In the audit of a company in Hong Kong, does the company need to pay profits tax if it has profits in the current year? As we all know, if the company has profits in mainland China, it is generally required to pay corporate income tax. That's because the mainland's corporate income tax is based on the principle of both territorial and personal taxation. What is the profits tax principle in Hong Kong? Today I will give you a detailed explanation.

Hong Kong Profits Tax is the tax levied by the Hong Kong Inland Revenue Department on income arising in or derived from Hong Kong by individuals and enterprises (including corporations, partnerships, trustees or bodies) carrying on any trade, profession or business in Hong Kong. Different from the taxation method in the mainland, the income tax taxation mode adopted in Hong Kong is not based on "tax resident", but on the principle of "regional origin". That is, only profits originating in Hong Kong are considered taxable income. Profits derived outside Hong Kong are not subject to profits tax in Hong Kong. That is to say, if a Hong Kong company generates profits in the current year, it needs to see whether the profits come from the profits generated in Hong Kong. If so, it needs to pay profits tax in Hong Kong; if the profits come from the mainland, it does not need to pay profits tax in Hong Kong.

Another important point in the scope of Hong Kong profits tax is that capital gains are not subject to the scope of Hong Kong profits tax. That is to say, if a company has capital gains in its profits in the current year, this capital gains is not subject to Hong Kong profits tax. A tax deduction (i.e. a deduction from the current year's profits) is required.

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