A simple tax system is a major advantage of setting up a company in Hong Kong and in general only a simple profit tax is required. In contrast, there are more taxes required in the Mainland, China. However, if entering into the Greater Bay Area ("GBA"), Hong Kong companies and Foreign companies will have tax concessions. For the specific industries, the tax rate would be even lower than the tax in Hong Kong.
What taxes do companies have to pay in Hong Kong and the Mainland?
Comparing with the general profits tax, the corporate income tax in the Mainland will be higher than that in Hong Kong. Starting a company in Hong Kong only needs to pay 16.5% of profits tax. Recently, under the two-tier profits tax system, the profits tax for the first 2 million profits is only at 8.25% and Hong Kong companies are also not required to pay dividend tax and capital gains tax, etc. The tax rate is relatively low in many countries and regions. On the contrary, without any concessions, the mainland corporate income tax is 25%, and a value-added tax ranging from 3% to 13% is levied on company dividends and rental income.
Taxes actually required for business in GBA
Although there are many tax types in China, there are also many concessions. In China, there are many free trade zones and you can find most of them in GBA region. In the Pearl River Delta region alone, there are Guangdong Free Trade Zones consisting of Qianhai, Nansha, and Hengqin Area. These areas, as well as the GBA, have various tax incentives. It is difficult to generalize. Here are a few examples:
Carry out designated projects such as e-commerce in Qianhai and Hengqin, the corporate income tax is about 15%
Shenzhen, Guangzhou, Zhaoqing and other cities in the Greater Bay Area, after September 9, 2016, the corporate income tax levied on foreign companies is lower than that of Hong Kong, and the preferential treatment covers multiple industries, such as professional services such as Shenzhen’s fiscal and taxation industry.
After the COVID-19, SME whose corporate profits are less than RMB 3 million have a value-added tax as low as 5%-10%
Tax incentives for different industries
The division of the industry is also an important factor affecting the tax concessions in China. The high value-added or high-tech industries supported by China, such as chips, electronic platforms, artificial intelligence, autonomous driving, etc., will have different tax concessions in different cities across the country, and the corporate profits tax rate can be reduced to 15%.
For example, in free trade zones or bonded areas such as Qianhai, e-commerce can be tax-exempt; as for different industrial parks, different industries such as biotechnology, and even popular industries such as vaccine research after the outbreak of COVID-19, can be deducted to varying degrees. taxi. Therefore, before entering the Greater Bay Area, you can check with our tax advisor about the tax deduction model that belongs to your industry and choose the best place to settle in order to obtain the best tax concessions.
If you want to know more, please feel free to contact us at info@rbcs.com.hk .
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