On Wednesday I attended a seminar organized by my virtual office hosting company Bridges Executive Center which I have been using since 2005 to setup and support my company. Regularly their team organizers seminars that can benefit their client base, like this one on the Hong Kong tax system and your annual obligations.
Hong Kong has an easy taxsystem which is even dealable with by small companies.
A ground principle is for example that business performed in Hong Kong territory is taxable. So when I am doing training or a consultancy assignment in Hong Kong, I am liable to profit tax on that. On the other hand, if I am delivering a training in malaysia then this is not liable to payment of tax profit. Obviously I can't file any deductions for that either.
Profit tax rate currently stands at 17.5% if I recall it well. A very sharp rate, and thats before deductions. Deductions cover things like MPF for employees, salary, and all other expenses needed to generate profit. This also covers office rental, capex etc. For example IT investments are 100% deductible in 1 year :)
On the salary tax, there are some ways to structure payments to staff to make it more interesting. As director I receive a directors fee. This is of course taxable, however it is in a different category compared to standard salary.
Another trick is reimbursement of house rental. Providing an allowance for this is directly taxable. Calling it a reimbursement (ie money paid after a claim has been made) will provide a "benefit" for both employee and employer on the bottom line.
Altogether an interesting climate to start your business!
