Nobody likes paying taxes. Luckily, as a small business in Hong Kong, there are some benefits available to you. With these benefits, your business will be able to enjoy a considerable amount of savings throughout tax season.
In order to encourage new businesses, the Inland Revenue Department (IRD) adopts a low Profits Tax rate for small businesses. For the fiscal year 2014/15, the profit tax rate is 16.5% for companies and 15% for individual sole proprietors.
That’s not all. There are other benefits that you as a small business owner can enjoy.
Profit Tax Related Savings
For the year 2014/15, tax payers can get a 75% one-off reduction on profits tax, salaries tax and tax under personal assessment, subject to a ceiling of HK$20,000 per case. This reduction is twice that of the previous year!
For profit tax, the ceiling of the tax reduction is applied to each business while for salaries tax; the ceiling is applied to each individual taxpayer. The good news is that a taxpayer who is separately chargeable to salaries and profits tax can enjoy tax reduction under each of the tax types, resulting in more even more tax savings.
The proposed reduction will reduce taxpayers’ amount of tax payable for the year. Upon enactment of the relevant legislation, the Inland Revenue Department will effect the reduction in the final assessment. It is expected that excess tax paid will be refunded starting from late July 2015. Taxpayers are not required to make any applications or enquiries to the Department.
Exemption + Deductions, deductions and more deductions
Profit tax is levied based on assessable profits, which is after excluding deductible expenses and tax-exempt income. These exemptions and deductions can help you save even more in taxes for your small business.
Tax-exempt income includes:
- Profits arising from the sale of capital assets
- Interest on deposits placed in authorized financial institutions
Deductible expenses include:
- Expenses paid by the taxpayer for producing assessable profits
- Industrial and commercial buildings allowance
- Plant and office equipment
- Corporate losses
For more details on these exemptions and deductions, check out IRD’s official website. Making the most of these will help you make sure you’re not paying more tax than you have to.