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For partnership:

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

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5 Answers

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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.

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Guidance form provided by IRD:

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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.

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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.

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IRD's Guidance for sole proprietorship and partnership:

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Expanded discussion:

Question 1: any further guidance about tax of insurance broker sole proprietorship?

Answer 1: Yes. For insurance brokers' sole proprietor, for fiscal years on or before Y/A 1995/96, only expenses equal to or less than one third of insurance commission income will be deductible in tax computation (more details can see  Paragraph 2 of DIPN 33). This 1/3 criteria still has guiding sense nowadays, especially when IRD tried to reach a quick compromising agreement with tax payer without detailed investigation.

Official guidance for insurance broker about chargeable income and allowable deductions: DIPN 33 (Revised) - INSURANCE AGENTS

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:

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