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黑暗中的沙漠

High-Income Individuals Can Use Hong Kong Company Structures for Tax Planning

稅表

Recently, many people have been searching online for keywords like "tax deduction" and "tax exemption," indicating that there is concern about tax payments. Here, we will share tips on how to legally reduce taxes in Hong Kong, helping taxpayers save more money before the Lunar New Year.

 

Calculation of Salaries Tax in Hong Kong


Salaries tax in Hong Kong is calculated based on income for the tax year (April 1 to March 31) using progressive tax rates or a standard tax rate, whichever results in a lower amount.


A. Income Tax Rates

收入稅率

B. Personal Exemptions & Deductions

免稅及扣稅項目

In simple terms:


  1. Total annual income minus the basic exemption amount;

  2. Then subtract eligible exemptions and deductions;

  3. Calculate the tax payable according to specific rate brackets;

  4. Finally, subtract any tax relief to determine the tax amount due for the year.

 

How to Reduce Taxes by Starting a Company

計算

For high-income individuals, the deduction items still have limits. Many high earners leverage the flexibility of setup company in Hong Kong for tax planning. The profits tax rate for the first HKD 2 million of profits for a Hong Kong limited company is 8.25%, while profits exceeding that are taxed at 16.5%. Additionally, various business-related expenses can be deducted.

 

Deductible Items for Companies


Starting a company allows you to have more deductible tax items.

Company Losses

If a business incurs losses during operations, some of those losses can be deducted from future tax liabilities.

Building Renovations

Capital expenditures for renovating offices, stores, or warehouses can be deducted over an average of five years from the date of payment.

Operating Expenses

Includes costs for materials, rent, office expenses, etc.

Labor Costs

Includes salaries, employee benefits, year-end bonuses, severance pay, and long-service payments.

Purchasing Equipment

100% of the costs for purchasing machinery, industrial equipment, and computer hardware/software development can be deducted in the year of payment.

Environmental Facilities

Costs for purchasing environmentally friendly devices, vehicles, machinery, etc., can also be fully deducted.

Depreciation of Assets

Company assets such as equipment and vehicles can be deducted based on specific percentages, with an initial deduction of 60% followed by annual depreciation based on the diminishing value of the assets.

Client Entertaining

Costs for reasonable business activities hosted by the company can be deducted.

Companies have more deductible expenses compared to individual tax deductions; thus, some high-income individuals utilize company formation for tax planning. Due to the complexity of deductible items, those interested in a detailed understanding are welcome to consult Hong Hai Strategies, where we provide tailored tax solutions.

 

Conclusion


Tax planning is a highly specialized area that requires significant time and effort to design optimal solutions. Engaging a reliable team of professional consultants can greatly enhance efficiency and effectiveness. At Oceanus Strategic, we offer a one-stop service, including company registration, opening corporate bank accounts, company secretary services, auditing, and more, ensuring your tax handling is efficient and compliant.


If you have any questions regarding tax issues or are planning to establish a company in Hong Kong, feel free to contact Oceanus Strategic. We will customize the most suitable tax optimization plan based on your background and needs, helping you save time and costs.

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