If a Hong Kong company’s business activities take place entirely outside of Hong Kong it qualifies for an Offshore Profits Tax Exemption granted by the Hong Kong tax authority which results in the company’s profits being tax-free in Hong Kong.
A Hong Kong company using our address as its business address and with a bank account in Hong Kong would enjoy tax-free profits in Hong Kong if
If a Hong Kong company satisfies all of the above conditions it is able to apply for the Offshore Profits Tax Exemption when filing its annual Profits Tax Return.
The Hong Kong tax authority may seek to verify a company’s claim that it has no business activities taking place in Hong Kong. This would usually take place on a sample basis by the tax authority randomly selecting a sales transaction and reviewing the various activities involved in this transaction to determine where those activities took place. It is therefore advisable to keep complete records to illustrate the fact that all activities take place outside of Hong Kong including emails with customers and suppliers, notes of meetings with customers and suppliers, travel documents to demonstrate any visits to customers and suppliers, copies of sales orders, copies of purchase orders and copies of shipping documents to show the origin and destination of the product supplied to the customer. In summary the company should retain any document that assists the company to demonstrate the company does not engage in any business activity in Hong Kong.