000) profits. Thereafter, the standard rate of 16.5% applies.

The new tax policy unit under the Financial Services & the Treasury Bureau started to review the two-tiered tax proposal and other tax concessions in April. Secretary for Financial Services & the Treasury James Lau announced that the reform proposal would be ready to be tabled as a bill to the Legislative Council before the end of the year. In her policy address on 11 October 2017 Chief Executive Carrie Lam announced the implementation of the two-tier tax regime in 2018.

The main benefactor of a two-tiered tax regime would be SMEs operating in and from Hong Kong. However, the tax effect would even see multinationals still taking an advantage.

The policy proposal clearly aims at making Hong Kong an even more attractive place to do business in Asia and globally.