Hong Kong operates a territorial tax regime, such that only
profits arising in or derived from Hong Kong sources are subject to
Profits Tax. In simple terms this means that a person who carries
on a business in Hong Kong but derives profits from another place
is not required to pay tax in Hong Kong on those profits.
To ensure that earnings from foreign sources outside Hong Kong
are eligible for exemption, a company must file an offshore tax
claim (OTC) with the Inland Revenue Department (IRD) to obtain an
'offshore status'. Making a successful offshore tax claim
(OTC), however, requires careful planning, accurate documentation,
and compliance with all relevant regulations.
The final assessment of a claim will be made by the IRD. It a
question of fact and must be decided by reference to the
circumstances of each case. It should, however, be noted that a
company need not have extensive activities in Hong Kong before it
is considered to be carrying on a business in
