A Hong Kong company for Indian traders and exporters: tax, audit and compliance
Hong Kong taxes only Hong Kong-sourced profits at 8.25% and 16.5%, has no VAT and has a tax treaty with India — but every company needs a local secretary and, unless dormant, an annual audit.
Hong Kong is a well-established base for Indian businesses that buy from, or sell into, Asia. It combines a common-law system with a simple, territorial tax regime. The trade-off is governance: a Hong Kong company must keep a local company secretary and have its accounts audited every year.
Forming the company
- A private company limited by shares is incorporated under the Companies Ordinance (Cap. 622).
- It needs at least one director who is a natural person and at least one shareholder; both may be of any nationality.
- A company secretary is mandatory — an individual ordinarily resident in Hong Kong or a Hong Kong body corporate. A sole director cannot also be the company secretary.
- The company has a registered office in Hong Kong and receives its business registration certificate at incorporation.
How profits are taxed
| Profits tax rate | 8.25% on the first HKD 2 million of assessable profits and 16.5% on the remainder (only one entity in a group of connected entities can use the lower tier) |
| Basis | Territorial — only profits arising in or derived from Hong Kong are taxed; under the foreign-sourced income exemption regime (from 1 January 2023), certain offshore passive income received in Hong Kong by a member of a multinational group can be taxed unless an exception such as economic substance is met |
| VAT / GST | None |
| First return | Usually issued around 18 months after incorporation, with later returns issued each April |
"Offshore" is a claim, not a status. Whether profits are sourced outside Hong Kong depends on the facts — where contracts are negotiated and concluded, where services are performed — and the claim must be supported with evidence. A company whose people work from India may also raise Indian tax questions (see below).
Annual compliance
- Financial statements audited by a Hong Kong certified public accountant every year (dormant companies excepted).
- An annual return to the Companies Registry within 42 days of each anniversary of incorporation.
- A significant controllers register kept at the company.
- Profits tax return when issued — the first return is normally due within three months of issue; later returns are due within one month, with extended dates available where a tax representative files under the IRD's block extension scheme.
The India connection
India and Hong Kong signed a comprehensive double taxation agreement on 19 March 2018; it entered into force on 30 November 2018 and applies in India from FY 2019-20. For a resident individual, the Hong Kong company is an overseas direct investment that must meet the ODI conditions — an operating business, not in financial services, and, where the individual has control, without a subsidiary or step-down subsidiary — and the APR is due by 31 December each year. If the directors take their decisions in India, the company's place of effective management could be in India. Our ODI checklist explains each step.
Hong Kong or the UAE?
If your customers and suppliers are in the Gulf, Africa or Europe, a UAE free zone company may serve you better, with UAE Corporate Tax at 0% on qualifying income for a Qualifying Free Zone Person (or 0% on taxable income up to AED 375,000 for other taxable persons) and residence visas available. For Asian supply chains, Hong Kong is often the more natural fit. See our Hong Kong page or talk to us.
Sources: Companies Ordinance (Cap. 622); Companies Registry guidance on directors and company secretaries; Inland Revenue Ordinance (Cap. 112) and Inland Revenue Department guidance on two-tiered profits tax rates and the territorial source principle; Business Registration Ordinance (Cap. 310); India–Hong Kong Comprehensive Double Taxation Agreement (signed 19 March 2018); Foreign Exchange Management (Overseas Investment) Rules, 2022.