The Most Fair Internal Revenue Service – IRS

Since most of us know the tax department as IRS (Internal Revenue Service). Actually, we call the Hong Kong tax authority the Inland Revenue Department (IRD).

You set up your company and get the business profitable, right? This practice is the ideal scenario. There is a section in the District Court Ordinance claiming that if for any reason you overpay the company tax to Hong Kong IRD, you might be entitled in a refund and additional profit which is calculated as an interest rate of 8.088 % per anum in Jan 2019.

Seeing this letter from IRD, I was not sure whether this was right, but as I talked to one of our CPAs, I was ensured that this is indeed the case.

The IRD has a practice where they make sure that you don’t overpay them, for reasons that you may intentionally pay them more than you should in order to profit from 8.088 %.

I think that this would be the best business model in the world; you put money into the IRD deposit and then you receive a refund.

  1. You are 100% sure that the government will not shut down as some of the banks have
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I’m certain that this is a brilliant deal 🙂

How is it in the US? If you overpay the US IRS

Well, I’m just trying to make a point that I’m a big fan of HK government, it’s the most straightforward and fair government in the entire world.

So if you are thinking of why Hong Kong is ranked as the freest economy and the easiest to do business, this might be one of them. Of course, you don’t overpay the government to benefit from the overpay. I’m just trying to make a point where most of the governments try to get provision tax or get so many advance payments, and in case you overpay them, it’s your mistake! You must ask the local IRS to get a refund or keep the amount as a deposit for the incoming tax bill.

Hong Kong is NOT offshore!

Also, there is a big mistake thinking that Hong Kong is an offshore jurisdiction. Well, if you set up a company in Hong Kong, you automatically pay 16.5% tax (for the first $2,000,000 HKD it’s 8.25% and then 16.5%). Hong Kong company income tax is an automatic thing; there is no such thing as offshore. What you want to know is that you might get a tax exemption. There is a tax rule where you need to pass the tax test to receive the tax exemption status (but you should also explain why you are based in Hong Kong, e.g. trading with China or doing business in surrounding countries):

  • You are not a tax resident in HK
  • Your employees are not based in HK
  • You don’t have an office in HK
  • You aren’t doing business in HK (invoicing local companies)

It’s quite interesting to see the differences in administrative burdens in every different country.

I just like Hong Kong; it’s a very pro-business place. There is no way any other country can beat HK. It’s the place where I started.

Most of our clients enjoy the benefits of this jurisdiction.

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