Hong Kong Profits Tax 2027 Calculator (Two-Tiered IRD)
Calculate Hong Kong Profits Tax for the year of assessment 2027/28 using IRD's two-tiered rates: 8.25%/16.5% for corporations, 7.5%/15% for partnerships and sole proprietorships.
Two-Tiered Rates Since 2018
Hong Kong introduced two-tiered profits tax in 2018. Corporations pay 8.25% on the first HK$2M of assessable profits, 16.5% on the excess. Unincorporated businesses (partnerships, sole proprietorships) pay 7.5% on the first HK$2M, 15% above. Each connected group nominates one entity to elect the reduced rate.
Connected Entities Rule
If a corporation is in a group of connected entities, only ONE entity may elect to use the two-tiered rates. The others pay the flat 16.5%. Connected = direct/indirect 50% interest or common control. Plan the election to the highest-profit entity for maximum saving (HK$165,000 max saving per group).
Territorial Source Principle
Hong Kong only taxes profits with a HK source. Offshore profits, profits from non-HK clients, and profits derived from operations outside HK can be exempt. IRD scrutinises offshore claims heavily — keep contract evidence.
100% Deduction for Capex on Plant & Machinery
Initial allowance: 60% of cost in the year of purchase, plus annual allowances of 10–30% per type. Industrial buildings: 20% initial + 4% annual. Computers and most office equipment: 100% deductible in year one.
Source: ird.gov.hk profits tax rates two-tiered system. Last updated: May 2026.