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How to apply for tax exemption in Hong Kong

Hong Kong is a great jurisdiction to establish your offshore business as the tax burden can be largely reduced by claiming income tax exemption from offshore profits.

A Hong Kong company can earn tax-free profits in Hong Kong if it meets the following general criteria:

• The business is operated by the owner or his employees from an overseas address; • The company has no employees based in Hong Kong and the owner or any foreign employees rarely visit Hong Kong; • The company negotiates and signs contracts with its customers and suppliers outside Hong Kong; • The company has no customers located in Hong Kong and does not receive payments from customer bank accounts in Hong Kong; • The company does not have suppliers located in Hong Kong and does not make payments to suppliers' Hong Kong bank accounts (the company may contract with and make payments to professional firms located in Hong Kong, such as BRASIA, including accountants and lawyers, and this would not disqualify the company to be able to claim the Offshore Profits Tax Exemption, as these payments are considered support services provided to the company, and not a business activity carried out by the company); • The company's products do not enter the territory of Hong Kong or any of its ports; • The company does not offer services in Hong Kong.

Arguing that a company is offshore in Hong Kong is not as simple as it seems, the IRD takes into account a wide range of facts. The Hong Kong tax authority may attempt to verify a company's claim that there are no business activities in Hong Kong. This typically occurs on a sampling basis by the tax authority, which randomly selects a few sales transactions and reviews the various activities involved in that transaction to determine where those activities occurred..

Hong Kong companies will be asked to provide detailed information about their business and structure. BRASIA helps customers with the tax exemption letter, responding professionally and clearly, improving your chances of supporting your claim.

It is highly recommended to keep complete records to illustrate the fact that all activities occur outside of Hong Kong, including emails with customers and suppliers, notes from meetings with customers and suppliers, travel documents to demonstrate visits to customers and suppliers, copies of received orders, copies of purchase orders and copies of shipping documents, to show the origin and destination of the product supplied to the customer. In summary, the company must retain any document that helps to demonstrate that the company does not carry out any commercial activities in Hong Kong.

The assistance of a professional in Hong Kong with experience in practical cases is essential in this process, not only to review the documentation, but also to understand the circumstances that may support the request for tax exemption for your company.

If you need help with your tax exemption application, our team of experts is ready to help. Contact us via email


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