CentreO Blog

In several countries, it is usual and even necessary to state your company VAT ID- for example on the home-page.Is it applicable in HK too? If yes, is such a VAT ID assigned to my HK Limited, yet? Also, I need to know which format or information invoices need to have if I would like to use those for business purposes – means as expenses, reducing the profit of my company?

Answer: There is no VAT number in HK, it’s not necessary to have any VAT or Business Registration number on the invoices.

Double taxation arises when two or more tax jurisdictions overlap, such that the same item of income or profit is subject to tax in each.

Hong Kong adopts the territoriality basis of taxation, whereby only income / profit sourced in Hong Kong is subject to tax. However, many countries which tax their residents on a worldwide basis also provide their residents operating businesses in Hong Kong with unilateral tax credit relief for any Hong Kong tax paid on income / profit derived from Hong Kong.

Hong Kong allows a deduction for foreign tax paid on turnover basis in respect of an income which is also subject to tax in Hong Kong. Businesses operating in Hong Kong therefore do not generally have problems with double taxation of income.

For more details, please feel free to contact us: sales@centreo.hk

Offshore claim is not automatic, it needs to be applied through application to IRD. Usually, offshore-sourced income must at least fulfill all of the following conditions:

1. Proof of profits not derived from Hong Kong with sufficient proofs of transactions which give rise to such profits are provided.
2. No business activities which produced the relevant profits held in Hong Kong
3. The director(s) stay less than 60 days in Hong Kong in a tax year.

The taxpayer should prepare copies of EVERYTHING relate to the business operation for the test. Seriously, the IRD wants every single invoice, receipt and every bank statement, etc. Moreover, IRD reasonably questions not only the company’s books but also every document.

The complete transaction records to illustrate the fact that all activities were taken place outside Hong Kong are listed as follows:

-Organization chart showing location of offshore operation

-Emails, faxes & itemized telephone bills showing to which numbers calls are made to clients / suppliers

-Memos of meetings with customers and suppliers

-Travel receipts & passport copies showing locations and dates of visit

-Purchase orders, sales orders and shipping documents

For more details, please feel free to contact us: sales@centreo.hk

The territorial concept of taxation in Hong Kong recognises that a Hong Kong business may generate profits from different geographical sources. Only profits sourced in Hong Kong may be subject to profits tax (15% on assessable profit). Profits sourced outside Hong Kong are possibly not taxable.

However the distinction between onshore and offshore profits is often an issue disputable between taxpayers and the tax authority in Hong Kong, the Inland Revenue Department (“IRD”). As there are no comprehensive definitive legal rules in this area, courts in Hong Kong have given the following general case law guidelines over the years: