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HONG KONG Two-tier Profits Tax System Effective From 2018/19 Onwards

21 March 2018, the Inland Revenue (Amendment) (No.7) Bill 2017 - The Two-tier profits tax system passed its third reading in the Legislative Council.  Commencing from the year of assessment 2018/19, tax relief will be provided to small and medium-sized enterprises by the two-tier profits tax system.  Each group of connected entities can nominate one enterprise to enjoy such tax relief. 

Summarize the relief for corporations below:-

Under the situation of corporations, “connected entities” means –


a) one of the entity has direct or indirect control over another; 

b) the entities are under common control directly or indirectly .

“Control” means –


i) owns or controls more than 50% in aggregate of the issued share capital; OR

ii) is entitled to exercise or control the exercise of more than 50% in aggregate of the voting rights at general meeting; OR

iii) is entitled to more than 50% in aggregate of the profits.


With the introduction of more tax relief, investments in Hong Kong as small and medium enterprises will bring more benefits and returns to investors.