The rates in force
The Inland Revenue Department (IRD) publishes two sets of rates. The normal rates have applied since the year of assessment 2008/09: 16.5% for corporations and 15% for unincorporated businesses[1]. The two-tiered rates, in force from 2018/19 onwards, halve the rate on the first HK$2,000,000 of assessable profits; anything above that stays at the normal rate[1][2].
| Taxpayer and slice of assessable profits | Rate |
|---|---|
| Corporation, first HK$2,000,000 | 8.25% |
| Corporation, any part over HK$2,000,000 | 16.5% |
| Unincorporated business, first HK$2,000,000 | 7.5% |
| Unincorporated business, any part over HK$2,000,000 | 15% |
A worked example
A company with assessable profits of HK$3,000,000 pays 8.25% on the first HK$2,000,000 and 16.5% on the remaining HK$1,000,000[1]. That is HK$165,000 plus HK$165,000, so HK$330,000 before any one-off reduction, against HK$495,000 if the whole amount were taxed at 16.5%. The most the lower tier can save a corporation in a year is therefore HK$165,000, and an unincorporated business HK$150,000 (half of 15% on HK$2,000,000).
The figure the rates apply to is assessable profits: the net profits for the basis period arising in or derived from Hong Kong, calculated under Part IV of the Inland Revenue Ordinance, leaving out profits from the sale of capital assets[1]. It is the bottom line of the tax computation, not the profit in the accounts.
Who gets the lower tier
Every entity with profits chargeable to profits tax qualifies, except where it has connected entities. Then the two-tiered rates apply only to the one entity nominated to use them, and the others pay 16.5% or 15% on all their assessable profits[2]. A person who runs two sole proprietorships is treated as a separate entity for each, so only one of the businesses can use the lower tier[2].
A corporation that has made certain concessionary elections, for example as a qualifying corporate treasury centre or a qualifying aircraft lessor, does not qualify for the two-tiered rates at all[2]. Profits taxed at a concessionary half rate, such as from qualifying debt instruments, do not stop the rest of a business's ordinary trading profits from using the two tiers[2].
Partnerships
For a partnership chargeable at the two-tiered rates, the HK$2,000,000 threshold is apportioned among the partners in their profit sharing ratios. A corporate partner's share is taxed at 8.25% and 16.5%, and other partners' shares at 7.5% and 15%[2].
How you claim it
There is no separate application. A corporation answers Item 2.3 of its Profits Tax Return (BIR51), and a partnership answers Item 1.6 of its BIR52[4]. An entity with no connected entity still has to declare that it has none at the end of the basis period; for convenience it can simply declare in its return that it is chargeable at the two-tiered rates[2]. If the rates were denied, or you forgot to elect, the ordinary objection and repayment provisions apply for 2018/19 and later years[2].
The one-off reduction for 2025/26
Separately from the rates, profits tax for the year of assessment 2025/26 is reduced by 100%, subject to a ceiling of HK$3,000 per case, and for profits tax the ceiling applies to each business[5][3]. The legislation was gazetted on 22 May 2026, and the IRD applies the reduction in the final assessment with no application needed[5]. The reduction comes off the tax worked out at the rates above; it does not change the rates.
What to check before you file
- Whether the business has any connected entity at the end of its basis period, and if so which one is nominated for the year.
- That the tax computation arrives at assessable profits, not the accounting profit.
- That the two-tiered answer on the return matches the group's nomination.
Rates and reliefs can change with each Budget, and the IRD and GovHK pages listed below are the authority wherever this summary differs from them.