HK$2000 OFF

when you

 when you register your company with Sleek

and subscribe to our accounting plans.

register your company with Sleek and subscribe to our accounting plans.


How to Avoid Double Taxation with IRD in Hong Kong

4 minute read

When two jurisdictions tax their residents on worldwide income, it could be a case of double taxation.  Luckily, Hong Kong has signed Double Taxation Agreements (DTAs) with several countries and adopts the territoriality basis of taxation.

This means tax accrues only on the income sourced in Hong Kong.  In most cases, profit sourced outside of Hong Kong by a resident is not subject to taxation. Tax treaties are a means to foster cooperation with other tax administrations and to prevent double taxation as well as fiscal evasion.

As a local resident, you will be subjected to DTA rules in order to avoid double taxation in Hong Kong. This is meant to:

  • Reduce double taxation, which could result in the case of overlapping tax jurisdictions
  • Prevent tax evasion between Hong Kong and its DTA partners
  • Provide security about tax rules applicable to specific foreign transactions
  • Lay down rules that help resolve conflicting claims about a taxpayer’s residential status and income source
  • Provide a taxpayer with an opportunity to forward their concern to the relevant tax administration in the event of double taxation contrary to the terms of a DTA
  • Provide certainty for investors on their taxation rights

Additionally, investors are better able to assess their potential tax liabilities in Hong Kong. Overseas companies can conveniently do business in Hong Kong without worrying about double taxation. Alternatively, Hong Kong companies can freely do business overseas and not worry about being taxed twice.


Benefits of DTA

DTA is an initiative of the Hong Kong administrative region government to minimise the exposure of its residents and that of its DTA partner countries to double taxation. Commonly referred to as source-residence conflict, double taxation occurs when you are charged twice on the same profit or income.

When the rules for the division of revenue are clearly outlined between two jurisdictions, there is no risk of double taxation. DTA also lays down how the tax will be imposed, guiding taxpayers about the potential limits of tax liability. Taxpayers are eligible to claim relief for taxes already paid overseas. Not only does DTA prevent double taxation, but also tax evasion.

A Hong Kong resident, who is not the resident of the contracting country, is eligible to claim relief from income tax. Hong Kong incorporated companies to qualify for relief. Companies managed and controlled in Hong Kong can also claim relief from income tax.

A company incorporated in Hong Kong or managed and controlled from the special administrative jurisdiction of Hong Kong is considered a resident. Taxes on income and property are covered under the DTA.

How to relieve double tax in Hong Kong

Tax credit relief

When it comes to avoiding double taxation in Hong Kong, the criteria used is to credit foreign tax against the domestic tax on overseas income. This calls for the deduction of tax payable in the source jurisdiction from the tax payable in the residence jurisdiction on the same income. However, the tax credit does not extend to tax payable in the source jurisdiction and is limited to the residence jurisdiction.

Tax exemption

When you earn income in a foreign country, it is eligible for tax exemption in the residence jurisdiction.  The exemption may be given on the entire or part of the foreign income.

In most treaties signed by Hong Kong, residents can avoid double taxation by means of a tax credit.

Foreign tax relief

Hong Kong residents can enjoy tax relief on foreign income sourced in a jurisdiction that has signed a CDTA with Hong Kong.

Beginning 2018/19, foreign income tax relief is available where you have paid tax for services rendered in a non-CDTA jurisdiction. Before filing a claim for tax credit within the jurisdiction of Hong Kong, salaried taxpayers must take reasonable steps to minimise tax payable overseas on foreign income.

This income exemption is applicable to everyone, including Hong Kong and non-Hong Kong employment. However, in the case of overseas employment, such exemption may not be practically applicable as only the income earned from services delivered in Hong Kong is taxable.

IRD Amendment: How to avoid double taxation in Hong Kong

As per the new amendment, if you are a Hong Kong tax resident who has paid foreign tax on interest and gains in a DTA country, you are eligible for tax credit, not tax deduction.

Following the IRD amendment enactment (No. 6), tax on profits is not deductible, as it is not an expense on generating chargeable profits.

Hong Kong has signed 40 DTAs or bilateral agreements with Mainland of China, Thailand, Belgium, Luxembourg, and Vietnam.

Under the new legislation, a salaries taxpayer in Hong Kong, who is subject to foreign tax for services rendered in that country having a DTA signed with Hong Kong may be eligible for a tax credit for the amount of tax paid in that jurisdiction. However, it is not applicable to the unilateral income exclusion claim that omits the income for services rendered in a foreign land of which overseas tax has been paid.

