Is Hong Kong still tax-efficient in 2025/26?

Hong Kong remains one of the most tax-efficient jurisdictions in Asia due to its territorial tax system. Under this approach, only profits arising in or derived from Hong Kong are subject to profits tax, while profits sourced outside Hong Kong may not be subject to taxation, subject to assessment by the Inland Revenue Department.

The standard corporate tax rate in Hong Kong is 8.25% on the first HKD 2 million of profits and 16.5% thereafter. However, companies engaged in international trading or cross-border services may apply for an offshore profits claim if they can demonstrate that the profit-generating activities take place outside Hong Kong. The Inland Revenue Department evaluates factors such as where contracts are negotiated, where management decisions are made, and where services are delivered.

For example, an international trading company sourcing products from mainland China and selling them to customers in Europe may qualify for an offshore profits claim if negotiations and management decisions take place outside Hong Kong.

For global entrepreneurs, Hong Kong remains a tax-efficient jurisdiction, but it is not a “zero-tax automatically” environment. Proper structuring, documentation, and substantiation are required to support an offshore profits claim.