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.