Hong Kong Tax
Offshore tax exemption - could your profits qualify?
If your company's profits are sourced entirely outside Hong Kong, you may qualify to have those
profits exempt from Hong Kong profits tax. We assess your eligibility and manage the full IRD application.
8.25%
Standard HK profits tax rate
0%
Tax on qualifying offshore profits
IRD
Approved
What's included
Our offshore exemption services
We handle the entire process, from assessing whether your business qualifies,
through to preparing the application, managing the IRD, and maintaining compliance once approved.
Eligibility assessment
Before anything else, we assess whether your business genuinely qualifies, reviewing your structure, activities, contracts, and profit sources against IRD criteria.
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Review of business model & activities
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Analysis of contract & profit source
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Honest assessment of claim strength
Documentation preparation
A successful claim lives or dies on documentation. We identify what's needed and work with you to compile a complete, well-organised evidence package.
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Contracts, invoices & correspondence
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Operational & business records
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Written representation to IRD
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Supporting schedules & analysis
IRD application & follow-up
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We submit the claim and handle all IRD correspondence, including follow-up queries, additional evidence requests, and negotiations where required.
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Formal submission to IRD
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Management of all follow-up queries
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Additional evidence as required
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Objection & appeal handling if needed
Ongoing annual compliance
Once approved, we ensure the exemption remains defensible year on year, maintaining the records and operational profile the IRD expects to see.
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Annual review of qualifying status
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Records maintained to IRD standard
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Annual profits tax return filing
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Proactive advice on any changes
The basics
What is offshore tax exemption?
Hong Kong taxes profits on a territorial basis, only profits that arise in or derive from
Hong Kong are subject to profits tax. This creates a legitimate opportunity for international businesses.
The territorial principle
Under Hong Kong's tax law, only profits with a source in Hong Kong are taxable. If your business generates profits through activities carried out entirely offshore - negotiating contracts, dealing with suppliers, serving customers - those profits may not be subject to Hong Kong profits tax at all. This is not a loophole. It is how the system is designed, and the IRD has a formal process for recognising it.
What "offshore" actually means
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Contracts negotiated and signed outside Hong Kong
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Customers and suppliers based offshore
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Core business decisions made outside HK
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Goods do not pass through Hong Kong
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Services performed and delivered offshore
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No significant business activities occur in HK
Important: Offshore exemption claims are scrutinised carefully by the IRD. We only advise clients to pursue a claim where the facts clearly and genuinely support it. A poorly prepared or unsupported claim can trigger a full IRD investigation. We assess your situation honestly before recommending whether to proceed.
Ami eligible?
What the IRD looks at
The IRD assesses each claim on its specific facts.
These are the factors they examine most closely, and what your documentation must clearly demonstrate.
Where contracts are concluded
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The single most important factor. Contracts with customers and suppliers negotiated and signed outside HK strongly supports an offshore claim.
Where business is performed
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The IRD looks at where the actual work happens, where people are based, where decisions are made, where services are delivered.
Movement of goods
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For trading companies, whether goods physically pass through Hong Kong is a key consideration. Goods moving directly offshore supports the claim.
Location of customers & suppliers
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If customers and suppliers are predominantly based outside Hong Kong, this supports the argument that the profit source is offshore.
HK entity substance
The IRD will look at what your HK company actually does. Minimal local activity can support an offshore claim, but the entity must be genuine.
Quality of documentation
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A successful claim requires robust supporting evidence, contracts, correspondence, and records that clearly show the offshore nature of profits.
How it works
From assessment to approval
We manage the entire process, you stay informed at every stage, we handle the IRD.
Free eligibility assessment
We review your business model, activities, and profit sources to determine whether an offshore claim is viable, and tell you honestly if it isn't.
Documentation review & preparation
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We identify the evidence needed and work with you to compile a complete package, contracts, invoices, correspondence, and operational records.
IRD application & follow-up
We prepare and submit the claim, handle all IRD correspondence, and provide any additional evidence or clarifications needed to get it approved.
Ongoing annual compliance
Once approved, we ensure your records and operations continue to support the exemption each year and the claim remains defensible if the IRD revisits it.
Frequently asked
Is offshore tax exemption legal?
Yes. It is a legitimate and widely used arrangement under Hong Kong's territorial tax system. The IRD has a formal process for assessing and approving offshore claims. It is not a tax avoidance scheme, it is the correct application of Hong Kong tax law to companies whose profits genuinely arise offshore.
How long does an IRD offshore claim take?
Typically 6 to 18 months, depending on the complexity of the case and the IRD's workload. The IRD will usually ask follow-up questions before making a determination. We manage all of this on your behalf.
What happens if my claim is rejected?
If the IRD rejects the claim, the profits in question become subject to standard Hong Kong profits tax. We assess the strength of your case before submitting, so we only recommend proceeding where the facts clearly support it. We also handle any objection or appeal process if needed.
Do I still need to file a tax return if I have an offshore claim?
Yes. You must still file your annual profits tax return with the IRD. The offshore claim is made as part of or alongside that return. Filing obligations do not disappear — only the tax liability on qualifying profits.
Can a service company claim offshore exemption, or only trading companies?
Both can claim, but the criteria differ. For service companies, the key question is where services are performed and delivered. For trading companies, it is primarily where contracts are negotiated and signed, and where goods move. We assess each case individually.
We already have an offshore claim, can you take it over?
Yes. We regularly take over existing offshore claims from other providers. We'll review what's in place, ensure the documentation is robust, and manage ongoing compliance and any future IRD correspondence.
How does offshore exemption relate to the standard tax & audit process?
The offshore claim is submitted alongside your annual profits tax return. If you are already a Woodburn tax & audit client, we will assess offshore exemption eligibility as part of your annual engagement. Find out more about our tax & audit service →