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Tel：+86 400 118 5939As is well known, Hong Kong attracts a large number of mainland enterprises to establish offshore companies for international trade due to its advantages in tax laws. The most important point is that Hong Kong adopts the principle of territorial origin taxation, which means that only profits originating from Hong Kong are subject to taxation in Hong Kong, while profits originating from other places are not subject to profits tax in Hong Kong. Even if a limited company is established in Hong Kong, if the company's business profits do not come from Hong Kong, the company can apply to the Hong Kong Inland Revenue Department for offshore exemption from paying Hong Kong profits tax when declaring Hong Kong profits tax.
In fact, determining the source of profits depends on the facts of the relevant case, so there is no general rule that can be generalized and applied to different situations. Whether profits are generated or derived from Hong Kong is determined by the nature of the profits and the nature of the transactions that generate the profits. So what arrangements should Hong Kong companies make in terms of taxation to fully comply with the profit tax exemption requirements for offshore income? The Hong Kong Inland Revenue Department does not have clear regulations. So what are the conditions for Hong Kong companies to apply for offshore exemption? What is the specific operational process? Specifically, as follows:
1. Both the supplier and the customer are not Hong Kong merchants;
2. The signing process of offshore exemption orders does not occur in Hong Kong;
3. The goods have not been declared, received or shipped in Hong Kong;
4. Not having a physical office in Hong Kong and hiring Hong Kong employees;
5. Offshore exemption does not have any operating records with the Hong Kong government.1. Accounting audit;
2. Submit the audited report and report to the tax bureau for application;
3. Tax bureau issues offshore issue letter;
4. Write a reply letter and related materials to submit to the tax bureau;
5. Approval results from the tax bureau.
It should be noted that all questions raised by the tax bureau must be responded to within a certain period of time (usually one month). If the tax bureau agrees that the company's operations are offshore, an exemption agreement will be issued. Generally, the tax bureau will not make any further inquiries to the company within 2 to 3 years after issuing the exemption agreement, but the tax bureau has the final decision-making power. Afterwards, the tax bureau will periodically require companies to resubmit documents every few years.
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