Profits Tax Hong Kong 2027: A Guide for Freelancers & Sole Traders

If you freelance or run a sole proprietorship in Hong Kong, your business profits are taxed under profits tax at 7.5% on the first HK$2 million of assessable profits and 15% above that, according to the Inland Revenue Department (companies pay 8.25% and 16.5%). You must register the business within one month of starting, which costs HK$2,350 for a one-year certificate from April 2026 unless you qualify for the small business exemption, and you report profits in Part 5 of your Tax Return for Individuals. For 2025/26, profits tax is cut by 100% up to HK$3,000 per business.

This guide covers how profits tax works for self-employed people, how to register, how to file and pay, and when electing personal assessment saves you money. It's a companion to our main guide to freelancing in Hong Kong as a foreigner, which covers visas and finding clients.

What Is Profits Tax in Hong Kong?

Hong Kong has three separate income taxes: salaries tax on employment income, property tax on rental income, and profits tax on business profits. If you work for yourself, whether as a freelance designer, a consultant, a tutor or a sole trader, your earnings are business profits.

Only profits arising in or derived from Hong Kong are taxed. Profits from work genuinely done outside Hong Kong can fall outside the net, but this is fact-specific and the IRD looks closely at where the work is actually done.

If you'd rather be employed than invoice clients, you can browse English-speaking roles on ExpatJobBoard.com. We list thousands of jobs in Hong Kong that don't require Cantonese or Mandarin.

What Are the Profits Tax Rates for 2026/27?

Hong Kong uses a two-tiered system. According to the IRD:

Source: Inland Revenue Department, two-tiered profits tax rates.

There are catches. If you run more than one sole proprietorship, only one of them can use the lower 7.5% tier each year; the others pay the full 15%. In a partnership, the HK$2 million threshold is split between partners by profit share.

Is There a Profits Tax Reduction for 2025/26?

Yes. The 2026-27 Budget reduced 2025/26 profits tax by 100%, capped at HK$3,000 per business, according to the IRD. The legislation was gazetted on 22 May 2026, and the IRD applies the reduction automatically in the final assessment. You don't need to apply.

The reduction doesn't apply to provisional tax, so you still have to pay 2025/26 provisional profits tax on time. Any overpayment is credited or refunded once the final assessment is done.

Do Freelancers Need to Register a Business?

Almost always. According to the IRD's Business Registration Office, anyone carrying on a business in Hong Kong must register within one month of starting. "Business" covers any trade, profession or activity carried on for gain, which includes most freelancing. The maximum penalty for not registering is a HK$5,000 fine and a year in prison.

Source: Inland Revenue Department business registration fee notice; levy relief ended on 31 March 2026.

Sole proprietors can register online through GovHK's business registration service.

Can a Small Freelance Business Avoid the Registration Fee?

Yes, if your turnover is small. The IRD offers a fee exemption for sole proprietors and partnerships (not companies, and not people running two or more businesses) where average monthly receipts are:

• HK$10,000 or less for a service business, which covers most freelancers.
• HK$30,000 or less for other businesses, such as selling goods.

You still have to register; you just get a 12-month exempt certificate. New businesses must apply for the exemption within seven weeks if applying online, according to the IRD.

How Do Freelancers File Profits Tax?

Sole proprietors don't file a separate profits tax return. You report the business in Part 5 of the Tax Return for Individuals (BIR60), the same form employees use, according to the IRD. If you have more than one sole proprietorship, report each one separately.

Partnerships are different: they file a Profits Tax Return for persons other than corporations (BIR52).

The paperwork depends on your size:

• Gross income of HK$2 million or less: You don't need to attach accounts, but you must prepare them and keep them.
• Gross income above HK$2 million: You must submit certified accounts (a balance sheet and profit and loss account) plus a tax computation.

If you solely owned a business during the year, you have three months from the issue date to file, rather than the one month employees get, according to the IRD.

What Records Must Freelancers Keep?

Keep invoices, receipts, bank statements and a record of income and expenses. The IRD says business records must be kept for at least seven years, including after the business stops. You must also tell the IRD in writing within one month if you cease trading.

A simple spreadsheet and a separate bank account for the business make this much easier. Claim only expenses incurred in producing your taxable profits.

