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Passage of Two-tiered Profits Tax Rates Regime
Date:  21 Mar 2018

Passage of Two-tiered Profits Tax Rates Regime

The Inland Revenue (Amendment) (No. 7) Bill 2017 which introduces the two-tiered profits tax regime, passed its third reading in the Legislative Council on 21 March 2018.

The two-tiered tax rates (see the table below) will apply starting from the year of assessment 2018/19.

Assessable Profits Tax Rate
  Corporation Unincorporated Business
First HK$2 million 8.25% 7.5%
In excess of the first HK$2 million 16.5% 15%

In order to primarily benefit small and medium enterprises (SMEs) and startups, and to prevent income splitting, the new law contains restrictive provisions prescribing that “connected entities” can only elect a single entity as eligible for the two-tiered regime for a given year of assessment.

Clients who wish to explore how they can benefit from the new law can contact Ms. Amie Cheung at amie.cheung@lccpa.com.hk