Hong Kong Provisional Profits Tax Calculator

The double bill that surprises new businesses

The first profits-tax demand a Hong Kong company receives is often a shock, because it is roughly twice what the owner expected. That is not an error. The Inland Revenue Department charges the final tax for the year that has just ended and, at the same time, a provisional tax for the year ahead, estimated from the same level of profit. You are effectively prepaying next year's tax. The provisional amount is then set off against next year's actual assessment, so over time it washes out, but the cash impact in year one is real. This tool reproduces that arithmetic by computing the final tax on your most recent assessable profit and adding the provisional tax on your expected profit for the coming year.

How the two-tiered rate feeds both halves

Both the final and the provisional figures use the same two-tiered profits-tax scale. For an incorporated company, as modelled here, the rate this calculator applies is 8.25 percent on the first $2 million of assessable profit and 16.5 percent on the balance. An unincorporated business, such as a sole proprietorship or partnership, uses 7.5 percent and 15 percent. Hong Kong layers nothing else on top: no surcharge for size, no separate tax on the dividends an owner later draws, and no capital gains tax on a future sale of the business. The two-tiered benefit is also limited to a single entity within a group of connected entities. These are the rates and the $2 million threshold the calculator uses for 2025/26, and you should confirm them with the IRD before filing, since a Budget can move them.

A $2 million profit, billed across two years

Take the defaults: an incorporated company with $2,000,000 of assessable profit this year and the same expected next year. The final tax is the whole $2 million taxed at 8.25 percent, which is $165,000. The provisional tax on the expected $2 million is another $165,000. The total demand is therefore $330,000, even though only $165,000 relates to a year that has actually happened. Next year, when the real profit is assessed, this $165,000 provisional payment is credited against it. Had this been an unincorporated business, the same $2 million would have produced $150,000 of final tax at 7.5 percent, showing how much the corporate rate adds.

Managing the cash, and a relief most owners miss

The practical tip is to budget for the double hit in your first profitable year and treat the provisional element as a deposit, not a cost. There is also a relief many owners overlook: if you genuinely expect next year's profit to fall well below the year just assessed, you can apply to hold over all or part of the provisional tax, provided you lodge the application before the statutory deadline. The calculator assumes profit holds steady, so if you anticipate a downturn, lower the expected-profit input to see the reduced provisional charge, then ask the IRD about a holdover. The edge case to remember is a first-ever assessment, where there is no prior year and the provisional charge is based on the very first results, making the opening bill feel especially heavy.

Common provisional-tax questions

When can I apply to reduce the provisional profits tax?

You can apply for a holdover if your assessable profit for the coming year is likely to be less than 90 percent of the amount assessed, or if the provisional assessment itself looks excessive. The application must reach the IRD by the deadline shown on the notice, generally not less than 28 days before the payment due date. Granting it reduces the provisional half without touching the final tax.

Is the provisional tax an extra tax I never get back?

No. It is a prepayment. When next year's profit is finally assessed, the provisional amount you paid is set off against the real liability. If the actual tax is lower, the excess is refunded or carried forward. Over the life of a steady business the provisional mechanism simply shifts the timing of payments rather than adding to the total burden.