That means you are eligible for the income exclusion claim only where overseas tax has been paid in a non-DTA jurisdiction for services rendered on that foreign land.

Next steps

We offer no-nonsense accounting for companies looking to set themselves up in Hong Kong. Get in touch with us to begin.

Ready to grow your business?
Our expert team is here to help you. Explore our accounting services or contact our team to get personalised advice today.

Start a business in less than 3 hours with us. Talk to our experts today.

Subscribe to our newsletter

Our jam-packed newsletter covers monthly compliance updates, upcoming events and exclusive offers

Other articles that might interest you

Related content

Contact us

We’d love to help. Share your contact details and we’ll call you back

We are here to help you!

In the beginning, the whole matter may seem complex to you. If that is the case, we are here to help. Take a look at our incorporation services or contact our team to find out more information

Start a business in less than 3 hours with us. Talk to our experts today.

WhatsApp Us

Get HK$2000 off on
your first Sleek
service purchase!

Offer valid when you register your company with Sleek and subscribe to our accounting OR audit and tax plans. T&Cs apply. Privacy policy.

Terms and Conditions of the Promotion:

Before participating in this promotion, you must carefully read and agree to abide by the following terms and conditions.

  1. Eligible Users: To enjoy this offer, customers must purchase Incorporation package with registered address and audit and tax/accounting services at the same time. Valid customers will receive a fee waiver of HKD 2,000.
  2. Promotion Period: This promotion is valid from Jun 19-Jul 2, 2023. Sleek reserves the right to end this promotion at any time without prior notice to customers.
  3. Fees and Payment: Customers must pay the service fees according to Sleek’s standard payment terms. The HKD 2,000 waiver will be applied as a discount on the customer’s invoice.
  4. Governing Law and Jurisdiction: These terms and conditions shall be governed and construed in accordance with the laws of Hong Kong. Any dispute arising out of or in connection with these terms and conditions shall be subject to the exclusive jurisdiction of the courts of Hong Kong.
  5. Confidentiality: Sleek shall treat all information provided by the customer as confidential and shall not disclose such information to any third party, except as required by law or with the customer’s consent.
  6. Limitation of Liability: To the extent permitted by law, Sleek shall not be liable for any direct, indirect, or consequential loss or damage arising out of this promotion.
  7. Disclaimer: To the extent permitted by law, Sleek shall not be responsible for any loss or damage arising from the customer’s use of this promotion. Sleek does not guarantee the accuracy, completeness, reliability, timeliness, suitability, or availability of the website and its content. Sleek reserves the right to change the website and its content at any time without prior notice to customers.
  8. Cancellation of Orders: If customers wish to cancel an order, they must contact Sleek’s customer service department within 24 hours of submitting the order. Orders cannot be cancelled if they have already been processed
  9. Links to Third-Party Websites: Sleek’s website may contain links to third-party websites that are not under Sleek’s control. Sleek is not responsible for the content, privacy policies, or practices of third-party websites and does not endorse or recommend them. Customers should carefully read the terms and conditions and privacy policies of any third-party website before using it.
  10. Accuracy of Registration Information: Customers warrant that all registration information provided is accurate, complete, and up-to-date. If a customer’s registration information changes, the customer should update their account information promptly. Sleek shall not be liable for any loss or damage arising from the customer’s provision of inaccurate or incomplete registration information.
whatsapp icon

Chat with us on WhatsApp from your mobile

30 day moneyback guarantee

30 Days Money Back Guarantee

Our refund policy:

We care about you – within 30 days from your purchase, if you’re unhappy with our services, we’ll refund our fee. Email or call us, and we’ll process the refund within five working days.

What it doesn’t cover:

We will not be able to refund Government fees once the application has been submitted, nor any third-party processing fees.

When it applies:

We cannot guarantee any specific legal outcomes when you use our services. For instance, a company registration might be filed correctly but still get rejected by the Company Registry for reasons beyond our control. We can only refund our fees for issues we are directly responsible for. In the case that you purchase a service and later change your mind, we can’t issue a refund.

Our customer support team is at your disposal for any questions or issue you may face.

Need help?

Our sales team is available from Mon - Fri 9am to 7pm (Hong Kong Time)

Let's get in touch

Book a time with our experts to guide you in finding the best solution.