Welcome to HK Account Q&A. (DISCLAIMER: All information provided on this website is for self-reference only. We are not responsible for any decisions made, financial or otherwise, based on information or links provided by us. We do not guarantee the accuracy of the information. Readers are reminded that you use such information and materials entirely at your own risk. Web editor gives no warranty and accepts no responsibility or liability for the accuracy or the completeness of the information and materials contained in this website. Under no circumstances will this web's editor be held responsible or liable in any way for any claims, damages, losses, expenses, costs or liabilities whatsoever resulting or arising directly or indirectly from readers' reliance on the information and materials on this website.)
0 votes

For partnership:

Care that Unincorporated Businesses' tax rate be 15% (first 2 million HKD profit @ 7.25%, subjected to condition).

asked by (9.5k points)

5 Answers

0 votes

In the calculation, partners' salaries' effect was removed to arrive at the adjusted profit of the partnership. And at the table below, the adjusted profit of the partnership was distributed to partners on equal sharing among partners basis.

But by agreement between partners, partners can have different % of sharing.

answered by (9.5k points)
0 votes

Guidance form provided by IRD:

answered by (9.5k points)

Additional discussion: sole proprietor and partnership are not Separated Legal Entity so that can't acquired any property, but they may still can claim Commercial / Industrial building allowances if the sole proprietor and partnership owns a property and grant it to the business for usage.

In IRD's form, we can see cells for Commercial / Industrial building allowances are provided.

0 votes

Year-end date of partnership and soleproprietorship can be any date of calendar year, not compulsory to be 31 March 2019, which is year-end date of HKSAR fiscal year.

Some Chinese traditional pawnshop may use lunar calendar year-end as its year-end so that at Gregorian calendar every year this pawnshop has different accounting year-end date.

answered by (9.5k points)
0 votes

IRD's Guidance for sole proprietorship and partnership:

answered by (9.5k points)
0 votes

Expanded discussion:

Question 1: any rumors about tax of partnership and sole proprietorship?

Answer 1: sure. Like: for insurance brokers' sole proprietor, only expenses equal to one third of insurance commission income will be deductible in tax computation. No blank-and-white issued by IRD about this so is rumor but may be practicable.

Question 2: any tricky thing on tax of partnership and sole proprietorship?

Answer 2: sure. Like DIPN 24 is for deductions being claimed by an unincorporated business for payments, often described as management fees, which are made to a company or a trust (service company) controlled by the proprietor or partners of the business. It set criteria / requirements on:

  • details of documentations be necessary in this kind of transaction;
  • only "Qualifying services" is allowed in this kind of transaction;
  • To establish deductibility, it must provide the Department with a detailed statement which lists the qualifying services obtained from the service company. 
  • In relation to the question of what is an appropriate mark-up, provided that the overall claim does not exceed the expenditure actually incurred, a margin not exceeding 12.5% of the cost element will generally be accepted as being commercially realistic.

DIPN 24's link: https://www.ird.gov.hk/eng/pdf/e_dipn24.pdf

Question 3: any concession for partnership and sole proprietorship?

Answer 3: Sure. Like: 

  • A concession therefore exists for those taxpayers engaged in retail trades, professions and businesses which are normally conducted in cash. They are not required to keep the specified details records of all goods sold. If the concession applies to you, you must nevertheless keep full records of your purchases and full details, recorded on a day by day basis, of all sums of money received and expended by your business. (Page 4 of A Guide to Keeping Business Records) Ref: 
  • A Guide to Keeping Business Records [English version] / [Chinese version]

Question 4: can non-HK resident / non-HKID holder apply sole proprietor business registration certificate?

Answer 4: can, but need a HK local agent (Form IRBR 177) and probably need to answer IRD query as following as sample:

answered by (9.5k points)
...