On 21 March 2018, the Hong Kong Legislative Council passed the Inland Revenue (Amendment) (No. 7) Bill 2017 in its third reading. As passed, the bill provides for the introduction of a two-tiered profits tax rate regime for corporations and unincorporated businesses for any year of assessment commencing on or after 1 April 2018 as follows:
In order to avoid double benefits, the following are excluded from the two-tiered profits tax rate regime:
To ensure that the tax benefits will target SMEs, a restriction is included that limits the application of the two-tiered regime to only one enterprise nominated from among those that are connected (under the control of the same enterprise or entity – more than 50%).
It is expected that the bill will be converted into law on 29 March 2018.
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