To apply for offshore exemption, firstly the Hong Kong Inland Revenue Department has to agree that the profits generated by the company are offshore income. According to Hong Kong tax regulations, the offshore income of a Hong Kong limited company can be exempted from profits tax, that is, "the business is not operating locally and the profits are derived from overseas" can apply to the government for exemption from profits tax.

This is mainly because Hong Kong's collection of profits tax follows the principle of source taxation, that is, only the profits originating in Hong Kong are taxed. If the profits did not originate from Hong Kong, you can declare that the company is operating offshore at the time of tax declaration. Whether the profit originates in Hong Kong is determined by the nature of the profit, or the nature of the transaction generated by the profit.

Conditions for Hong Kong companies to apply for offshore exemption

· The goods have not been declared, received or delivered in Hong Kong;

· Not having physical office and local employees in Hong Kong;

· Neither the supplier nor the customer is a Hong Kong merchant;

· The signing process of offshore waiver orders is not performed in Hong Kong;

· No business records, etc. have been left with the Hong Kong government.

Information (including but not limited to) for Hong Kong companies to apply for exemption from offshore

(1) Hong Kong company organizational structure;

(2) The company's products and prices, it is best to organize them into a price list;

(3) Does the company have warehouses or other locations;

(4) Responsible for all employee information, travel locations, contract signing locations, etc. for business development;

(5) Detailed information of customers and suppliers (including the name and address of the customer's company);

(6) The source of the company's suppliers, the basis for determining the price of the goods; the supplier's delivery channel, and payment channel (if a letter of credit is used, the letter of credit information needs to be provided);

(7) Customer source channel, commodity price determination basis; delivery channel, and customer payment method (if L/C is used, L/C information needs to be provided);

(8) All purchase and sale contracts, invoices, insurances, shipping documents, and business-related mails (including faxes and emails) of the company, etc.

Process for applying for offshore exemption

The Hong Kong company audits the accounts—> submit the audited statements and reports to the Inland Revenue Department for application—> the Inland Revenue Department issues a letter on offshore issues—> write a reply letter and relevant information to the Inland Revenue Department—> the Inland Revenue Department approves the results.

Precautions

After a Hong Kong company's application for offshore exemption is approved in the first year, given that the Hong Kong company has not changed its operation mode, the Inland Revenue Department will generally not request for a review of the company for 2 to 3 years. After this period, the Inland Revenue Department will ask the company for a review from time to time. Documents are re-provided as requested by the tax office.