How Hong Kong companies can reduce their tax burden - offshore exemption

Warm tips: Hong Kong companies in the daily operation of all the evidence that can prove the offshore related information should be retained to ensure that the later face of the Inland Revenue Department objections, can provide timely and favorable materials to rebut, help to apply for offshore exemption.

五、The process of applying for offshore exemption

1.The Hong Kong company needs to do the audit and explain the company's business process and operation in detail to the Hong Kong licensed accountant;

2.When the Hong Kong company completes the auditing work, the licensed accountant will, according to the client's wishes, apply to the Hong Kong Inland Revenue Department (IRD) for offshore business tax exemption;

3.The Hong Kong Inland Revenue Department (IRD) will request the Hong Kong company in writing to provide supporting information related to the audit report. If there is any doubt about the information submitted by the company, the IRD will also request the company to provide clarification, and the Hong Kong company must reply to the IRD's query within one month;

4.If the Inland Revenue Department (IRD) determines that the company is an offshore operation after assessment and validation, a tax exemption consent letter will be issued to the company;

5.After the Hong Kong company obtains the consent of exemption, the Inland Revenue Department will not request the company to review the offshore operation within 2-3 years. If the application is successful, the company will be able to legally utilize the Hong Kong tax regulations to be exempted from paying profits tax arising from offshore income, which not only saves tax expenses and reduces operating costs, but also the funds from the tax exemption can enhance the company's ability to invest in other businesses.

The application cycle for offshore exemption is long and may take about six months. It also depends on the timeliness of the company's response letter and the materials provided, and whether the IRD still has any questions after the additional information is provided, and thus continues to issue inquiry letters.