Company Formation & Tax in Hong Kong
The gateway between mainland China and global capital — two-tier profits tax from 8.25%, territorial taxation, and no VAT, capital gains or dividend tax at all.
Hong Kong runs one of the world's simplest tax systems. Profits tax is charged in two tiers — 8.25% on the first HK$2 million and 16.5% above — and only on profits sourced in Hong Kong. There is no VAT or sales tax, no capital gains tax, no dividend tax and no withholding on dividends or interest paid abroad. Combined with same-week incorporation and direct access to the Greater Bay Area, it remains the natural base for China-facing trading and holding companies.
The headline numbers
| Tax | Rate |
|---|---|
| Profits tax — first HK$2 million | 8.25% |
| Profits tax — above HK$2 million | 16.5% |
| VAT / GST / sales tax | None |
| Capital gains tax | None |
| Dividend tax / dividend withholding | None |
The two-tier rates apply per group — only one entity in a connected group may claim the 8.25% band. Unincorporated businesses pay 7.5% and 15% under the same structure.
Territorial taxation — the defining feature
Hong Kong taxes only profits arising in or derived from Hong Kong. Genuinely offshore trading profits can fall outside the net entirely, though offshore claims are assessed on the facts and documentation matters. Since the foreign-sourced income exemption (FSIE) regime was refined for 2023–2024, passive income received in Hong Kong by multinational-group entities — dividends, interest, IP income and disposal gains — is only exempt where economic-substance or participation conditions are met. Standalone founder-owned companies are generally unaffected, but group structures should be reviewed.
Forming the company
The standard vehicle is the private company limited by shares, registered at the Companies Registry with business registration at the IRD handled in the same submission — typically complete within a few days, fully online. Requirements: at least one shareholder (100% foreign ownership permitted), at least one director who is a natural person (no residency requirement), a Hong Kong-resident company secretary (individual or licensed firm), and a registered Hong Kong address. There is no minimum capital. Annual obligations are the annual return, audited accounts and the profits tax return.
Frequently asked questions
What is Hong Kong's corporate tax rate in 2026?
8.25% on the first HK$2 million of assessable profits and 16.5% above, under the two-tier profits tax regime. Only Hong Kong-sourced profits are taxed.
Does Hong Kong have VAT?
No. Hong Kong has no VAT, GST or sales tax, and no capital gains or dividend tax either.
Can a foreigner own a Hong Kong company fully?
Yes — 100% foreign ownership is permitted, directors face no residency requirement, and incorporation can be completed remotely. A Hong Kong-resident company secretary and local registered address are required.
Are offshore profits really tax-free?
Profits genuinely sourced outside Hong Kong can be outside the charge to profits tax, but offshore claims are examined on the facts, and refined FSIE rules impose substance conditions on passive income received by multinational-group entities.
Official sources
- Inland Revenue Department — profits tax
- Companies Registry — incorporation
- InvestHK
This guide is general information prepared by ARM Management and is current as at July 2026. It is not legal or tax advice; source rules and FSIE conditions are fact-specific and rules change. Confirm against the IRD, or with an advisor, before acting.
Structure a Hong Kong company the right way.
ARM Management advises trading businesses, holding structures and China-facing groups on Hong Kong incorporation, offshore-claim positioning and cross-border structuring. Begin with a confidential conversation.