Hong Kong: The new two-tier profits tax rates regime

The Inland Revenue (Amendment) (No. 7) Bill 2017 (Amendment Bill) was gazetted on 29 December 2017. The Amendment Bill seeks to implement the two-tiered profits tax rates for corporations announced in the Chief Executive’s Policy Address.

The proposed two-tiered profits tax rates regime will be effective from year of assessment 2018/19 and it will benefit all eligible enterprises with assessable profits irrespective of their size. As an anti-avoidance measure, the Hong Kong Government proposes to introduce restrictions to limit the application to only one enterprise nominated from among those which are connected. 

The proposed two-tier system shows that the Hong Kong Government is committed to adopt a competitive taxation system to promote economic development while maintaining a simple tax regime and low tax rates. Introducing a two-tiered profits tax rates regime will reduce the tax burden on enterprises, especially small and medium enterprises (SMEs) and startup enterprises.

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