The Inland Revenue Department (“IRD”) conducted the bulk issuance of 2025/26 Profits Tax Returns in early April. Businesses should now review the applicable filing deadlines and any new compliance obligations for the current year.

Hong Kong companies (and non-Hong Kong companies carrying on business in Hong Kong) are required to comply with ongoing profits tax reporting obligations. These obligations apply to both first-time Profits Tax Returns and subsequent annual returns.

Where a tax representative has been properly appointed, Profits Tax Returns may be filed under the Block Extension Scheme, subject to the entity’s accounting date.

For newly incorporated Hong Kong companies, the IRD typically issues the first Profits Tax Return (“PTR”) around 18 months after incorporation. Upon receipt, the first PTR is generally required to be filed within three months.

After the first PTR has been filed, the IRD normally issues Profits Tax Returns annually. In practice, the IRD may temporarily suspend issuing returns for companies that have previously reported nil assessable profits or substantial tax losses. Such arrangements are administrative, non-statutory, and may be withdrawn at any time.

Even where a Profits Tax Return is not issued, businesses remain subject to Hong Kong tax compliance obligations. Preparing annual profits tax computations and maintaining supporting documentation can help mitigate future compliance risks, support tax positions, reduce administrative pressure when filings resume, and demonstrate a consistent compliance record with the IRD.

For the current year of assessment, the following statutory and extended filing deadlines apply to both first-time and subsequent Profits Tax Returns where a tax representative has been appointed:

• Accounting date between 1 April 2025 and 30 November 2025
  → No block extension applies
  → Returns are generally due one month from the issue date (or three months for the first PTR)
• Accounting date between 1 December 2025 and 31 December 2025
  → Extended filing deadline: 17 August 2026
• Accounting date between 1 January 2026 and 31 March 2026
  → Extended filing deadline: 16 November 2026

Businesses should identify their applicable deadlines early to allow sufficient time for audit completion and internal review.

With effect from the Year of Assessment 2025/26, Hong Kong constituent entities of multinational enterprise (“MNE”) groups within the scope of BEPS Pillar Two are required to electronically file their Profits Tax Returns via the IRD’s Business Tax Portal (“BTP”).

This requirement applies regardless of whether:

• Hong Kong profits tax is payable; or
• Pillar Two top-up tax arises

Affected entities should ensure that appropriate BTP registration, user access, and digital authorisation arrangements are in place. Entities subject to mandatory electronic filing may also be eligible for an additional one-month filing extension, subject to proper notification to the IRD.

Failure to comply with Profits Tax Return obligations — including late filing, incorrect filings, or failure to notify chargeability — may result in penalties of up to HK$10,000 plus up to three times the amount of tax underpaid.

Companies are also required to maintain proper accounting records for at least seven years. Failure to do so may attract significant penalties.

Profits tax compliance involves more than meeting filing deadlines. It requires coordination across finance, audit, and tax functions, as well as awareness of evolving administrative requirements such as mandatory electronic filing.

Our team supports clients with profits tax compliance, audit coordination, and Pillar Two obligations, helping businesses manage risk and meet their Hong Kong filing requirements efficiently. Get in touch with us to stay ahead of your 2025/26 obligations.

Hong Kong adopts a territorial basis of taxation, whereby Profits Tax is generally chargeable only where a person carries on a trade, profession, or business in Hong Kong and derives profits from that business.

Where this threshold is met, the next consideration is whether the relevant profits are sourced in or outside Hong Kong. Profits derived from activities carried out outside Hong Kong may be eligible for an offshore claim, depending on the specific facts and circumstances.

In practice, offshore claims can arise in a wide range of cross-border business arrangements. Understanding how such claims are reviewed by the Inland Revenue Department (“IRD”), as well as the associated documentation and administrative requirements, is an important aspect of effective tax management in Hong Kong.

An offshore claim is made through the Profits Tax Return, where a business that is considered to be operating in Hong Kong takes the position that some or all of its profits are sourced outside Hong Kong and therefore fall outside the scope of Hong Kong Profits Tax.

In assessing such claims, the IRD focuses on where the actual profit-generating activities are carried out, taking into account the taxpayer’s business model, operational structure, and the manner in which profits are derived.

As a result, offshore claims are highly fact-specific and depend on how a business operates in practice.

Offshore claims may be relevant where a business:

• Deals primarily with overseas customers
• Negotiates or concludes contracts outside Hong Kong
• Conducts manufacturing, logistics, or service activities offshore
• Relies on overseas personnel or group entities to perform key business functions

Even where a business is carried on in Hong Kong, these factors may raise questions as to whether the resulting profits are sourced outside Hong Kong.

Once an offshore claim is made, it is common for the IRD to issue enquiry letters requesting information and documentation to substantiate the claim.

The IRD typically expects:

• Clear explanations of the business model and operational arrangements
• Evidence of where key profit-generating activities are performed
• Contemporaneous documentation supporting the offshore position

Each claim is assessed on its own merits, based on the relevant facts and supporting evidence. Insufficient or inconsistent documentation may significantly reduce the likelihood of a successful claim.

Offshore claims are not fixed and may be reviewed by the IRD at a later stage, even in years where a Profits Tax Return is not issued. Reviews may arise through reissued returns, routine enquiries, or broader tax reviews.

As IRD assessments focus on actual business operations, responding to enquiries can become time-consuming and disruptive if claims have not been properly considered in advance.

Early preparation allows businesses to:

• Assess the relevance of offshore claims to their operations
• Understand the IRD’s review focus
• Prepare appropriate supporting documentation
• Reduce uncertainty and potential disruption during enquiries

A proactive approach enables offshore claims to be managed in a structured and supportable manner, rather than on a reactive basis.

Offshore claims require close alignment between a business’s operational reality and Hong Kong’s territorial tax principles. Our tax team works with businesses to assess when offshore claims may arise, understand how such claims are evaluated by the IRD, and manage the process in a practical, well-supported manner. For tailored advice on offshore tax claims, please reach out to our team.