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3.1. Corporate Tax Residence

Hong Kong applies a territorial-based tax system. This means that the profits tax is not levied based upon a company's residence, but rather on profits derived in or arising from a trade or business in Hong Kong, regardless of the residence of the entity deriving such profits. Therefore, a resident company may not be assessed to Hong Kong profits tax if it does not derive profits from a trade or business carried out in Hong Kong, whilst a non-resident may be assessed to Hong Kong profits tax if it derives income from a trade or business in Hong Kong. As a result of this territorial approach, corporate tax residence has not been clearly defined in law.