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How do Hong Kong companies differentiate between onshore and offshore profits?

Released Date: Mar 14,2022 Article Source: HUANZE

Recently, when I was doing the audit of a Hong Kong company, I encountered such a problem. The business of the client's Hong Kong company involved the transaction with Hong Kong and also involved the transaction outside Hong Kong.

Have been doing recentlyHong Kong companyThe audit encountered such a problem that the client's Hong Kong company's business involved the transaction with Hong Kong and also involved the transaction outside Hong Kong. As we all know, Hong Kong corporate profits tax adopts the principle of territorial taxation. That is to say, only profits derived from Hong Kong need to be subject to Hong Kong profits tax. If profits are derived from outside Hong Kong, they do not need to be subject to Hong Kong profits tax.

Met clients during our actual audit workHong Kong companyProfits are generated both in and out of Hong Kong. In this case, if the client can accurately distinguish which revenues, costs and expenses are obtained in Hong Kong and which are obtained outside Hong Kong for the company's business, it is suggested to distinguish between onshore (inside Hong Kong) profits and offshore (outside Hong Kong) profits, so as to avoid paying tax on offshore profits. If the client cannot accurately distinguish between offshore profits, it may be taxed as onshore profits.

If the customer's business activities involve such transactions, it is best to distinguish accurately, so as to save unnecessary tax expenditure.

How do Hong Kong companies differentiate between onshore and offshore profits?

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