Overseas earnings/profits are targeted at countries and regions that use the principle of geographical origin to levy taxes. In Hong Kong, for example, only profits derived from Hong Kong are taxable in Hong Kong, while profits derived from other places are not taxable in Hong Kong and are overseas profits. After applying for overseas profits in accordance with the principle of source tax, limited companies whose profits are not from Hong Kong can legally get exemption from corporate profits tax from the inland revenue department, so as to minimize the tax cost of enterprises.
To ensure that the application process for overseas profits in Hong Kong proceeds smoothly, the Hong Kong company must satisfy the following conditions in addition to the fact that its profits are indeed from overseas:
1. The Hong Kong company does not have an office in Hong Kong (the registered address of the Hong Kong company is not an office)
2. The Hong Kong company does not employ staff in Hong Kong
3. The goods of the Hong Kong company do not pass through Hong Kong
4. The goods of the Hong Kong company are not stored in Hong Kong
5. The Hong Kong company does not lend in Hong Kong
6. The Hong Kong company's suppliers and customers are foreign companies
7. This Hong Kong company signs sale contract place, be not Hong Kong
8. The goods sold by the Hong Kong company correspond with those purchased
9. The Hong Kong company's receipt and payment may correspond
Frequently asked questions
To sum up, about 5 questions are the most common and major enquiries made by the tax bureau. However, in the process of processing, the data and documents involved are troublesome. In the process of reply, every link should be carefully analyzed and considered. As for other issues, of course, we cannot ignore them.
1. Provide company structure: including the overseas address of the company, staff information (including staff name, identity card number, title, duty and service location, etc).
2. Provide the information of top 10 suppliers: including the name and address of suppliers, the total annual purchase amount of individual suppliers, the relationship with shareholders and directors of the company, etc.
3. Provide 10 major customer information: including customer name and address, annual sales amount of individual customers, relationship with shareholders and directors of the company, etc.
4. Representative transactions: the tax bureau usually designates 2 different dates, each from the largest customer, to provide the maximum amount of 1 single transaction data, such as contract order invoice, packing list, shipping list, insurance policy, bank receipt and payment slip; And the date that duty bureau appoints, press bill date to allow.
5. Business trip information: tax bureau will provide copies of business trip records and travel documents of directors and company heads and staff as required by individual circumstances.
The most common companies eligible to apply
1. Trading company (import and export business)
2. Companies providing services outside Hong Kong
If you have further enquire, please feel free to contact Tannet at anytime, anywhere by simply visiting Tannet’s website www.tannet-group.net, or calling Hong Kong hotline at 852-27826888 or China hotline at 86-755-82143422, or emailing to email@example.com / firstname.lastname@example.org
Previous：Application for Hong Kong Money Lender's License
Next：Website Building: Importance of Having a Website