According to the Hong Kong Taxation Ordinance, anyone in Hong Kong:
- Generate income from business or trading business
- Whose business or trader’s assessable income is derived from Hong Kong
must pay profits tax.
Regarding the first point above to determine whether the person is engaged in a business or a trading business, the Hong Kong tax department will consider the following matters:
- The intention to gain profit/incur loss (for example, buying and selling assets for gains, but you may also lose money as a result)
- Frequency of similar transactions and services (whether to repeat product transactions or provide services)
- The nature of the asset (for example, purchased a motor vehicle for bringing students to school)
- How to change the product (for example, beautify the product to promote sales)
- How to sell (whether it is in accordance with the sales procedures of general business activities)
- Source of income (short-term or long term loan)
- Time between purchase and sale (the shorter the time distance, the higher intention to trade)
- How to acquire the assets (if the assets are inherited, it shows that the intention to trade is not high)
We welcome your inquiries in relation to any taxation matters.