In recent days, financial secretary of HK government announces a series of taxation reducing policies of 2018. How do these policies work? Let’s see!
There are mainly two implemented policies ↓↓↓
1st Policy
Reduce 75% of Profit Tax of year 2017/2018 (30,000 HKD at most), which will apply to all HK companies.
How to calculate Profit Tax?
For example
↓↓↓
The Assessable Profit according to the auditing report of B company in 2017/2018 is 50,000 HKD. Generally, the company should pay taxes as following:
① Tax Payable:
50,000 * 16.5% = 8,250 HKD;
② Withholding Tax of the next year:
50,000 * 8.25% =4,125 HKD.
(It is the two-tire Profit Tax system in 2018-2019, and the rate of Profit Tax for the first 2-million-HKD profit of corporation is 8.25%.)
So the total taxes of the corporation shall be: Tax Payable + Withholding Tax of the next year = 1,2375 HKD.
However, under the taxation reducing policies, the company will pay less taxes.
① Tax Payable: (50,000 * 16.5%) * (1-75%) = 2062.5 HKD;
② Withholding Tax of the next year: 50,000 * 8.25% =4,125 HKD.
(It is the two-tire Profit Tax system in 2018-2019, and the rate of Profit Tax for the first 2-million-HKD profit of corporation is 8.25%.)
So the total taxes of the corporation shall be: Tax Payable + Withholding Tax of the next year = 6,187.5 HKD.
We can see, there are 6,187.5 HKD of the tax reduction in total!
Moreover
In Hong Kong, company should pay taxes of the current year, and prepay taxes of the next year based on profits made in the current year as well.
The HK government has ensured effective implementation of two-tire Profit Tax system in 2018, according to which, the rate of Profit Tax for the first 2-million-HKD profit of corporation is 8.25%, even though the official notice is not yet issued.
2nd Policy
On one side, the HK government will share 50 billion HKD, which are from yearly estimated profits, with HK citizens. Besides, the remaining profits will be used to develop a better governmental service system and create a better future.
On the other side, commercial management systems in Hong Kong become stricter gradually -- more requirements are for establishing HK companies and opening HK accounts under CRS and anti-money laundering policy, and “Significant Controllers Register (SCR)”and tightened account opening policy have come into effect since March 1 this year.
Click the link below to learn more about "SCR"
Attention! New Rules for HK Company Since March 1!
We are here to remind each owner of HK company that please keep up-to-date beneficial ownership information in SCR and finish auditing report ASAP in case of penalty or any punishment!
HACOS,Business Services Solutions Master