Accounting, Audit and Profits Tax Services in Hong Kong

What’s included

• Bookkeeping and management accounts prepared to audit standard
• Audit coordination with an independent Hong Kong CPA practice
• Profits tax computation and return filing
• Employer’s return and payroll administration
• Catch-up work where several years of audits have been missed

Hong Kong profits tax and audit at a glance

Hong Kong taxes profits arising in or derived from Hong Kong, for years of assessment ending 31 March. A company’s return must be supported by audited accounts unless the company is dormant.

Item	Detail
Year of assessment	1 April to 31 March, based on the financial year ending in that period
Rates, unincorporated businesses	7.5% on the first HK$2 million; 15% above
Connected entities	Only one entity per connected group can be nominated for the two-tiered rates each year
Capital gains	Profits from the sale of capital assets are outside profits tax
Dividends received	Excluded if paid by a corporation subject to Hong Kong profits tax
Foreign-sourced income (FSIE)	Since 1 January 2023, foreign interest, dividends, disposal gains and IP income of multinational group members can be taxable unless an exception applies
Global minimum tax	15% for groups with revenue of EUR 750 million or more, from fiscal years starting 1 January 2025
Tax treaties	Comprehensive agreements concluded with 60 jurisdictions, some not yet in force
Auditor	A certified public accountant (practising); the AFRC has issued practising certificates since 1 October 2022
Record keeping	At least 7 years after the transactions

Hong Kong profits tax rates and exemptions compared

A Hong Kong corporation normally pays 8.25% on the first HK$2 million of assessable profits and 16.5% above. A connected entity that is not nominated pays 16.5% throughout, while offshore profits and some concessionary regimes are taxed at 0% to 8.25%.

Tax position	Rate	Applies to	Key condition
Two-tiered rates	8.25% on the first HK$2m; 16.5% above	Corporations; one nominated entity per connected group	Nominated in the profits tax return; irrevocable for that year
Standard rate only	16.5% on all assessable profits	Connected entities not nominated	Control means more than 50% of shares, votes, or capital or profits
Offshore profits	0%	Profits arising outside Hong Kong	Untaxed even if remitted, subject to FSIE; facts and records must support the claim
FSIE exception	0% on specified foreign-sourced income received in Hong Kong	Multinational group members with foreign interest, dividends, IP income or disposal gains	Economic substance; or at least 5% held for 12 months (dividends, equity gains); nexus approach (IP income)
Qualifying corporate treasury centre	50% of the normal rate (8.25%)	Qualifying profits	From 2016/17
Eligible IP income (patent box)	5%	Concessionary portion of eligible IP income	Years of assessment from 1 April 2023
Family investment holding vehicle	0%	Qualifying and incidental transactions	Managed by an eligible single family office in Hong Kong; from 2022/23

How the Hong Kong accounting and profits tax cycle works

The cycle runs from bookkeeping to audit to the profits tax return (Form BIR51). For 2025/26, returns were issued on 1 April 2026 and are due one month later unless a block extension applies.

1. Keep books from the first day of trading and retain records for at least 7 years.
2. Close the year at the accounting date and prepare financial statements. Small private companies may use the reporting exemption but still need an audit.
3. Have the statements audited by a practising CPA and approved by the directors.
4. Prepare the tax computation, supporting any offshore or FSIE claim and confirming which connected entity takes the two-tiered rates.
5. File the profits tax return (BIR51). A company with gross income must submit its financial statements, auditor’s report and tax computation with it.
6. Pay the assessed tax, plus provisional tax for the next year based on the profits just assessed.
7. File the Employer’s Return (BIR56A with an IR56B per employee) within one month of issue, and IR56E, IR56F or IR56G as staff join, leave or depart.
8. Pay MPF contributions monthly, generally by the 10th day of each month.

Documents needed for a Hong Kong audit and profits tax return

Auditors and the IRD expect source records that tie to the ledger. Have these ready first.

• Bank statements for every account for the full year
• Sales and purchase invoices, receipts and contracts
• Fixed asset register
• Payroll records, IR56 forms and MPF remittance statements
• Loan, lease and intercompany agreements
• Prior-year audited accounts and tax computation
• IRD notices of assessment
• For an offshore claim: contracts and evidence of where the profit-producing work was done
• For an FSIE exception: evidence of economic substance in Hong Kong, or of holding at least 5% for at least 12 months

Hong Kong profits tax return deadlines and payroll rates (2025/26 returns)

Profits tax returns for 2025/26 were issued on 1 April 2026 and are due within one month. Block extensions for tax representatives run to 1 February 2027, depending on the accounting date.

Item	Amount / deadline
Profits tax return (BIR51), standard	Within 1 month of issue
“N” code: year-end 1 April – 30 November 2025	No extension
“D” code: year-end 1 – 31 December 2025	31 August 2026 (paper); 2 October 2026 (e-filed)
“M” code: year-end 1 January – 31 March 2026	16 November 2026
“M” code with a 2025/26 loss	1 February 2027
E-filing through the Business Tax Portal	Further 1 month, on application
First return for a new company	Issued about 18 months after incorporation; 3 months to file
Employer’s Return (BIR56A / IR56B)	Within 1 month of issue (1 April 2026)
New employee (IR56E)	Within 3 months of the start date
Leaver (IR56F) / leaving Hong Kong (IR56G)	1 month before cessation / departure
MPF mandatory contributions	5% each from employer and employee; relevant income HK$7,100 to HK$30,000 a month (cap HK$1,500 each)
Late or incorrect return	Additional tax up to 3 times the tax undercharged, or prosecution
Insufficient records	Fine of up to HK$100,000

Block extension dates apply to returns filed by a tax representative for 2025/26. Government deadlines and statutory rates only.

