Is It Really Possible to Set Up a Company in Hong Kong with Low Corporate Tax?

Hong Kong has long been recognized as one of the world’s most business-friendly jurisdictions, offering clear regulations, robust infrastructure, and a simple, low-rate tax regime. Entrepreneurs from around the world choose Hong Kong not only to reduce corporate tax exposure but also to operate in a stable and transparent environment that encourages global trade and investment.

Understanding Hong Kong’s Corporate Tax System

Hong Kong maintains a straightforward tax structure with only three direct taxes:

• Profits Tax –Corporations pay 8.25 % on the first HKD 2 million of profits and 16.5 % on the remainder. Unincorporated businesses are taxed at 7.5 % / 15 % respectively.

• Salaries Tax –Individuals pay up to 15 % on income arising in or derived from Hong Kong.

• Property Tax –Rental income from local property is taxed at 15 % of the net assessable value.

In addition, there is no VAT or GST, no capital-gains tax, no estate duty, and generally no withholding tax on dividends or interest (royalties may be deemed taxable in limited cases).

(Official Reference – Inland Revenue Department: Profits Tax Rates)

Territorial Tax Principle and Offshore Profits

Hong Kong taxes only profits arising in or derived from Hong Kong. Foreign-sourced income is generally exempt, even when remitted, provided it does not fall within the Refined Foreign-Sourced Income Exemption (FSIE) rules.

Since 1 January 2024, certain foreign-sourced dividends, interest, disposal gains, and IP income received by in-scope multinational enterprise groups can be taxed unless they meet substance, nexus, or participation tests. This framework preserves Hong Kong’s territorial model while aligning with global anti-base-erosion standards.

(Official Reference – IRD: Foreign-Sourced Income Exemption (FSIE))

Why Hong Kong Remains a Low-Tax Jurisdiction

• No VAT or Sales Tax – Reduces operating costs for goods and service providers.

• No Capital Gains Tax – Businesses keep 100 % of disposal profits.

• Simple Two-Tier Rates – SMEs benefit from the 8.25 % tier.

• Efficient Compliance – Streamlined filing and electronic services.

• Extensive Tax Treaties – Over 50 Comprehensive Double Taxation Agreements (CDTAs) prevent double taxation.

(Official Reference – IRD: Comprehensive Double Taxation Agreements)

How to Incorporate a Company in Hong Kong

1. Choose a Company Name

Select a unique English, Chinese, or bilingual name that complies with the Companies Registry’s naming rules.

2. Prepare Required Documents

• Completed Form NNC1 (Incorporation Form)

• Articles of Association

• ID and address proof for directors and shareholders

• Registered office address in Hong Kong

• Appointment of a Hong Kong-resident company secretary

3. Submit via e-Registry

Electronic incorporation through the Companies Registry e-Registry is available 24 / 7, and most applications are approved within about one hour once documents are in order.

4. Obtain Business Registration Certificate

At incorporation, the system automatically issues a Business Registration (BR) certificate from the Inland Revenue Department. As of 2025, the BR fee is HKD 2 , 200, and the levy is waived until 31 March 2026.

5. Open a Corporate Bank Account

Banks require in-person verification and Know-Your-Customer (KYC) documentation. Some virtual banks offer remote onboarding subject to compliance approval.

Ongoing Compliance Obligations

To remain in good standing, every company must:

• File Annual Return (NAR1) within 42 days of each incorporation anniversary.

• File Profits Tax Return within one month of issue (date extensions under IRD Block Extension Scheme).

• Maintain a Significant Controllers Register (SCR) identifying beneficial owners.

• Prepare audited financial statements to support tax filings.

Special Tax Incentives and Concessions

Hong Kong offers specific tax concessions for key industries:

• Corporate Treasury Centres (CTC) – Profits taxed at 8.25 %.

• Aircraft Leasing Businesses – 8.25 % rate with a 20 % tax base concession.

• Ship Leasing and Maritime Business – Qualifying lessors/managers taxed at 0 % or 8.25 %.

• Reinsurance and Insurance Activities – Reduced rates for qualifying operations.

These schemes further reinforce Hong Kong’s position as Asia’s financial and logistics hub.

Conclusion: Why Choose Hong Kong

Hong Kong’s low corporate tax rates, territorial system, and efficient regulatory framework make it ideal for startups, SMEs, and multinationals alike. The jurisdiction balances global standards with business freedom — offering a transparent, well-regulated environment that continues to attract international entrepreneurs.

Mirr Asia Business Advisory helps you navigate every step — from incorporation and banking to annual compliance and tax optimization — ensuring your Hong Kong company remains compliant and profitable..