PREPARE AND APPLY FOR OFFSHORE TAX EXEMPTION

PREPARE AND APPLY FOR OFFSHORE TAX EXEMPTION

2025-07-24

Learn how to save money on overseas income with Hong Kong’s offshore tax exemption. Understand what qualifies as offshore income, gather necessary documents, and check your eligibility with our easy steps. Get ready to maximize your business savings today!

Step 1: Understand What Qualifies as Offshore Income

To qualify for tax exemption, the Inland Revenue Department (IRD) will check the main business activities, such as sales or support.

a) It is beneficial if contracts are signed outside of Hong Kong.

b) Managing payments through foreign bank accounts.

Examples of Offshore Income:

– E-commerce sales to overseas customers (no HK involvement)
– Royalties from foreign IP licensing
– Consulting services delivered outside HK

Non-Qualifying Income (Taxable in HK):

i) Sales to Hong Kong customers
ii) Warehousing or fulfilment in HK
iii) Signing contracts locally

Step 2: Prepare Your Offshore Claim (OTC) – Required Documents

To apply for offshore tax exemption, you must submit:

  • Company Details (Certificate of Incorporation, Business Registration)
  • Contracts & Invoices (showing transactions are all outside HK)
  • Bank Statements (foreign banks and foreign currency transactions)
  • Website & Server Hosting Proof (if selling online)
  • Shipping & Logistics Records (again without HK involvement)

Remember, the IRD might take over 6 months to review your claim, so you need to provide good documents.

Step 3: Quick Checklist – Does Your Business Qualify?

To find out if your business is eligible, answer these questions (similar to what the IRD will ask):

A. Where do you send invoices and manage accounts? (Outside HK )

B. Where is your bank account? (Foreign banks help)

C. Do you sell products or provide services? (Must be fully offshore)

D. Where is your e-commerce site hosted? (Server outside HK, even blocking HK IP addresses to access to your website)

E. Where are shipping and logistics managed? (Avoid HK)

F. Where do you make pricing and ad decisions? (Outside HK)

G. Where are contracts signed? (Outside HK)

👉 If most answers point outside Hong Kong, you likely qualify!

What If Your Claim is Denied?

Common reasons for rejection inlcude:

  • Employees or operations in HK
  • Contracts signed locally
  • Lack of proof for offshore activities

Next Steps:

  1. Review the reasons provided by the IRD.
  2. Gather more evidence (like contracts or transaction records).
  3. Consider consulting a tax professional for advice.

Final Tips for Keeping Your Company’s Offshore Status

  Keep detailed records of all offshore transactions.

Avoid any business activities in HK (no local clients, contracts, or warehouses).

Renew your offshore status every 3-5 years.

By organizing your business the right way, you can legally reduce your taxes and focus on growing your e-commerce presence!

For further information, please contact us.

You may want to read: HONG KONG: OFFSHORE TAX REPORTING RULES

Subscribe