How much profits tax on HK$3 million? A worked example for 2025/26

A nominated Hong Kong corporation with HK$3 million of assessable profits for 2025/26 owes HK$330,000 before the one-off reduction, an effective rate of 11%, and HK$327,000 after it. It should also plan for HK$330,000 of provisional tax for 2026/27, based on the same profits.

1. First HK$2,000,000 at 8.25%: HK$2,000,000 × 8.25% = HK$165,000.
2. Remaining HK$1,000,000 at 16.5%: HK$1,000,000 × 16.5% = HK$165,000.
3. Tax before reduction: HK$165,000 + HK$165,000 = HK$330,000; effective rate HK$330,000 ÷ HK$3,000,000 = 11%.
4. One-off 2025/26 reduction of 100% of final tax, capped at HK$3,000: HK$330,000 − HK$3,000 = HK$327,000.
5. If the company were a connected entity that is not nominated: HK$3,000,000 × 16.5% = HK$495,000, or HK$492,000 after the reduction. Nomination saves HK$165,000.
6. Provisional tax for 2026/27, based on the HK$3,000,000 assessed for 2025/26: HK$330,000. The reduction applies to final tax only.
7. 2025/26 final tax plus 2026/27 provisional tax: HK$327,000 + HK$330,000 = HK$657,000.
8. Holdover: if 2026/27 profits are expected to be HK$2,500,000, below 90% of HK$3,000,000 (HK$2,700,000), provisional tax on that figure is HK$165,000 + (HK$500,000 × 16.5% = HK$82,500) = HK$247,500. The amount that could be held over is HK$330,000 − HK$247,500 = HK$82,500.

Assumptions: a corporation nominated for the two-tiered rates; HK$3,000,000 of assessable profits for 2025/26 after deductions; provisional tax at the same rates; no losses brought forward. The reduction was passed by the Legislative Council on 13 May 2026 and is applied without an application.

Profits tax calendar for a company with a 31 March 2026 year-end

A company with a 31 March year-end files its 2025/26 return by 16 November 2026 under the IRD block extension. It then has one month from the date of the notice of assessment to object.

When	What	Deadline	Authority
31 March 2026	Financial year ends: the basis period for 2025/26	Year-end	Company
1 April 2026	IRD issues the 2025/26 profits tax return (BIR51) and Employer’s Return	Employer’s Return within 1 month	IRD
16 November 2026	File BIR51 with audited financial statements and tax computation (M code, block extension)	16 November 2026, or 1 February 2027 for a loss case	IRD
After the return is assessed	Notice of assessment: 2025/26 final tax less up to HK$3,000, plus 2026/27 provisional tax	Pay by the dates on the demand note	IRD
Within 1 month after the notice is issued	Lodge a written objection if the assessment is wrong	1 month	IRD
Later of 28 days before the due date or 14 days after the notice	Apply to hold over provisional tax if 2026/27 profits are likely to be under 90% of 2025/26, or the business has closed or become dormant	As stated	IRD

Common Hong Kong accounting and tax mistakes

Most penalties come from late returns, weak records and wrong assumptions about what is exempt.

• Claiming the 8.25% rate in more than one group company: only one nominated connected entity qualifies each year.
• Assuming a small company needs no audit: only dormant companies are exempt.
• Filing BIR51 without supporting documents: a company with gross income must submit its accounts and tax computation.
• Treating foreign dividends or gains as automatically exempt: FSIE rules can tax them for multinational group members.
• Missing MPF enrolment: employees aged 18 to 64 must be enrolled within the first 60 days.
• Forgetting IR56G: it is due at least 1 month before an employee leaves Hong Kong.

Hong Kong profits tax terms explained

These terms appear on IRD returns, assessments and notices.

Term	Meaning
BIR51	The profits tax return for corporations. A company with gross income files it with its financial statements, auditor’s report and tax computation.
Assessable profits	Profits arising in or derived from Hong Kong from a trade, profession or business, after allowable deductions. Profits from selling capital assets are excluded.
Year of assessment	The tax year from 1 April to 31 March. Profits are assessed on the financial year ending within it, called the basis period.
Provisional tax	Tax paid in advance for the current year, based on the profits assessed for the preceding year, and set off against the final tax later.
Holdover	An application to reduce provisional tax, for example where profits are likely to be under 90% of the previous year’s.
Connected entity	An entity that controls, or is under common control with, another, where control means more than 50%. Only one can be nominated for the two-tiered rates.
Offshore claim	A claim that profits arose outside Hong Kong and so are not chargeable, even if remitted. The IRD decides it on the facts.
MNE entity	For FSIE purposes, a person that is, or acts for, a multinational group, or an entity in one, whatever its size.