Section 14 (amended)

Charge to profits tax will be amended to apply for any year of assessment commencing on or after 1 April 2018.

Profits tax is to be charged in accordance with the new Schedule 8A or 8B (see below)

Sections 14AA, 14AAB and 14AAC (new)

Section 14AA will include a definition of “entity” and “sole proprietorship business”.

Section 14AAB has defined an entity as a “connected entity” of another entity if:

• one of the entities has control over the other;
• both entities are under the control of the same entity; or
• in the case of the first entity being a natural person carrying on a sole proprietorship business – the other entity is the same person carrying on another sole proprietorship business.

Section 14AAC provides that if two or more entities are connected, the two-tiered profits tax rates may apply to one of the entities only. In particular:

(a) for an entity other than a corporation, the tax is to be charged on the assessable profits of the person at the standard rate (i.e., 15% for unincorporated businesses)

(b) for a corporation and a corporation that is a partner in a partnership, the tax is to be charged under Schedule 8B (see details below).

Schedules 8A and 8B (new)

Schedules 8A and 8B will be included for the charging of profits tax under the two-tiered profits tax rate system for corporations and unincorporated businesses. This applies to a year of assessment commencing on or after 1 April 2018.

Section 1 of Schedule 8A applies to the charge of profits tax to persons other than corporations (i.e., unincorporated businesses):

(a) at the rate of 7.5% on the assessable profits from the trade, profession or business up to HK$2 million; and

(b) at the rate of 15% on any part of the assessable profits over HK$2 million from the trade, profession or business

Section 2 of Schedule 8B applies to the charge of profits tax to a corporation (including partners in a partnership):

(a) for a corporation

• at the rate of 8.25% on the assessable profits from the trade, profession or business up to HK$2 million; and
• at the rate of 16.5% on any part of the assessable profits over HK$2 million from the trade, profession or business.

(b) for a corporation that is a partner in a partnership

• at the rate of 8.25% on the net share of assessable profits concerned up to the threshold. The threshold has been defined for a corporation that is a partner in a partnership to be HK$2 million multiplied by the ratio at which the corporation shares the profits or losses of the partnership during the basis period for the year of assessment; and
• at the rate of 16.5% on the net share of assessable profits concerned over the threshold.

Schedule 43 (new)

Schedule 43 provides for transitional provisions in relation to the charging of provisional profits tax for the year of assessment commencing on or after 1 April 2018.

In particular, an application for a hold over payment of provisional profits tax on an additional ground may be made where:

• a person who is liable to pay provisional profits tax in respect of the year of assessment 2018/19 may apply to the Commissioner in writing to have the tax payment, in part or whole, to be held over until the person is required to pay profits tax for the year.
• an application may be made for the year of assessment 2018/19 if the person is, or is likely to be, chargeable to profits tax in accordance with Section 1 of Schedule 8A or Section 2 of Schedule 8B, under Section 14.
• This section does not affect the operation of Section 63J (holding over of the payment of provisional profits tax).

The written application must be made not later than the 28th day before the day by which the provisional profits tax is to be paid or by the 14th day after the date of the notice for payment of provisional profits tax.