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.
Frequently Asked Questions
What is the two-tiered profits tax?
Introduced in 2018, it taxes the first HK$2M of profits at half the standard rate (8.25% corp / 7.5% unincorp) and the excess at the standard rate (16.5% / 15%). Saving up to HK$165,000 per electing entity per year.
Can all my group companies claim the lower rate?
No. Only ONE connected entity in a group can elect two-tiered rates. The others pay the flat 16.5% (or 15%). Connected = ≥50% ownership or common control. Elect for the company with highest profits.
What is the offshore exemption?
Hong Kong only taxes profits sourced in HK. Profits arising from operations entirely outside HK (e.g. trading goods that never enter HK) may be exempt. Document substance carefully — IRD scrutinises this aggressively.
How is unrealised investment gain treated?
Generally exempt from HK profits tax (capital nature). Only realised trading gains taxable. The new FSIE (Foreign-Sourced Income Exemption) rules require substance for offshore-passive-income claims since 2023.
Is my data private?
Yes. All calculations run in your browser. Income, contribution and asset data are never sent, stored, or shared.