Profits Tax - Basic charge
- Section 14 of IRO
Every person (including an individual, a partnership, a body of
persons, a corporation) carried on a trade, a business or a profession in
Hong Kong is chargeable to Profits Tax. But not all his profits are
taxable --- indeed only the profits having a Hong Kong source, that is
they are arising in or derived from Hong Kong, are taxable. Those
profits earned by a chargeable person from activities outside Hong Kong
is non-taxable. This basic charge is also known as territorial
first tip on profits tax:
Only the profits arising in or
derived from Hong Kong are assessable. In other words, if the chargeable
person has only profits derived from activities outside Hong Kong, no
profits tax liability will arise. If the person has profits derived from Hong Kong as well as profits
derived from outside Hong Kong, only the
profits derived from Hong Kong are assessable.
The charge is irrespective of
whether the person is a resident or non-resident of Hong Kong. But
there are special rules applicable to non-residents.
Whether a trade, a business or a
profession is carried on in Hong Kong is chiefly a question of facts ---
there are a number of court cases on this question.
Whether assessable profits are derived from Hong Kong is
also largely a question of facts
--- there are quite a lot of court cases on this issue --- indeed a hot topic
be explored here.