We can help reduce your tax liabilities in Hong Kong by optimising your current tax structure. That includes tax health check, identifying and mitigating tax inefficiencies and leaks, eliminating the risk of double taxation and more.
Identifying new opportunities
You may be unknowingly leaving money on the taxman’s table. Our tax experts will help you reclaim your profits by making the best of available tax concessions, cash repatriation and incentives systems.
Strategic tax planning
For those making significant transactions or dealing with business expansion to other emerging markets in Asia, our team can provide the necessary tax guidance for performing them tax-efficiently.
Corporate & personal tax advisory
Our tax advisory services.
Profits tax advisory
Our tax advisors can examine transactions that your company is proposing and advise on the optimal way of executing it from the Hong Kong tax perspective. This includes advising you on restructuring your business models to strengthen the validity of the claim, making use of specific tax rules to lodge deduction claims on their capital expenditure and providing ways to minimise tax liabilities according to the tax law legally.
Minimising withholding tax on foreign-sourced passive income
Both individuals and corporations receiving passive income, such as interest income, dividend income, and royalty income from overseas companies may be subject to foreign withholding tax. They can apply there to use a lower withholding tax rate (or even zero withholding tax rate) if Hong Kong has a double tax treaty with the overseas jurisdiction in question. The application for relief to the foreign tax authority must be accompanied by a Certificate of Resident Status (COR) from the IRD, which confirms that the individual or corporation is a tax resident of Hong Kong. Our tax professionals are experienced in handling COR applications for clients and have successfully obtained a significant number of CORs already.
Transfer pricing advisory
Where your company is involved in the import/export of goods and services from related parties, our tax experts can provide you with a transfer pricing report. It will analyse the correct method of pricing your products and services and include a comparability analysis with other similar transactions in the market.
Advance pricing agreement
Included in the service is the preparation of an Advance Pricing Agreement (APA) that will be agreed with the Hong Kong IRD under their transfer pricing policies. The process involves meeting with the IRD to discuss the APA in advance, which Acclime can facilitate. Concluding an APA provides certainty in pricing goods and services that flow cross border.
Tax authorities all around the world are focusing on transfer pricing to ensure that goods and services flowing across borders are priced appropriately. The worldwide BEPS (Base Erosion and Profit shifting) collaboration amongst 135 countries brings transfer pricing into sharp focus.
Hong Kong adopts the internationally agreed arm’s length principle for the determination of prices for transactions between related parties. The arm’s length principle is the international standard to guide transfer pricing. It requires the related party to make a transaction under comparable conditions and circumstances as a transaction with an independent party.
Hong Kong has a series of regulations which require Hong Kong companies to prepare transfer pricing documentation unless they are exempt. The exemptions are for companies that satisfy either Test A or Test B:
A. Business size exemption – meet 2/3 criteria below:
Total annual revenue < HK$400 million (US$51.6million)
Total assets < HK$300 million (US$38.7 million)
The average number of employees < 100
B. Related party transaction value-based exemption:
Transfer of property (excluding financial assets and intangibles) < HK$220 million (US$28.4 million)
Transactions of Financial Assets < HK$110 million (US$14.2 million)
Transfer of Intangibles < HK$110 million (US$14.2 million)
Any other transactions < HK$44 million (US$5.68 million)
If the company is not exempt, it must prepare the following documentation as stipulated by OECD:
Master file: provides a high-level overview of the multinational’s global operations and value chain
Local file: provides detailed analysis of the local entity’s operations and transfer pricing practices
Country by country report: provides a wide range of specific information regarding the value chain and operations of the multinational as a whole
Even if a company falls under the exemptions above, the IRD encourages the company to keep documentation supporting the arm’s length nature of the price at which it undertook the transaction(s). Hong Kong’s tax treaties also incorporate provisions that guard against treaty abuse and provide for the exchange of information upon request in line with the internationally agreed standard.
Only income sourced from Hong Kong is taxable. However, this is not automatic. If a Hong Kong company fulfills the following requirements, it may choose to lodge an offshore claim when it file the profits tax return. Inland Revenue Department will then issue questions and the company has to reply with supporting documents. Once the offshore claim is successful, the profits is exempted from tax.