Hong Kong profits tax basics for invoicing
How invoices feed profits tax: what counts as income, which rates apply and why records matter.
Profits tax is charged on profits from a trade, profession or business carried on in Hong Kong, arising in or derived from Hong Kong. Your invoices show the income side. Under the two-tiered regime, the first HK$2 million of assessable profits is taxed at 8.25% for corporations and 7.5% for unincorporated businesses. The rest is taxed at 16.5% and 15%.
- Profits from selling capital assets are not taxed as business profits.
- Only one entity in a connected group can use the two-tiered rates.
- Non-residents are chargeable on Hong Kong-sourced business profits too.
- Rates change by law. Check the IRD site before you file.
How it works
Issue an invoice for every sale and keep the number sequence.
Record when each invoice is paid.
Keep expense invoices from suppliers too, as they support deductions.
At year end, give your accountant the full set of invoices and bank statements.
Follow the IRD instructions for your profits tax return.
Legal framework
- Inland Revenue Ordinance (Cap. 112), profits tax provisions.
- IRD: Profits Tax (ird.gov.hk).
- IRD: FAQ on Two-tiered Profits Tax Rates Regime.
- GovHK: Tax Rates of Profits Tax.
Frequently asked questions
Do my invoices decide how much profits tax I pay?
They are the evidence of your income. Tax depends on assessable profits, not on invoice totals alone.
Does 4invoices calculate profits tax?
No. 4invoices creates invoices with a tax rate per line, supports any currency with an exchange rate, and downloads a PDF. It does not connect to the Inland Revenue Department, file returns or keep legally validated archives. The 6-month free trial needs no card.
Which rate applies to a sole proprietor?
Unincorporated businesses are taxed at 7.5% on the first HK$2 million and 15% above it, per the IRD.