Profits Tax

Taxation

Certain trading receipts listed below:

Operating income (sale of goods or provision of services)
Rental income from part of the business office
Commission
Deposits forfeiture due to cancellation of business contract
Compensation received from customers due to either party breaking the business contract
Recovery of receipts which have been claimed as bad debts previously
Non-capital grants and allowances from the Government or other parties
Hiring income from letting computers or equipments
Compensation from insurance for loss or damage of trading stocks

Receipts not trading in nature

Capital income
Sales proceeds from fixed assets
Sale or transfer of business interests / goodwill
Compensation due to early termination of rental contract by landlords
Dividends
Interest on Tax Reserve Certificates
Interest on bank deposits

Deductions

- (incurred by the companies in the production of chargeable profits)

Office rental/employee housing allowance
Electricity, water and telephone charges
Employees' salaries, wages, allowances, bonuses
Contributions made to a mandatory provident fund scheme
Severance payment or long service payment for termination of employment
Interest on loan by which the business income is generated
Bad debts
Machinery repair and maintenance expenses
Tools and utensils (not entitled to depreciation allowances)
Approved charitable donations

Non-deductible items

Family and private expenses
Payment made to spouse (eg. salary)
Capital expenditure or loss
Voluntary contributions made to MPF
Penalties for breaking law
Entertainment and communication expenses not related to the business

Profits Tax Culculation (Two-tiered rates)

for 2022/23

Corporations tax rate

8.25% on assessable profits up to $2,000,000
16.5% on any part of assessable profits over $2,000,000

100% of the profits tax is waived subject to a ceiling of $6,000 per case.

Unincorporated businesses

7.5% on assessable profits up to $2,000,000
15% on any part of assessable profits over $2,000,000
100% of the profits tax is waived subject to a ceiling of $6,000 per case.