Hong Kong Corporate - Group Taxation
Hong Kong doesn't have a consolidated or group tax system for corporations. This means each company within a group is taxed individually on its own profits.
Here's a breakdown of some key points:
Territorial Tax System: Hong Kong follows a territorial tax system, meaning only profits derived from Hong Kong sources are subject to profits tax.
Two-Tiered Profits Tax Rates: There's a two-tiered tax rate structure for both corporations and unincorporated businesses. The first HK$2 million of assessable profits are taxed at a lower rate (8.25% for corporations), with the remaining profits taxed at the standard rate (16.5% for corporations).
Advance Pricing Arrangement (APA): To manage transfer pricing between related companies within a group, Hong Kong has an APA program. This helps ensure arm's length pricing is used in transactions and reduces the risk of double taxation. https://www.pwchk.com/en/services/tax/transfer-pricing/advance-pricing-agreement.html
While there's no group taxation regime, tax concessions are available for specific industries like qualifying corporate treasury centers, aircraft leasing, and ship leasing activities carried out in Hong Kong.
Group Relief Provisions
There are no group relief provisions for losses or transfers of assets under Hong Kong tax legislation.
Hong Kong tax law does not allow for group relief provisions, meaning:
Losses Cannot Be Shared: Losses incurred by one company in a group cannot be offset against the profits of another company within the group.
Asset Transfers Don't Transfer Tax Attributes: Tax losses associated with assets don't transfer to the acquiring company when those assets are sold within the group.
Each company is considered a separate entity for tax purposes. This can be a disadvantage for groups with subsidiaries that may be operating at a loss.
Here are some resources that confirm this:
Inland Revenue Department Hong Kong: https://www.ird.gov.hk/eng/pdf/2023/BriefGuide20222023.pdf
How Bestar can Help
Even though Hong Kong doesn't have group taxation, Bestar can still be a valuable asset for corporations looking to navigate the corporate tax landscape. Here's how Bestar might assist:
Tax Planning and Structuring: Bestar can help you structure your group's operations in a tax-efficient manner within the limitations of the territorial tax system. This could involve advising on the location of certain activities or subsidiaries to maximize profits derived from Hong Kong.
Compliance with Reporting Requirements: We can ensure your individual companies are filing tax returns and meeting all regulatory requirements on time and accurately.
Transfer Pricing Advice: With our knowledge of Hong Kong's Advance Pricing Arrangement (APA) program, Bestar can advise on setting arm's length prices for transactions between companies within your group. This helps minimize the risk of tax disputes with authorities.
Tax Concessions for Specific Industries: If your group operates in a qualifying industry like aircraft leasing or corporate treasury functions, Bestar can help you navigate claiming the available tax concessions.
Staying Updated on Tax Legislation: Tax laws can change, and Bestar can keep you informed of any updates that might impact your group's tax situation.
Overall, while there aren't group tax benefits, Bestar's expertise can help your group navigate the Hong Kong tax system effectively and potentially minimize your overall tax burden.
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