Profits Tax or Personal Assessment: Which Is Cheaper?

This is where many freelancers overpay. Under profits tax, you don't get personal allowances such as the basic allowance. Under personal assessment, your business profits are added to any other income and taxed at salaries tax rates, with allowances.

Here's how it works out for a single freelancer with no other income, using the IRD's progressive rates and the 2026/27 basic allowance of HK$145,000:

Source: ExpatJobBoard calculations using IRD two-tiered rates, progressive salaries tax rates and the 2026/27 basic allowance; before any one-off reduction.

Lower earners, and anyone with children or dependent parents to claim for, often save by electing personal assessment. Higher earners usually do better with the flat 7.5%. The IRD warns that personal assessment can be disadvantageous because all your income is taxed at progressive rates, so run both numbers before you elect. Our salaries tax guide lists the allowances.

What Is Provisional Profits Tax?

Like employees, the self-employed pay provisional tax: an estimate of next year's tax based on this year's profits. It's usually payable in two instalments alongside your final tax. If your profits will fall by more than 10%, you can apply to the IRD to hold over (reduce) the provisional tax.

The first year is the shock. Your first bill can include a full year of final tax plus most of the next year's provisional tax. Set aside around 10% to 15% of what you invoice from day one.

Our guide on how to pay tax in Hong Kong explains instalments, payment methods and what happens if you pay late.

Freelancer or Employee: Does It Matter for Tax?

Yes. If a client treats you as a freelancer but you work set hours under their control, the IRD may view you as an employee, which changes your tax and your employment rights. Equally, a job that ends and becomes a "freelance" arrangement with the same company can look like disguised employment.

The safest approach is a written contract that reflects how you actually work. Our freelancing guide covers the employee or contractor question in more detail.

FAQs: Profits Tax for Freelancers

What is the profits tax rate in Hong Kong?

For sole proprietors and partnerships, 7.5% on the first HK$2 million of assessable profits and 15% above that. For companies, 8.25% and 16.5%.

Do freelancers pay profits tax or salaries tax in Hong Kong?

Freelancers running their own business pay profits tax on business profits. If they also have a job, that salary is taxed separately under salaries tax, unless they elect personal assessment to combine them.

Do I need a business registration to freelance in Hong Kong?

Yes, in most cases. You must register within one month of starting. Small service businesses with monthly receipts of HK$10,000 or less can apply for a fee exemption but still need to register.

How much is business registration in Hong Kong?

From 1 April 2026, a one-year certificate costs HK$2,350 and a three-year certificate HK$6,170, including the levy.

Where do sole proprietors report profits?

In Part 5 of the Tax Return for Individuals (BIR60). Partnerships use the BIR52 profits tax return.

When is the profits tax return due for sole proprietors?

Within three months of the issue date if you solely owned a business during the year, according to the IRD.

Is there a profits tax reduction for 2025/26?

Yes, 100% of profits tax payable, capped at HK$3,000 per business. It's applied automatically in the final assessment.

Should freelancers elect personal assessment?

Often, if your profits are modest or you can claim allowances for children or parents. At HK$300,000 of profit, personal assessment can cost less than half as much as profits tax. At higher profits, the flat 7.5% usually wins.

How long must freelancers keep records?

At least seven years, according to the IRD, including after the business stops.

Can I freelance in Hong Kong on any visa?

No. You need a visa that allows self-employment, and employment visas usually tie you to one employer. Check your conditions of stay before you start invoicing.

Key Takeaways

• Sole proprietors pay profits tax at 7.5% on the first HK$2 million of assessable profits and 15% above that.
• Register your business within one month of starting; a one-year certificate costs HK$2,350 from April 2026.
• Service businesses with monthly receipts of HK$10,000 or less can apply for a fee exemption.
• Report sole proprietorship profits in Part 5 of the BIR60, due three months after issue.
• 2025/26 profits tax is reduced by 100%, capped at HK$3,000 per business.
• Personal assessment can cut the bill by more than half for lower-earning freelancers.
• Keep business records for at least seven years.

Prefer a Steady Salary?

Freelancing isn't for everyone. Browse thousands of English-speaking jobs on ExpatJobBoard.com, including contract and full-time roles that don't require Cantonese or Mandarin.