Offshore income claiming tax exemption

Financial statement of a company needs to cover all transaction undertaken by a company disregarding where those transaction is carried out. This means even non-taxable offshore income needs to be reported in the financial statement.

Therefore, offshore income needs to be stated in "Tax Computation' in order to claim for non-taxability. Sufficient evidence needs to be submitted in order to support the claim. Those evidence include:

  • Company structure and office location.
  • Document example of a deal showing how an offshore income business is handled.

Hong Kong adopts a territorial source principle of taxation. Only profits which have a source in Hong Kong are taxable here. Profits sourced elsewhere are not subject to Hong Kong Profits Tax. The principle itself is very clear but its application in particular cases can be, at times, contentious. To clarify the operation of the principle, Inland Revenue Department prepared a [ A Simple Guide on The Territorial Source Principle of Taxation ]. It gives a brief explanation of how the principle operates and provides simple examples for illustrative purposes of the tests applied to different types of businesses. If you wish to explore the subject in greater depth, consultation with professional advisers is recommended.