Tax Obligations of Non-Resident Business Operators

As a non-resident who wants to invest or operate a business in Hong Kong, you should know how to apply for business registration, and what kind of tax you need to pay for your business. This article provides information on business registration, profits tax, property tax and stamp duty.

Business Registration

The Business Registration Ordinance (Cap. 310) requires every person who carries on a business in Hong Kong to apply for business registration within 1 month from the date of commencement of the business, and to display a valid Business Registration Certificate at the place of business. If the registered particulars of the business have changed, the business operator has to notify the Inland Revenue Department (IRD) within 1 month of the change.

Business registration is not for regulating business activities. Neither is it a licence to trade. Its main objectives are to provide IRD with information on businesses so that tax files can be opened and updated in a timely manner; and to enable the public to obtain information on businesses with which they are dealing with.

You can apply for business registration and change particulars online.  Please visit the following link for details.

Profits Tax

Persons, including corporations, partnerships, trustees and bodies of persons carrying on any trade, profession or business in Hong Kong are chargeable to tax on all profits (excluding profits arising from the sale of capital assets) arising in or derived from Hong Kong from such trade, profession or business.

If your income is derived from the buying and selling of goods, or from providing professional or personal services, you are considered as carrying on a trade, business or profession and a self-employed person.

A self-employed person may be a sole proprietor or a partner of a partnership business.

There is no distinction made between residents and non-residents when it comes to liability to profits tax.  A resident may therefore derive profits from abroad without being charged to tax; conversely, a non-resident may be chargeable to tax on profits arising in or derived from Hong Kong.

As a business operator, you need to keep sufficient business records for at least 7 years, and notify IRD in writing about any changes in the status of your business.

Property Tax and Stamp Duty

If you have derived rental income from letting of properties situated in Hong Kong, you should pay property tax.

As a property owner, you need to keep records of rent received at least for 7 years as supporting evidence for reporting rental income to IRD. If you receive a tax return from IRD, you must complete and submit it in time even if you do not have any income from property letting.

The Stamp Duty Ordinance (Cap. 117) imposes duty on certain types of documents, including conveyance on sale (i.e. Assignment), agreement for sale of residential property, lease of immovable property (i.e. Tenancy Agreement), and documents on transfer of Hong Kong stocks.

Personal assessment

Personal assessment may reduce the tax burden on certain individual taxpayers who have to pay profits tax and/or property tax.